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Transatlantic hydrogen coalition seeks to emulate market forces

In forming a coalition of prospective buyers and sellers of hydrogen on both sides of the Atlantic, an industry group is looking to set up the superintending architecture of a market before a market even exists.

A coalition of industry players is forming with the aim of emulating some of the market forces that wouldn’t otherwise exist due to the absence of an actual global hydrogen market.

The group, called the Transatlantic Clean Hydrogen Trade Coalition (H2TC), has outlined the pursuit of five main goals that will support early hydrogen movers in the US Gulf Coast and Northwestern Europe, Nabil Bennouna, principal on the hydrogen team at RMI, one of the coalition’s proponents, said in an interview.

The coalition is still growing its membership, and its work has been endorsed by over 20 companies including Ambient Fuels, Apex Clean Energy, Buckeye, BAES Infrastructure, Intersect Power, Linde, LyondellBasell, NextEra Energy, OCI, Shell, STX, Trafigura and Zhero.

As its first goal, H2TC is seeking to foster regulatory cohesion between the US and Europe.

“The lowest hanging fruit we saw was regulatory alignment between the US and the EU, and the opportunity to incorporate real market data from the private sector in shaping those decisions, because there are a lot of efforts on both sides of the Atlantic, but specific trade objectives have been lacking,” Bennouna said.

The coalition has a stated goal of facilitating trade of more than three million metric tons per year of methanol and ammonia by 2030.

H2TC is also seeking to map out infrastructure requirements to ensure the right foundation is built for the industry.

“In the absence of some limited amount of coordination, there’s a real risk for harmful path dependencies to emerge. Building the wrong infrastructure could create bottlenecks by itself,” he said.

‘Temporary scaffolding’

A third goal is to match supply and demand, something that gets at the heart of the value of coalitions, according to Bennouna.

“Before you have a fully liquid commodities market for hydrogen, prospective market participants really need a medium to exchange these ideas to identify bottlenecks and at least signal their interest,” he said. “Where do you go to signal your interest as a market participant? There’s no digital exchange for any of this to happen at these very nascent stages.”

He added: “I think about it as emulating some of the benefits of market forces before the market exists, so it’s kind of a temporary scaffolding to help build a little bit of structure to accelerate the market activation.”

A fourth objective is building a dedicated workstream to model landed cost estimates with sound data.

“You want to be able to quantify regulatory risks and implications of different rules as they are implemented, and you can’t do that without a sound quantitative engine,” he said. 

Finally, the group is seeking to integrate its findings with capital markets – or telling their “de-risking story” to the project finance lenders that will ultimately finance projects.

“At some point you’re going to need to implement these big ideas, and you’re going to need to finance these big ideas, and the capital markets are going to need some help understanding risks,” he said.

In this sense, according to Bennouna, the coalition is “a way of spreading out first-mover risks across a diverse set of market participants.”

He noted that, before a mature market exists with developed infrastructure, no individual player is incentivized to take on first-mover risk: other competitors can step in and take advantage at later stages. 

“If you’re framing out the story and the pathway to de-risking for the direct project participants, then theoretically that de-risking story and data can also be utilized to help the capital markets navigate their internal risk management processes,” Bennouna said. “If you’re already doing a lot of that work through this platform, it’s a natural way to integrate and help those institutions get the best and most current story about risks for transatlantic trade projects.”

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