Securing offtake remains a big challenge for renewable hydrogen project developers, but a focus on producing derivatives has enabled a breakthrough for some, delegates heard at the World Hydrogen Week conference in Copenhagen this week.
"We had to go through the entire value chain" to find where the demand is, Swedish green steel company Stegra's chief business development Luisa Orre said. Stegra found customers that were willing to buy green steel "made from green iron made from hydrogen made from renewable electricity". A project focused on producing green iron, or renewable hydrogen would not have found its footing in the same way, Orre said.
Danish developer European Energy took a similar approach to realise its project in Denmark's Kasso — the largest e-methanol plant operating in Europe. "We started with the offtaker" and worked backwards to build the project, chief executive Knud Erik Andersen said.
European Energy held discussions with several potential customers to find out what they needed and eventually entered an agreement with Danish shipping group Maersk for long-term e-methanol offtake. The firm has "sold out" the capacity of the Kasso plant and has started a "new round of discussions" with buyers for capacity from other facilities, Andersen said.
Having a "more established offtake market", for example for ammonia or methanol, means that derivatives projects have a better financing case in comparison with pureplay hydrogen projects looking for customers, European bank Unicredit's managing director and head of infrastructure and export finance Youssef Fahd said.
Hydrogen infrastructure initiatives such as transport pipelines have been delayed in many European countries, which has not helped the business case for pure hydrogen projects, delegates said. Products such as ammonia and methanol benefit from existing infrastructure for transport and storage and known risks, the port of Antwerp-Bruges' hydrogen and CO2 programme manager Gilles Decan said. But existing facilities will still have to be expanded to serve the energy transition market, he said.
Regulatory frameworks driving adoption of hydrogen-based fuels through mandates — such as the EU's ReFuelEU Aviation rules and the International Maritime Organisation's planned net-zero framework — further strengthen the business case for derivative projects, French biomass and hydrogen company Haffner Energy business developer Meryl Haffner said. An e-fuels market with mandates can work "as a catalyst" to the hydrogen sector, Haffner said. The company is approached more often by e-fuels developers looking to source biogenic CO2 than customers looking for hydrogen, Haffner said.
But regulations need to be "taken seriously" by industry and governments in order to become a real market driver, H2Global managing agency Hintco chief executive Timo Bollerhey said. While "in theory" e-fuels projects have a good business case, very few are moving forward, Bollerhey noted. Recent industry conversations about making adjustments to European rules, for instance on the definition of renewable fuels of non-biological origin, have held back progress because potential customers wonder whether regulations could change in a few years. "Europe really shot itself in the knee" with opening the way to revisions to the rules, Bollerhey said.
