By Vera Eckert

FRANKFURT (Reuters) -Germany’s Sunfire, a Dresden-based clean technology company, on Monday said it has secured 109 million euros ($126 million) of funding to boost its role in fast expanding markets for green hydrogen derived from renewable sources like wind or solar.

Sunfire, a manufacturer of electrolysis plants, whose shareholders include Total and Neste, said the money was raised from private equity investor Lightrock, Planet First Partners (PFP), based in London, Carbon Direct, based in New York and British HydrogenOne Capital which is backed by chemical and energy group INEOS.

Goldman Sachs Bank Europe served as exclusive financial adviser and placement agent to Sunfire, it said.

“Our electrolysis technologies are critical for increasing green hydrogen supply that is needed to decarbonise industrial companies at significant scale,” said chief executive Nils Aldag.

The European Union and Germany aim to create a “green” hydrogen industry based on non-fossil sources as part of its decarbonisation strategy.

Electrolysers are a crucial part of that industry as they use electrical current from wind and solar plants to split water into hydrogen and oxygen.

In this way, surplus renewable electricity production can be stored on gas networks and caverns, and the hydrogen can be used in industry, energy, heating buildings or fuelling fuel cell vehicles.

Conventional or “grey” hydrogen is currently produced in a different process using fossil fuels, and serves a smaller range of industrial applications than is thinkable once its green counterpart arrives at large scale.

In October, Sunfire said it would be expanding its annual production capacity of alkaline electrolysers to at least 500 megawatts (MW) per annum by 2023 from 40 MW at present.

Demand for electrolysis capacity in the EU is expected to rise to 40,000 MW by 2030 from currently under 1,000 MW, it said.

Sunfire has expertise in both alkaline pressure electrolysis and high-temperature electrolysis method, called solid oxide electrolyser cells (SOEC), equipping it to respond to a range of different use cases.

($1 = 0.8621 euros)

(Reporting by Vera Eckert, editing by William Maclean and Kirsten Donovan)