A sustainable hydrogen world requires not only a comprehensive expansion of infrastructures, but also a functioning market. With H2Cloud, the Managementberatung think utilities AG & Co. KG wants to position a platform for OTC trading (over-the-counter trading, also direct trading or telephone trading) of hydrogen products. Dr Peter Rügge, founder of H2Cloud and managing director of think utilities, explains the background and analyses the market environment.
H2-international: Dear Dr. Rügge, how do you assess the current market for hydrogen?
Rügge: As exciting and very dynamic. A lot is happening in a short time and we hope that the activities will remain coordinated.
How is the H2 trade currently handled?
At the moment, long-term supply contracts are concluded between the suppliers and the demanders. Transport is included. Much is reminiscent of the “old” gas economy. Currently, the hydrogen market is still intransparent and illiquid. The profit margin for suppliers is currently relatively high, as few players are involved in the oligopolistic market and thus relatively little information is available. In addition, the current volumes of supply and demand are not systematically recorded. This also means that the market opportunities for new producers or consumers are not clearly identifiable.
What quantities are we talking about here? Where do these mainly come from and what are the current sales markets?
If we take the current assessments for Germany, the annual demand is 57 terawatt hours, EU-wide without Germany it is 256 TWh. The quantities are produced predominantly in Europe for the process industry and the chemical industry, but also for other customer segments.
How many active providers and demanders are we talking about here at the moment?
This is a manageable market – we still have an oligopoly that supplies the customer segments mentioned. While this oligopoly can meet the current demand for hydrogen, it is not in a position to provide the necessary supply quantities of hydrogen needed for widespread decarbonisation.
You want to change this situation with the H2Cloud. What approach are you taking?
Market activity comprises the economic relations between all suppliers and all demanders of a certain good in a certain space at a certain time. Two basic questions have to be answered by the mechanisms of the market in controlling and allocating the production of goods: How do suppliers get information about what goods to produce and in what quantities? And: How are demanders’ plans coordinated so that there is a balance of supply and demand plans?
The solution is simple, since the coordination of supply and demand is achieved through markets by adjusting the price of any good in such a way as to bring supply and demand into line. In the hydrogen market, we are still a long way from this coordination, which is also known in economics as the “invisible hand”. Of course, the European and German support measures, for example, are aimed at activating the hydrogen market and enabling the market ramp-up so that sufficient supply quantities are possible. Since today’s hydrogen market can be described by low transparency of supply and demand quantities, with low market liquidity and high transaction costs, we see precisely here starting points for effectively developing the market for hydrogen.
To what extent do you sense interest from the market for a corresponding solution?
We are experiencing a lot of interest from a wide variety of market participants in the gas industry, who are naturally pushing into the developing hydrogen market. In the course of EU funding under the Important Projects of Common European Interest, IPCEI, a lot of money is also available already. But we are also pleased about foreign interest. We are surprised that we have received so much positive feedback. In the meantime, we are in talks with various national and international energy suppliers.
What is the timetable for the launch? What are the biggest challenges in implementation?
We want to launch in the second quarter of 2022. Until then, we still have a lot to do. These include talks with associations, business development or project acquisition. The current situation – coming from the existing market – can also be described as an upheaval, as new suppliers and demanders are pushing into an existing oligopoly. […]
… Read this article to the end in the latest H2-International
Author: Michael Nallinger