Creation of hydrogen exchange step closer

Due to a growing demand for climate-neutral hydrogen, the need for proper market functioning and transparent, efficient pricing arises. A hydrogen exchange can facilitate both. Therefore, a hydrogen exchange named HyXchange has been conceived. In a follow-up project, HyXchange plans to test the first trading products in pilots and simulations, further involving the market.

What does a hydrogen exchange entail? Important is the certification of hydrogen, an index that makes prices transparent and a spot market. Developing trading instruments to balance the physical hydrogen grid and store hydrogen are also important. This is according to research by Bert den Ouden, commissioned by Gasunie and the port companies of Rotterdam, Amsterdam, Groningen and North Sea Port in consultation with market parties and governments.

An initial scoping exercise on establishing a hydrogen exchange took place in September 2020. The scoping report provided a vision of a step-by-step construction of a hydrogen exchange. The exchange grows along with the hydrogen market and the development of hydrogen networks. Subsequently, the above stakeholders took the initiative to commission a follow-up study by Bert den Ouden, former director of the Dutch Energy Exchange.

The port companies of Rotterdam, Amsterdam, Groningen and North Sea Port are all involved in plans for hydrogen infrastructure, for their industries and other new initiatives in their areas. Gasunie has long been working on plans for a national infrastructure to connect all these regions with each other and with hydrogen storage. In addition, Gasunie has the plan to enable import and transit to Germany and Belgium in particular. This will make hydrogen accessible to even more parties. A hydrogen exchange, along the lines of the power and gas exchanges, could help catalyse a market for climate-neutral hydrogen. In addition, it helps the economic growth of a hydrogen market.

comprehensive follow-up study provided valuable suggestions. First, certification of both green, low-carbon and imported hydrogen is needed. This is to allow a larger volume of hydrogen of multifaceted origin to be transported over one network, while still allowing users to choose which type of hydrogen to buy. This is similar to the electricity and gas system where everything goes over the same grid, but green electricity and gas are certified, thus maintaining the added value for the customer. For hydrogen, in anticipation of regulations, the exchange initiative wants to organise a pilot to gain experience in this.

second issue for the development of a hydrogen exchange is an index that ensures transparency. It must be clear at what price hydrogen can be traded. The study formulated an index in which the price of hydrogen, as well as certificates, is reflected depending on the method of generation and the degree of CO2 emission reduction it achieves.

Thirdly, a spot market is important in the development of a hydrogen exchange. Initially, a market simulation is needed. Once infrastructure is ready in a port area and there are multiple suppliers and customers, this can be set up as a local spot market. Links between Gasunie's national hydrogen network and the hydrogen networks of the various port and industrial areas will ensure growth of the spot market. Such a spot market then also gives room for international interconnections of hydrogen trading.

Finally, trading instruments are needed to balance the grid and store hydrogen. It is important to further explore these mechanisms. This could also be part of an envisaged market simulation.

The initiators want to further develop the results of the study in pilots and simulations and thus realise the HyXchange trading platform step by step. This market will also have a European dimension. Some outlines of this were already recently presented by Bert den Ouden in the European ("Madrid") policy forum for gas regulation, based on the project outcomes.

Source and image: Port of Rotterdam