Setbacks in hydrogen projects across Europe have sparked frustration, especially with recent pauses in high-profile pipeline initiatives. Despite this, the hydrogen supply chain remains riddled with risks, particularly in key areas.
Advocates argue that national governments in the US and Europe have been slow to clarify policies and set standards for hydrogen. They point out the lack of infrastructure to move hydrogen across borders and stress the need for financial markets that provide clear price signals and help mitigate risks.
Looking back, it seems almost inevitable that low-carbon hydrogen, a fuel with no existing market, would face challenges. Yet, the hydrogen industry continues to progress. While many projects have been delayed, relatively few have been canceled. According to the Hydrogen Council’s “Hydrogen Insights 2024” report, over 1,500 clean hydrogen projects worldwide have reached the final investment decision (FID), signaling a maturing pipeline that now focuses on the most promising initiatives.
Still, advocates are calling for stronger leadership and greater financial support from governments and public institutions. However, their primary focus remains on stimulating market demand.
Global Auctions Begin to Foster Hydrogen Market
Recent developments, such as auctions held by organizations like the European Hydrogen Bank and the H2 Global Foundation, have started to create a functioning market for low-carbon hydrogen and its derivatives. These global auctions could play a pivotal role in driving the industry forward.
One significant breakthrough occurred in July when the first winner of the H2Global auction was announced. The contract was awarded to Fertiglobe, a joint venture between UAE-based fertilizer company OCI and the state-owned oil company ADNOC. Fertiglobe will deliver green ammonia to European ports starting in 2027, with a contract worth up to EUR 397 million.
The ammonia will be produced at Fertiglobe’s Egypt Green Hydrogen project, launched in 2022 in the Suez Canal Economic Zone. The project will use solar and wind power (273MW) along with a 100 MW electrolyzer capacity to produce the green ammonia, according to H2Global.
In addition, auctions for green methanol and eSAF are also planned, with sales-side auctions in Europe expected to start around 2025 or 2026.
Auction Mechanism Reduces Risk and Encourages Investment
H2Global CEO Timo Bollerhey explained that in these auctions, “volume and price determine the best bidder.” The approach follows a pure market model, where the best offer wins. The H2Global Foundation, established by the German government in 2021, is working to create markets for green hydrogen and its derivatives. The foundation’s trading subsidiary, Hintco, enters long-term contracts with suppliers and short-term contracts with buyers in Europe. This system provides the legal certainty needed to reduce risks and enable large-scale projects to secure investment.
The H2Global auction system helps bridge the gap between the high cost of producing low-carbon hydrogen and the lower prices buyers are willing to pay. By leveraging significant funding, H2Global enables sales in Europe at market-based prices through short-term contracts.
Bollerhey emphasizes that the goal is to establish transparent pricing, which is crucial for creating a functional market. He explains that this process will eventually lead to equilibrium prices and enable both buyers and sellers to manage risks more effectively.
“We need to create a market with not just bilateral trades, but liquid markets with price transparency,” Bollerhey said. “That’s why people were eager to see our first pricing signal.”
These price signals will guide project developers globally, helping them adjust their business plans to match available prices in Europe.
Auctions Expand Globally
H2Global’s efforts to create hydrogen markets are not limited to Europe. The foundation, originally based in Germany, is expanding into international partnerships with entities in countries such as the Netherlands, Canada, and Japan.
In 2021, Hintco received EUR 900 million from the German government for its first three auctions. This amount grew to EUR 3.5 billion in 2023, with additional contributions from the Dutch government (EUR 300 million) and similar pledges from Canada and Australia.
Looking forward, H2Global plans to set up separate entities for specific countries. For example, a Dutch joint entity is being planned to cater to local needs.
H2Global: A Green Market Maker
In 2024, the H2Global Foundation received a $1 million grant from the Bezos Earth Fund, recognizing the foundation as a key player in creating markets for new green fuels. As a “green market maker,” H2Global is also working to create futures contracts and other financial instruments to support the hydrogen market’s growth.
Bollerhey stressed that the next step after matching supply and demand will be to establish futures markets. “To develop a real market, you need to put financial instruments in place,” he said. “These are the prerequisites for achieving liquidity in the market.”
He added that once market liquidity and price signals are in place, large-scale investments, including gigawatt-scale projects, can begin in the next decade. H2Global is collaborating with the European Energy Exchange in Leipzig to develop new energy exchange platforms.
Bollerhey pointed to a study by Roland Berger, “The Roaring ‘30s – A Clean Hydrogen Acceleration Story,” which highlights the challenges in meeting 2030 green hydrogen goals. He noted that the 2030s would be a critical decade for the hydrogen industry.
“It’s important that we’re laying the foundation now, so that in the 2030s, these markets can really take off,” he said.
Mobilizing Global Markets
H2Global’s continued expansion is supported by significant funding from the German government and growing international partnerships. Its second round of auctions is expected to be larger, incorporating lessons from the first round.
These efforts will be amplified by the EU’s European Hydrogen Bank, which held a EUR 800 million pilot auction this year to support hydrogen production in Europe. Larger auctions, backed by the EU’s Innovation Fund, are expected to follow.
Governments around the world, including those in Denmark, the UK, Chile, and India, are also working on creating auction mechanisms to bridge buyers and sellers. These initiatives, funded by billions of dollars from public sources, aim to provide the initial leverage needed to attract the trillions in investment required for a global green hydrogen economy.
Bollerhey emphasized that mobilizing private sector investment is crucial. “Public dollars should not only subsidize specific projects but should flow towards market creation,” he said. “A functioning market is essential for private funds to flow in.”
With growing international cooperation and increasing investment, H2Global is poised to play a pivotal role in shaping the future of the hydrogen market.
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