Green hydrogen consumers share their views
Developers and off-takers unite to examine how to get early projects off the ground
The nascent green hydrogen sector faces something of a dilemma. Green hydrogen developers need customers that are willing to purchase the hydrogen they plan to produce in order to get their projects off the ground. However, potential customers won’t sign those deals, or invest in retrofitting their systems for hydrogen, if they aren’t confident about future supplies of green hydrogen.
That is why Tamarindo gathered green hydrogen developers and off-takers in London on Wednesday, May 24th for a meeting of our Power-to-X Leadership Council. The forum allowed future consumers of green hydrogen to share their respective challenges with producers and examine what it will take from both sides of the market to get early projects off the ground.
Here are some key insights from the discussion and some images from the day.
Green hydrogen makes sense
Off-takers at the meeting asserted that the reasons for integrating green hydrogen into their operations were relatively straightforward. First, green hydrogen will assist them in reaching ambitious decarbonisation targets. Second, green hydrogen presents the best alternative to natural gas, especially for industries that require high heat and cannot electrify easily or cheaply.
Switching to green hydrogen comes at a cost
For most off-takers who don’t currently use any colour of hydrogen in their operations, new equipment will be required or existing equipment will need to be retrofitted to enable them to run on hydrogen - and this is an obstacle due to the up-front capital expenditure that would be required. Manufacturers, for example, may need to replace their existing boilers that run on natural gas in order to incorporate green hydrogen.
Reliability of supply is a worry
Off-takers made clear that they see the reliability of green hydrogen supply as a major risk, considering the small amount that is produced today. Guaranteeing supply is especially important for off-takers that run factories 24/7 and need a constant supply of hydrogen, and for those whose equipment can only run on hydrogen and not other gases.
Off-takers can mitigate supply risks
In order to best mitigate supply risks, off-takers are looking to have equipment that can run on both hydrogen and other gases or have multiple equipments for different gases, so they can switch to a different gas if green hydrogen production goes down. Off-takers and developers also discussed ensuring adequate storage is in place to create a supply buffer.
Impacts on the end product aren’t yet known
Some off-takers stressed that they do not yet know the impact of using green hydrogen on their equipment and on the quality of the end product. While early testing allows off-takers to get some understanding of the impacts, they won’t be able to adequately ascertain the long-term consequences of consistent hydrogen use on the lifespan of equipment and the quality of the product until normal operation is underway.
It is important for risks to be shared
Developers and off-takers were largely optimistic about the potential of future projects, but they are proceeding with caution. With the market very much in its infancy, there are considerable uncertainties ahead. But developers and off-takers are certain that risks will need to be shared between both sides of the value chain if projects are to come to fruition - and that collaboration with infrastructure operators, policymakers, financiers, investors and lawyers is essential too.