One of the biggest hurdles in the hydrogen market is finding buyers who are ready to commit to long-term offtake agreements. Without guaranteed demand, investors and developers are hesitant to pull the trigger on big hydrogen projects. To get the hydrogen economy moving, we need serious buyers to step up—and we need strategies to make that happen.
Why Serious Buyers Matter
Hydrogen projects are high-risk and capital-intensive. Investors want assurance that the hydrogen they produce will actually be sold. Long-term offtake agreements provide that assurance, reducing uncertainty and making projects financially viable.
Examples of Securing Offtake Agreements
- Industry Partnerships:
- Steel and Cement Sectors: Companies like Thyssenkrupp and ArcelorMittal are exploring ways to decarbonize steelmaking using green hydrogen. Governments and developers can encourage these industries to commit to hydrogen offtake agreements by offering subsidies or tax incentives.
- Fertilizer Production: Fertilizer makers, like Yara, are turning to green ammonia (made from hydrogen) to reduce emissions. Yara has signed multiple offtake agreements to secure its supply chain.
- Transportation Commitments:
- Airlines: Airbus is developing hydrogen-powered aircraft, but this only works if airports and fuel suppliers commit to investing in hydrogen infrastructure. An example is the partnership between Air Liquide and Groupe ADP to explore hydrogen use in Paris airports.
- Heavy-Duty Vehicles: Companies like Nikola and Hyundai are developing hydrogen fuel cell trucks. Partnerships with logistics giants such as Amazon or DHL can create strong demand for hydrogen fuel in this sector.
- Government-Led Offtake Programs:
- Germany’s H2Global Initiative: The German government has committed to buying green hydrogen on behalf of industries that can’t yet afford to pay a premium. This de-risks investment by creating a guaranteed market.
- Japan’s Hydrogen Policy: Japan has signed agreements with Australia and the Middle East to import green hydrogen, ensuring demand while stimulating global hydrogen production.
- Regional Hubs with Shared Demand:
- The Port of Rotterdam: As a major industrial hub, Rotterdam is working on securing hydrogen buyers across shipping, refining, and heavy industry. These buyers collaborate to create a critical mass of demand, which supports hydrogen infrastructure and lowers costs for everyone.
- California Hydrogen Hubs: California has fostered partnerships between hydrogen producers and buyers in transportation, particularly for hydrogen refueling stations.
How to Attract Serious Buyers
To make offtake agreements more appealing, governments and the private sector can take several steps:
- Subsidize the price gap: Hydrogen is still more expensive than fossil fuels. Bridging this gap with incentives can encourage industries to adopt hydrogen.
- Provide regulatory certainty: Buyers won’t commit if they’re unsure about future policies. Clear, long-term hydrogen strategies from governments can boost confidence.
- Support infrastructure development: Buyers need assurance that the supply chain (pipelines, storage, and refueling stations) will be ready when they need it.
By securing serious buyers, the hydrogen economy can build the momentum it needs to scale up, reduce costs, and deliver on its promise of a greener future.
Note: The context and inspiration for this blog post were drawn from EU Hydrogen Week, 18-22 November, Brussels.
