Price transparency key for development of hydrogen markets: EEX

Hydrogen markets currently lack the price transparency that is key for regional and global trade to develop, but standardized trade should start to emerge soon, according to power and gas exchange EEX.

EEX's head of political and regulatory affairs Daniel Wragge said the European hydrogen market would develop differently to gas and power markets -- in a more fragmented manner -- and that developing price transparency early on would be key.

"You need price transparency, and that's what is lacking so far," Wragge said at the First Element conference Sept. 7.

There are virtual indexes which are helpful, but these are not yet based on physical trading, he noted.

S&P Global Platts publishes a range of cost-of-production calculated hydrogen price assessments, and launched a market survey hydrogen pump price assessment Sept. 2.

Hydrogen makes a good complement to EEX's platform for trading power, gas and CO2 emissions, Wragge said, coupling these sectors through its role as a power-to-gas energy carrier, and with the potential to decarbonize hard-to-electrify industries.

"Hydrogen is something like the natural supplement to these markets," he said.

Hydrogen would develop to have the equivalent of the Dutch gas trading hub TTF, HyXchange project director Bert den Ouden said, speaking at the same event.

The Netherlands has proposed a country-wide hydrogen backbone from 2027, he noted, with connections planned to Germany and Belgium. This could provide the basis for the start of trade, he said.

"There will be a 'hydrogen TTF', so to speak, and that will have a spot price," den Ouden said.

The spot market would develop naturally, he said, to cater for the volatility from variations in supply and demand from wind and solar output, from imports and variable demand from industry, housing and power plants.

Market evolution

However, the hydrogen market evolution would be different, Wragge said. Whereas in the past OTC markets evolved first, before moving to standardized exchange-traded products later, Wragge expects hydrogen markets to emerge from the beginning.

"You will not have a fully-fledged infrastructure before you start this market," he said. "You will not have a complete grid in Europe, you will not have implemented trade routes all over the globe before you start this market. So it will be very fragmented from the beginning, and it will grow together."

In addition, carbon prices and renewable power prices would be critical to the development of the green hydrogen sector, he added.

Carbon certification

Certification of the carbon intensity of hydrogen production would also be key to developing renewable and low-carbon markets in Europe, Wragge said.

He said Europe currently lacks clear enough definitions of green and sustainable hydrogen to facilitate imports from other regions and trade between them.

HyXchange's den Ouden said definitions of sustainable and low-carbon hydrogen should be broad enough to encourage trade and the acceleration of the market.

Speaking at the same event, he said speed was needed and security for investors, but added "we should be ready to accept, within reasonable bounds, any green hydrogen which has more or less the same way of generation like it is done in Europe from other parts of the world."

Blue hydrogen produced from fossil fuels with carbon capture and storage could also play a role in this, he said.

Wragge said the development of a global market would be a great liquidity provider. "Imagine if you had imports from outside the EU from countries like Australia and Chile and others. Imagine what that would mean and how that would boost the whole market."

Wragge added that both subsidies and market exposure were important for accelerating hydrogen market development, but that policy makers should have clear goals around how long subsidies should be in place, learning from the experience of the rollout of renewable power.

S&P Global Platts assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur7.12/kg ($8.42/kg) Sept. 7 (Netherlands, including capex).

PEM electrolysis production was assessed at Eur8.67/kg, while blue hydrogen production by steam methane reforming (including carbon, CCS and capex) was Eur3.80/kg.

German pump prices were assessed at Eur9.50/kg Sept. 1.