The Netherlands – The items and conditions that will be necessary to develop trade for hydrogen have been clarified as a result of research into the practical implementation of a hydrogen exchange in the Netherlands.
They include hydrogen certification, a price transparency index, a spot market, and the development of trading tools to balance the physical hydrogen network and store the gas. Bert den Ouden conducted research on behalf of Gasunie and the port authorities of Rotterdam, Amsterdam, Groningen, and North Sea Port, in consultation with market actors and governments.
Growing hydrogen demand
The growing demand for climate-neutral hydrogen necessitates that the market function effectively and that pricing be transparent and efficient. Both can be facilitated by a hydrogen exchange. HyXchange will be the name of the new hydrogen exchange. In a further initiative, HyXchange intends to test the initial trade products in pilots and simulations, involving the market even further.
In September 2020, the initial exploratory study on establishing a hydrogen exchange was presented. This research envisioned the gradual establishment of a hydrogen exchange that would grow in tandem with the hydrogen market and the development of hydrogen networks. In response, the aforementioned parties commissioned Bert den Ouden, former CEO of the Dutch Energy Exchange, to conduct a follow-up investigation.
The port authorities of Rotterdam, Amsterdam, Groningen, and North Sea Port (Vlissingen, Terneuzen, and Ghent) are all working on hydrogen infrastructure plans for their industries, as well as other innovative initiatives. For some years, Gasunie has been developing plans for a national infrastructure to connect all of these places, as well as hydrogen storage, with the goal of facilitating import and transit to Germany and Belgium, while also making hydrogen more accessible to a wider range of parties. A hydrogen exchange, similar to the electricity and gas exchanges, could help to kickstart a market for climate-neutral hydrogen. It may also aid in the economic development of a hydrogen market.
The subsequent project comprised a lot deeper investigation and a more in-depth examination of the options. In addition, a significant number of market participants were informed and then consulted in the form of product groups.
Certification of green, low-carbon and imported hydrogen is needed to pipe a greater volume of hydrogen from a wide range of sources through a single grid, whilst still allowing users to choose which type of hydrogen they wish to purchase. This is like an electricity and gas system where the same grid is used whatever the origin, but where green electricity and gas are certified, thus adding value for the client. In anticipation of the regulations, the hydrogen exchange initiative intends to organize a pilot scheme to gain experience in this area.
A second point needed to develop a hydrogen exchange is an index that provides transparency with respect to the price at which hydrogen can be traded. The study produced an index reflecting the price of the hydrogen, as well as the certificates, according to the generation method and the extent to which it manages to cut carbon emissions.
Thirdly, a spot market is important in the development of a hydrogen exchange. This will at first be set up as a market simulation, and when the infrastructure in one of the ports is ready and there are several providers and customers, a real local spot market will be launched. This would be expanded as Gasunie connects the hydrogen grids in the various port and industrial areas to its national hydrogen grid (HyWay27 project). This type of spot market would present an opportunity for international hydrogen trading links.
Finally, trading instruments are needed to balance the network and store hydrogen. These mechanisms must be explored in further detail and they could also form part of a proposed market simulation.
Establishing the necessary conditions
The initiators intend to flesh out the study’s findings through pilots and simulations in order to eventually build the HyXchange trading platform. This market will also have a European component.
In this regard, the government will play a critical role in establishing the necessary conditions. For starters, there is green and low-carbon hydrogen certification, as well as hydrogen imports. Furthermore, it is highlighted that, though the government has high objectives in the field of hydrogen, more particular tools are required if these objectives are to be completely realized. It is about creating an environment in which market participants are encouraged to participate in and trade in hydrogen in order to achieve a rapid and efficient energy transition and attain carbon neutrality.