PROJECT BY HYXCHANGE
24-09-2020
PROJECT
A Hydrogen Exchange for the Climate
This study explores the possibilities for a hydrogen exchange, partly based on the previous experience of the establishment of the electricity exchange and the gas exchange.
Several preconditions apply to a hydrogen exchange, partly based on previous experience with the establishment of the electricity exchange and the gas exchange. It requires a developed market with enough different suppliers and demanders, as well as a physical trading point or energy infrastructure where market participants can find each other to exchange surpluses and deficits. One difference is that, at the time, the electricity and natural gas exchanges were created by liberalising an existing situation where the market and the infrastructure were in place beforehand. In the case of hydrogen, both the market and the infrastructure have yet to be largely built up. It takes time (approx. 6 – 10 years) to realise the necessary hydrogen infrastructure and also to bring the climate-neutral hydrogen production up to the required level. The hydrogen exchange must therefore be built up in phases, with the exchange growing along with the market.
In the final situation, several options are possible as trading points: new hydrogen hubs in the making or announced; the existing hydrogen pipelines of the industry; future landing hubs for hydrogen imports; storage facilities for hydrogen; and the announced hydrogen “backbone” of the Gasunie (by converting part of the gas infrastructure). Ultimately, the hydrogen backbone will be the most decisive element since all other infrastructures will be connected to it. This backbone can also serve a variety of market participants. This is a favourable situation for an exchange with added value.
In terms of volatility and temporal dynamics, the hydrogen market is expected to be half-way between the electricity market and the gas market. This creates added value for the economic optimisation process and for optimising the dynamic matching of supply and demand. This will reduce costs, especially if this is an exchange that works for all market participants across the network, without barriers.
The Netherlands has a unique starting position due to its cost-efficient approach to sustainable energy, its location, which is perfect both for offshore wind and the landing of hydrogen imports, the role that Dutch industry plays in hydrogen, and, of course, the unique gas infrastructure that will be converted and used for the transport of hydrogen. The Netherlands also has a track record when it comes to energy exchanges: as the designer of the system of market coupling of the European electricity exchanges, and, of course, the creation of Europe’s leading gas market at the TTF.
In this regard, it is recommended to take an appropriate initiative. Such an initiative should be structural, aimed at the launch, development and expansion of the exchange initiative as it grows with the development of the Hydrogen Market as a whole.
Three elements can be distinguished
subsequently:
1. Forerunners of the exchange initiative also paving the way for the market: a system for guarantees
of origin and the trade therein.
2. Regional physical markets in the start-up phase based on the hydrogen infrastructure at one or more port locations.
3. The final hydrogen market on the hydrogen “backbone” around a virtual trading point, over a network with a postage stamp tariff with international connections to other countries
In order to set this up in a coherent manner, it would be best to set up an initiative group. Such an initiative group would then deal with the main preconditions and condition-setting activities such as the initial design of a hydrogen price index and the criteria of a system of guarantees of origin. Such an approach has already yielded positive results: at the start of the electricity and gas exchanges and also in the international context with European market coupling of the electricity markets. This experience can be used for the establishment of the hydrogen exchange.
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