Building Strategic Partnerships to Combat Climate Change
To create a post-carbon world by 2050, the Paris Agreement's goal for net zero emissions, companies need to innovate, commercialize and scale a vast array of technologies at unprecedented speed. This challenge demands business models that can act nimbly while drawing on deep resources and expertise.
Partnerships between large corporations and startups are a key part of the solution, and they offer tremendous potential for all sides. Small companies are capable of moving quickly and innovating in ways that are often difficult for large companies, especially in fast-growing markets. On the other hand, multinational enterprises have experience commercializing and scaling their offerings, with well-established access to mature markets around the world.
Yet these partnerships can be challenging to execute well. In fact, a 2020 McKinsey study found that 72% of startups were not fully satisfied with these types of corporate engagements. Although large companies and startups can complement each other, their differences -- from work style to culture to preferred tech -- also can create friction. Making such collaborations effective takes much more than investing in a promising technology. It requires shared vision, strategic alignment and some give and take.
The partnership [with MHI] goes well beyond the capital -- it will allow us to support each other in the growth of our initiatives.
The company's latest investment round was oversubscribed, showing the considerable interest in advancing novel sustainable fuel production technology. One of the firms Infinium selected was MHI, because of its expertise in both carbon-capture technology and the hydrogen value chain. Infinium appreciates that carbon capture could help provide the feedstock for its electrofuels production process. And MHI Group's effort to connect the hydrogen value chain, from production to utilization, provides market access for Infinium's e-fuels -- considered a "drop-in fuel" that can replace existing liquid fossil fuels without modifications to engines or infrastructure.
MHI Group's collaborative culture also has made the partnership successful. "We talk all the time about projects that we can work on together, technologies we can integrate," says Scheutzle. "The partnership goes well beyond the capital -- it will allow us to support each other in the growth of our initiatives."
Creating the hydrogen value chain
MHI Group's substantial investment in adapting gas turbines for hydrogen also creates synergies with startups developing innovative methods to produce clean hydrogen. "By adding startups' innovations on the upstream side to our existing technologies on the downstream side, we believe we can make the connections that create an end-to-end hydrogen value chain," says Sakai.
In the first quarter of this year, MHI Group had the largest market share (in megawatts) in the Americas for orders of heavy-duty gas turbines. The company is currently converting those turbines to run on a blend of natural gas and 30% hydrogen and eventually will transition to 100% hydrogen. That combination of scale and strategy means it can offer hydrogen fuel producers access to a large, growing end market.
"We recently completed two major deals with Monolith Materials and C-Zero, two hydrogen production startups that we believe could set a blueprint for emerging technologies that deliver real-world results quickly," Sakai says.
Rob Hanson, the CEO of Monolith, which uses a proprietary emissions-free process to make hydrogen from natural gas, likens the development of new hydrogen technologies today to advancements in the airline industry since the Wright brothers. Today's airline industry, he notes, represents a century of technological advances in aeronautics, computing and materials from tens of thousands of engineers and scientists around the world. Hanson says the hydrogen industry is engaged in a similar transformation---but in a dramatically faster time frame.
"The scale that MHI brings and the thousands of really brilliant, hardworking engineers and scientists only help accelerate technology and, ultimately, its deployment in key regions like Japan," he says.
The power of strong partnerships
With short timelines and ambitious goals, the energy transition will require a broad range of technological innovations to be developed, refined and brought rapidly to scale. Selecting startups with the greatest chance of success will be critical. That means moving beyond the era of spray-and-pay investments into a more collaborative model---one that can yield greater benefits for large corporations, startups and society at large.
"The scale of the energy transition is too big for any single breakthrough technology to be the ultimate answer," says Sakai. "We've been incubating technologies on our own for years, but now it's time to step up and work with startups to create a new, decarbonized world."