BP has invested in a start-up company developing technology seeking to use vapour from heavy industry to sharply reduce the production costs of zero-carbon hydrogen.

BP Ventures, the British energy giant's venture capital arm, was among several investors in a $12.5 million Series A financing in U.S.-based Advanced Ionics, the companies said on Tuesday.

Other investors include Mitsubishi Heavy Industries, Clean Energy Ventures and Gatemore Capital Management.

Green hydrogen, produced by splitting water through electrolysis using renewable energy, is expected to play a key role in decarbonising transport and industries.

But it is produced today on a very small scale and costs up to five times more than the most common hydrogen produced from natural gas, which is highly carbon-intensive.

The investment will allow Advanced Ionics to accelerate the small-scale deployment of its water vapour-based electrolysers for heavy industry.

The technology, Symbion, uses heat emitted from a plant's existing operations to drive the electricity use to less than 35 kilowatt hours (kWh) per kilogram of hydrogen compared with more than 50 kWh per kilogram for a typical electrolyser, according to Advanced Ionics.

It sharply reduces the cost of electricity for the electrolysis process, which accounts for more than 70% of green hydrogen production costs, the company said.

The lower electricity consumption will drive the cost of green hydrogen to less than $1 per kilogram, which is less than most fossil-fuel based production, it said.

Advanced Ionics is already running a pilot programme with Spanish oil and gas company Repsol.

BP, which aims to sharply reduce its carbon emissions in the coming decades, is betting big on green hydrogen. By 2030, it aims to produce between 0.5 and 0.7 million tonnes per year of primarily green hydrogen.

(Reporting by Ron Bousso, Editing by Louise Heavens)