INTERVIEW: German H2Global hydrogen import auction to open in Q2 for green ammonia

Germany's H2Global hydrogen import initiative plans to open a first auction window for a 10-year contract for green ammonia imports this quarter, with a first cargo expected in 2024, a senior advisor for the government-funded agency said April 4.

Germany is providing Eur900 million ($1.1 billion) to H2Global to fund up to 500-MW of electrolyzer capacity abroad.

"We are hearing from the industry that H2Global with its criteria will set the gold standard for a lot of other deals," Kirsten Westphal, executive director analysis at the H2Global Foundation, told S&P Global Commodity Insights in an interview.

The agency is developing a WTO-compliant catalogue of standards, focused on ensuring project additionality and trustworthy certification of renewable hydrogen.

Certification across the supply chain was challenging for most countries, Westphal said.

"There is a clear trade-off between the speed and depth of the energy transformation," she said.

Proposed standards supporting the first global auctions were currently with the ministry for approval.

The first auction would be global competition for frontrunner projects. Proceeding auctions would zero in on green methanol and sustainable aviation fuel projects.

Future windows could then focus on projects in specific developing markets, Westphal said.

The H2Global scheme is to bridge the gap between 10-year hydrogen purchase agreements and annual resale contracts for German consumers, with the first sale planned in 2023.

Ammonia price signals

The focus on existing liquid markets for ammonia, methanol and jet fuel ensured there was ready demand for green versions of the products, Westphal said, allowing new applications in transport or power generation to emerge.

Estimates of how much hydrogen would accrue from the initiative, however, were hard not least due to the commodity cost environment.

"We have the Eur900 million, which as you can imagine is something but not that much given the current cost paradox situation. So we want to see how much they bid for the specific amount of money, and what volumes they will deliver ... at the moment, it's extremely difficult to say," she said.

Using average electrolyzer utilization rates for 500 MW installed, volumes could be in the region of up to 1 million mt over the 10-year period of the scheme, according to S&P Global estimates.

Platts assessed the price of ammonia CFR Northwest Europe at $1,665/mt March 30, almost double that seen just before Russia invaded Ukraine on Feb. 24, S&P Global data showed.

Conventional ammonia is made from natural gas-derived hydrogen via the Haber-Bosch process adding nitrogen from the air.

Ammonia is much easier to transport than pure hydrogen, due to its higher condensation point.

Around 20% of global ammonia demand is transported internationally, mainly via seaborne cargoes.

Green ammonia can be derived from renewable hydrogen via electrolysis.

Hydrogen accelerator

Westphal noted the ambition to expand H2Global to European level in the German government's coalition agreement.

EU funding could promote larger auctions with "energy diplomacy needed for the upstream development of green hydrogen as well as reliable and mutually beneficial interconnectivity," she said.

Hydrogen pipelines as proposed by Germany and Norway or plans to link North Africa to a European H2 backbone could play a vital role in accelerating the sector and helping EU efforts to disengage from Russian gas, she added.

In its REPowerEU strategy in March, the European Commission proposed an additional 15 million mt of renewable hydrogen by 2030 to offset reliance on Russia.

This implied an additional 10 million mt of imported hydrogen to Europe and 5 million mt of fossil-free hydrogen produced in Europe itself.

"We have the technologies, but we need to kickstart. Regulation has to be simple and trade mechanisms need to be in place," Westphal said.

S&P Global assessed Northwest European green hydrogen (PEM electrolysis, including capex) at Eur16.98/kg ($18.70/kg) April 1, versus $4.25/kg for the cheapest locations in Western Australia, the US Gulf Coast and Saudi Arabia.