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  • Writer's picturePeter Yolles

H2O to H2, Assessing Hydrogen's Relationship with Water

Updated: May 8

By Jack Schaufler, Echo River Capital, Spring 2024 Associate


At Echo River Capital, we are constantly examining the impacts from the intersection of our water system with different industries. We look for emerging trends where innovation is needed to reduce our societal impact on water, and how we can support startups striving improve water security and climate resilience. One fast-growing industry we’ve been tracking recently is Hydrogen, and its potentially negative impact on water. We decided to investigate and take a closer look.

What is H2?

Hydrogen gas (H2) offers a potential solution in the search for an energy dense fuel that can be

decarbonized. Potential applications are industries that rely on medium to high heat (cement,

steel, chemicals) that require immense amounts of energy deployed very quickly and currently

rely on energy dense fuels (natural gas) to accomplish this. Other industries require a mobile

solution that offers a higher energy density than batteries, mobility, especially large-scale

transport like aviation, rail and maritime shipping.Hydrogen can be produced using a variety of methods:

  • Steam-methane reforming - Currently the most common method for producing hydrogen globally, high temperature steam is used to produce hydrogen from a methane source (natural gas, ethanol, etc.).  Methane + Steam + Pressure + Catalyst + Heat = Hydrogen + Carbon Dioxide

  • Electrolyzers - An electrochemical machine that converts water* into hydrogen and oxygen gas, consisting of an anode and a cathode separated by an electrolyte. 

  1. Polymer Electrolyte Membrane (PEM) Electrolysis

  2. Alkaline Electrolysis 

  3. Solid Oxide Electrolyzers

The feed water for current commercialized electrolyzers must be purified, if the incorrect purity of water is used the electrolyzer could become fouled or degraded and its output become compromised.

  • Biological:  Hydrogen can be produced via biological reactions using bacteria and microalgae. In this process, microbes break down organic matter (biomass, wastewater), in some cases using photobiological processes, with the output being Hydrogen gas.

The industry uses a “color” of hydrogen to quickly refer to the type of production, here’s a guide to the industry lingo.

Impact of Hydrogen on Emissions

To understand why there is a push for hydrogen compared to other fuel sources, compare hydrogen to  other energy sources. The Intergovernmental Panel on Climate Change (IPCC) published a report following a life-cycle assessment of carbon emissions on the most common sources of energy3. These sources are ranked from least to most emitting across their life cycle. Hydrogen’s emission vary from 26 to 335 g CO2e/kWh depending on the process and sources of energy utilized in the process. Each of the three hydrogen methods compare favorably to fossil fuels. We layered in data from Praxair and IEA to paint the below picture.

Hydropower: approximately 4 g CO2e/kWh

Wind power: approximately 11 g CO2e/kWh

Nuclear power: approximately 12 g CO2e/kWh

Solar power: around 41 g CO2e/kWh

Natural gas: 290-930 g CO2e/kWh

Oil: 510-1170 g CO2e/kWh

Coal: 740-1689 g CO2e/kWh.

Hydrogen - Green: 26 g CO2e/kWh

Hydrogen - Grey: 335 g CO2e/kWh

Hydrogen - Blue: 195 g CO2e/kWh


Grey Hydrogen is roughly on par with natural gas in terms of emissions, lower in some cases but not all. Blue Hydrogen reduces the carbon footprint, but not to the extent of Green Hydrogen. 

Water Consumption of Hydrogen

One of Echo River’s investment themes is water efficiency, which includes the prospect for de-watering energy production processes. The Institute for Global Sustainability at Boston University published a study on the water consumption of various energy sources below.

Rocky Mountain Institute provides water intensity of Grey, Blue and Green Hydrogen, which is added to this table:

Power Plant Type*

Water Usage (L/MWh)





Hydrogen - Blue


Natural Gas


Hydrogen - Green


Hydrogen - Grey






Blue Hydrogen is often touted as a “clean alternative” to natural gas, and while it does offer a reduction in emissions, this data demonstrates it will have a net negative impact on water, consuming nearly 350 liters more per MWh of energy generated. Green Hydrogen offers the highest potential to reduce emissions from conventional thermal generation plants while also consuming less water. (N.B.  Biomass and hydropower were excluded due to variability in the methodology presented by the research referenced.)

Understanding the relationship between emissions and water consumption provides a new lens for analyzing projects for potential investment. For example, there is reduction in emissions when retrofitting Grey Hydrogen facilities with carbon capture systems, but at a cost of additional water consumption that may mean Green Hydrogen is a better solution.

This data is intended to be a tool in determining the tradeoff of transitioning from one energy type to another.

The Market

Understanding the market for Hydrogen is critical to understanding the scale of impact, the direction the industry is heading, and potential fit for venture involvement. Below is market data on Global Hydrogen, including all types, and Global Green Hydrogen, focused on the highest growing segment of hydrogen production.

The main takeaways from this information:

  1. The existing hydrogen market is large, there is room for innovative solutions to grow within the existing infrastructure.

  2. Green hydrogen is projected to grow rapidly, with a CAGR of 61% in the US that cannot be ignored.

Drivers of Growth – Green Hydrogen

Causes for optimism behind the high projected growth of Green Hydrogen in North America:

  1. Declining cost of renewable energy will drive down input costs of Green Hydrogen, with solar leading the way:  Median installed costs of PV in the US have fallen by 78% (or 10% annually) since 2010. a. Curtailment is an increasing issue, especially in markets like Texas where renewable generation is not located near load, green Hydrogen offers a potential solution to capture otherwise wasted energy production.

  2. New First of a Kind (FOAK) financing:  ACES Utah project funded by DOE LPO.

  3. Inflation Reduction Act (IRA): The “45V” hydrogen production tax credit will range from $0.60 to $3.00 per kg depending on the production mechanism’s lifecycle emissions.

Challenges to Growth – Green Hydrogen

What may slow things down:

  1. Water consumption: In many cases other renewable technologies may be a better solution

  2. Storage and Transportation: current options for storage are compression and liquefaction or storage in physical or chemical carriers are expensive and under-developed.  

  3. Need for innovation in the demand market: According to the IEA, in order to meet 2030 hydrogen growth predictions, 30% of the demand will need to come from new applications.

Looking at the breakdown of type of investment, later-stage investment into Hydrogen has been the primary driver of the significant spike in capital deployment, but early-stage and seed investments continue to grow at a significant rate. 

Research has found that 97% of venture funding in the Hydrogen sector has been allocated to hardware focused solutions. Digital solutions will play a role, but investors need to have an appetite for the timeline and risks of hardware deployment to invest in Hydrogen.


Analyzing exits to-date, there have not been as many as other climate tech verticals. Experts expect most exits to come in the form of M&A as a few industry leaders emerge. The successful IPOs have exclusively been in the European and Asian markets.

Looking at example investments in the three areas of the value chain:


  1. Supply - Clyde Hydrogen, a Scotland-based green hydrogen producer, raised $2m in Pre-Seed funding from the University of Glasgow and Zinc.

  2. Transport – Hydro X, a Israel-based company developing a new chemical storage process for hydrogen, raised a $1m Seed round from Nissan Caspi and other undisclosed investors.

  3. Demand – Genevos, developer of a modular fuel cell for marine shipping application, raised $2.75m of seed funding from GO Capital.

Of these examples, the supply and production of hydrogen have the most alignment with Echo River’s mission. 


Echo River’s Perspective

Following this industry deep dive, it is clear that investing in hydrogen without attention to the method of production or what energy source it is displacing can lead to negative impacts on freshwater systems. However, green hydrogen in appropriate applications can have a positive impact on the water system. Throughout the research conducted, it was disappointing that there is a significant lack of attention to reducing hydrogen’s consumption of water. In fact, in the IEA 2022 “critical” review of hydrogen-production technology, fails to address water supply at all. Having examined the full value chain of hydrogen, there is significant room for innovation in de-watering the production of hydrogen via electrolysis. 


Ongoing Efforts:

Of the current efforts, many are at the project development level. While this is not a fit for Echo River investment, it is important to highlight some of the research and efforts here.

  1. In California, electrolyzer manufacturer Plug Power is planning to build a water-treatment plant for the municipality of Mendota in return for source water for hydrogen production. The city otherwise would not be able to fund a new wastewater plant, which will increase the city’s capacity to treat water and reduce their consumption of ground water.

  2. In Sydney, Australia, researches associated with municipal water authority of Sydney and the University of Sydney published a study determining that by adding electrolyzers to the local wastewater treatment plant they could save the city $1.5m per year by using unused effluent from the wastewater treatment process.  While this project is not underway, this type of research is encouraging.

  3. In 2022, a team of researchers from Yale found that the cost to treat seawater for a Hydrogen electrolysis facility would require only 0.3% of the total energy budget.



Our Focus Moving Forward:

As mentioned in the overview of H2, the water feedstock for current commercial electrolyzers must be purified and often comes from some of our best freshwater sources. Echo River is on the search for companies that are working on technologies to support de-watering electrolysis through the use of wastewater, desalination, or alternative inputs like aluminum. Here are some encouraging examples we found:


Chemergy – They are developing technologies to convert wet organic and plastic wastes into green hydrogen. This explores the “biological” process of making hydrogen that is currently under-developed.

Maygia – Maygia is working to develop a modular device for treating wastewater and producing hydrogen, potentially reducing the dependence on freshwater as an input.

GH Power – They are developing technology to use recycled aluminum as an input in green hydrogen production, it is unclear the impact on this could have on water usage in the end but something to keep track of.

Evolve Hydrogen – Evolve is working towards affordable green hydrogen electrolysis directly from seawater, an encouraging step towards reducing impact on freshwater systems.


Echo River is keeping an eye out for other technologies that may improve Hydrogen’s relationship with water. So, please introduce us to innovators working at the Hydrogen-Water nexus.



Markets and Markets:

Grandview Research:


Peter Yolles

General Partner


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