From producer to consumer: supply strategies for green hydrogen project developers
What did we learn from Leadership Council meeting two?
On Friday 17th February, Tamarindo gathered its community of green hydrogen project developers for the second meeting of its Power-to-X Leadership Council. Our members-only working group is dedicated to helping senior leaders at green hydrogen developers to harness the potential of power-to-X technologies.
Our members said a key priority facing developers, as they seek to get early projects off the ground and secure funding, is structuring supply in order to guarantee delivery to off-takers.
We convened our members, who are spearheading some of the pioneering green hydrogen projects across Europe, for a dedicated meeting to examine this issue. Tamarindo facilitated the discussion and we gave our members a space for peer-to-peer dialogue and collective problem-solving to help them progress their projects.
Here are some key takeaways from the meeting and a snapshot of the day.
Developers should start with the end user
Participants were in broad agreement that it is advisable for developers to identify the off-take plan from the project outset, as supply strategies are largely determined by the end use. This is not always straightforward: many developers are building projects where there are optimal renewable conditions and then identifying end users.
Securing an off-taker is challenging
Participants noted it is challenging to find and secure deals with customers that are willing to sign up to long-term hydrogen off-take agreements, which are critical for developers to achieve project bankability. Developers speculated that potential off-takers are concerned about the costs associated with switching to hydrogen as a new fuel and fear it is too risky and innovative.
Developers need to minimise risk
Tamarindo identified a number of strategies that developers can deploy to minimise supply risks while the hydrogen market is still nascent. Developers can supply green hydrogen to existing grey hydrogen users for example, or supply to customers who will take hydrogen blended with gas, ensuring that off-takers have a diversified supply base.
Legal frameworks are emerging
Participants noted that legal frameworks and structures to underpin hydrogen off-take deals are still evolving. In speaking to legal experts, Tamarindo identified a number of parallels with supply structures for biofuels and LNG meaning that future hydrogen agreements can draw on existing market examples.
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