Hydrogen & nuclear energy

Crucial pieces of the puzzle to reduce emissions or over-priced, over-hyped distractions? Hydrogen and nuclear definitely divide the room.

Some tout hydrogen’s potential to clean up the hard-to-abate emissions cases. Electricity isn’t strong enough for industrial processes like making steel or concrete. Also, it looks like batteries won’t work for the heavy duty vehicles — like buses, planes and boats — that go long distances.

Over the past few years, investors have lined up to support European hydrogen startups. The sector was one of a few that saw a funding bump in 2023, pulling in $2.2bn — a 47% increase from the previous year. Almost five months into 2024, hydrogen startups have seen further success, securing $1.3bn in funding. Dresden-based Sunfire’s €500m Series E (a mix of equity, debt and grants) has been the standout hydrogen deal this year. The company is building the key component of the so-called “green” hydrogen economy, the electrolyser — a device that uses electricity to split water into hydrogen and oxygen which incidentally sounds like a weapon a comic book villain would use.

Hydrogen can be made and burned without releasing greenhouse gases — so far, so good. But it’s also really awkward: using hydrogen typically requires installing different equipment. The cost of making electrolysers has skyrocketed: the main culprit being inflation, which has pushed up the costs of materials, utilities such as water and electricity and labour, according to recent analysis by BloombergNEF. Switching focus to nuclear, it wasn’t so long ago that people were turning their backs on ageing plants, amid worries over meltdowns and radioactive waste. But there’s fresh momentum and billions of euros in the race to build new generation reactors.

Sifted broke the news this week that the sector’s only European unicorn, UK-based Newcleo, has just announced an €87m raise. The company is building small modular reactors (SMRs), using radioactive waste, and says it’s not done raising money this year. The appeal of the SMR is easy to understand: these prefabricated and standardised units are intended to be cheaper to mass produce at scale. We don’t yet see many SMRs currently in commercial operation, though their size means you could potentially pop them on a lorry and bring them to remote areas where they’re needed.

But in truth, the nuclear startup sector has yet to take off in Europe. Funding for startups from the continent rose from $140m in 2021 to $541m in 2022 (propped up by €100m and €300m raises from Newcleo) before falling to $178m in 2023 — a 67% drop. The US nuclear sector is more developed, with several companies raising megarounds since 2021 — deals include Commonwealth Fusion Systems’ $1.8bn, TerraPower’s $750m and Helion Energy’s $500m. Still, the past year has proved challenging for stateside nuclear companies. Investor confidence has been dented by failed projects and collapsed deals, the FT reported in December last year. Total investment into US nuclear startups dropped to $333m in 2023 — a fraction of the $4.5bn picked up the two previous years. Some of that investor chill could drift over to Europe.