PROJECT BY HYXCHANGE
The objective of the HyXchange GO (certificate)-pilot was to test with real companies and realistic assets whether hydrogen Guarantees of Origin certificates are ready for implementation in the Netherlands.
Existing hydrogen (H2) value chains are organised around a relatively small number of large scale producers of (petro)chemicals. Many of these are large scale H2 consumers, which typically have their own on-site H2 supply or have close links with specialised industrial gas suppliers on premises or close-by, who produce large volumes of H2 typically from fossil sources.
Driven by the energy transition, new H2 applications are emerging in industry, mobility, power and the built environment, which are changing these historic value chains. Next to an increasing variety in demand, also the upstream market variety is increasing, with ambitious plans for H2 supply from renewable sources (e.g. wind and solar power with water electrolysis) as well as decarbonised H2 sources. The transition comes with changes to the current market operation, as the market for H2 will develop from its current bilateral trade mode, more and more into a market in which H2 can be traded freely between multiple suppliers and consumers. HyXchange aims to facilitate that development by setting up a commodity exchange, similar to those existing for natural gas and electricity.
An important difference between commodity markets and the future H2 market is the expectation that a large part of the emerging hydrogen demand will be driven by compliance targets. These compliance targets can either be mandatory, derived from EU or Dutch policies, such as the EU Renewable Energy Directive or the Wet Milieubeheer, or can be voluntary as set by companies’ corporate social responsibility (CSR) strategy.
Companies are expected to pay premium prices for H2 that has the specific environmental attributes that allows them to meet their compliance targets. These H2 attributes could be a low greenhouse gas footprint, or production via renewable electricity. In fact, it is the premium value linked to specific H2 attributes that is the main driver for the current development of new clean H2 supply chains.
For the market to recognise and verify such environmental attributes, certification is a proven approach. Guarantees of Origin (GO) certificates for instance, allow markets to verify the production origin of H2, while other types of certificates allow markets to verify whether the H2 meets eligibility requirements from mandatory policy targets.
The HyXchange GO pilot resulted in several general learnings as summarised in the report. Overall the pilot has been successful and no issues have been encountered in GO issuance or the processes. From the pilot learnings, two points of attention have been identified.
Point of attention 1: Clarifying GO definitions
During the pilot, we identified that additional clarification is needed on the definition of the GO data fields, as listed in Figure 7 to ensure they are interpreted correctly. None of these points of improvements present barriers to the implementation of GOs in the Netherlands.
Point of attention 2: Electricity and H2 metering & verification
The HyXchange GO pilot accepted H2 production data from participants without independent, third-party verification. In some cases, the data was simulated based on expected performance of assets to be developed in the future. For real issuance of GOs, only production from existing assets can be accepted. It is important that the data provided to issue these GOs will be verified by an independent body.
H2 metering and verification
We identified two aspects where such independent verification will be necessary:
1. Measurement and verification of the H2 production data, at least on a monthly basis. Typically this is done by an independent metering company.
2. Verification of the plant setup to classify the type of hydrogen produced from the feedstocks used and the greenhouse gas footprint of the H2. Typically such verification is done by an independent (certification) auditor.
At this point, guidance on how such companies or activities would be accredited is still lacking. It is also still unclear how and at what specifications the H2 will need to be metered. We expect that the Ministry of Economic Affairs and Climate will need to develop such guidance over the course of next months, prior to implementation of the GO to HBE route.
Electricity metering and verification
Currently renewable electricity that is not connected to a grid does not receive renewable electricity GOs from CertiQ. Without such electricity GOs, no H2 GOs can be issued for that renewable electricity. This will be an issue especially for integrated renewable power and hydrogen producers with a direct connection. A solution could be for CertiQ to issue electricity GOs for non-grid connected production, or for Vertogas to issue renewable H2 GOs based on other proof of renewable electricity production, e.g. via an audit report. In the latter solution, attention should be paid to potential risks of double counting the renewable electricity.
Pilot Report September 2022
Latest update Certication Committee February 2023
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