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New hub for hydrogen trading planned

There is a lot of talk about hydrogen – not much is produced. Potential manufacturers shy away from the investments. A new trading center in Leipzig is now supposed to change that – also with a lot of money from the federal government.

Germany needs hydrogen to tackle the climate change, that much is clear. The colorless gas is considered a substitute for natural gas, oil and coal. It is easy to transport and could play an important role for certain sectors in the future – for example for the energy-intensive steel industry, as the economist Veronika Grimm, member of the German Hydrogen Council, explains, but also in the chemical industry, glass and paper production.

Hydrogen still rare

The process of producing hydrogen is called electrolysis. This is done with the help of electricity, which ideally comes from renewable sources. If the total electrolysis capacity in Germany was just under 0.1 gigawatts in 2022, it should be ten by 2030 – a goal that Federal Minister of Economics Robert Habeck (Greens) described as “really demanding” at the East German Economic Forum in Bad Saarow.

However, the need is much greater. Depending on which forecast you follow, between 56 and 110 terawatt hours (TWh) will be called for in 2030. The oversized mass will therefore have to be imported. The Grimm economy speaks casually of “huge amounts” for which there is currently no market. A “chicken and egg problem,” said Habeck in Bad Saarow, which must finally be solved – this summer.

It remains to be seen whether the start-up Hint.Co can create this market by the summer. But the subsidiary of the H2Global Foundation came to stimulate precisely this market ramp-up. “We are building the first hydrogen dealer here to bridge the chicken-and-egg problem we have right now,” explains Hint.Co boss Timo Bollerhey.

Prices should form

The Hint.Co is a so-called intermediary – based in Leipzig, although the employees are more likely to be found in Hamburg or Berlin than in Saxony. The company buffers the risks of producers and buyers, buys green hydrogen produced under strict conditions or its derivatives in one auction and sells it in another auction to buyers in Europe.

The trading center wants to get potential hydrogen manufacturers to produce – and achieve that prices are formed. How it works? “We offer long-term purchase contracts on the purchasing side – this provides the basis for investment security. On the selling side, we sell every year,” says Bollerhey.

investors want acceptance security

“Bidders from all over the world can bid and then get a contract that has a term of around ten years,” explains Grimm. That means acceptance security, and that is important for investors. According to Bollerhey, as long as there is no guarantee of acceptance, no one is willing to bear the production costs.

Hint.Co wants to buy as cheaply as possible and as much green hydrogen as possible – in order to then sell it cheaper than it was bought throughout Europe. “The hope is that the price at which hydrogen can be sold in Europe will increase bit by bit. There is just more demand, with more companies converting their business models to hydrogen,” says Grimm. And that the price Hint.Co buys for goes down.

billion funding from the federal government

In the beginning it is a loss-making business that is subsidized by the state. The Federal Ministry of Economics is providing 900 million so-called shortfall financing for the first funding window – money that is tied to strict production criteria, from EU guidelines for renewable energy to environmental and social impact assessments.

If profits are made, the federal government gets money back. Another 3.5 billion euros are to follow, and the Federal Ministry of Transport also wants to get involved. So a lot of money. “From the perspective that something has to happen, it’s not a big sum at all,” says Grimm.

Where are the suppliers from?

Similarly, the energy exchange European Energy Exchange (EEX) in Leipzig evaluates the concept behind Hint.Co and H2Global. A hydrogen ramp-up requires massive private investments, for which a liquid hydrogen market with reliable price signals must be established, says a spokeswoman for the exchange, who is herself a H2Global member.

According to EEX, Europe could thus develop into a global hub for hydrogen trading. However, Hint.Co still has to organize the first bidding process for hydrogen producers. Now it is becoming clear where the companies willing to invest millions in setting up green hydrogen production under European rules are coming from.

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