Spot market trade may well play a critical role in the development of hydrogen markets, but their emergence may not come until well after initial funding programmes and subsidy schemes have been completed.
Prior to that, market participants must also navigate significant hurdles. Frans Pieter Lindeboom, Regional Manager for Lhyfe Spain, answered ICIS’ questions on the future of emission-free hydrogen production.
Hydrogen has been suggested as a key enabler for the energy transition.
However, it is far from mature as commodities markets go, meaning it is not yet liquid enough for price references to emerge. Such price points, usually centralised via exchanges or brokers, are critical for market entrants, as they reflect the balance of supply and demand, indicating whether a market needs more or less supply.
According to Lindeboom, the development of a spot market could arise as a secondary phase to the hydrogen economy. “I assume that during this decade most projects will be financed by offtake agreements, which will create a first market for the growing demand of delivery by tube trailers, as – for example on our side – in all our production sites, we plan to produce more than the volume requested by our initial offtakers,” Lindeboom said.
Following the 2020s, “once hydrogen or its carriers have become a more integral part of the energy transition a bigger spot market will appear,” Lindeboom continued.
The official start of the biggest hydrogen infrastructure project – the European Hydrogen Backbone, will further support the creation of a spot hydrogen market, Lindeboom added.
Collated data from ICIS Analytics shows that hydrogen demand in Europe is expected to more than double by mid-2030 compared to 2024. Hydrogen production via electrolysers is also forecast to increase, although not as fast, and is expected to cover about 39% of European demand by 2035.