Green Markets Hydrogen, a Bloomberg company, has presented a brand-new white paper that provides a Hydrogen Purchasing Guide and Considerations specifically for those on the procurement side of the industry.
Hydrogen today is largely sold by large industrial gas companies and distributors, and the hydrogen economy in the US is set to experience an influx of subsidies from the Inflation Reduction Act and the Infrastructure and Investment Jobs Act.
As the new white paper explains in its overview, these acts are expected (as of mid-2022) to dedicate a combined $22.5bn to lower-carbon hydrogen production.
This funding may alter the competitive landscape in the industry, although the key needs procurement professionals must address in terms of business requirements and physical properties of the hydrogen will remain the same.
The only exception to this – the white paper explains – is with relation to Net Zero goals from the organisation, which may filter down to carbon dioxide (CO2) equivalence targets for hydrogen purchased.
A guide to procurement
Against this backdrop, it is clear that where the need for hydrogen exists, an organisation must understand both its physical needs in terms of how the hydrogen will be used, as well as its business needs.
The new guide from Green Markets Hydrogen identifies some of the key considerations to be aware of when procuring hydrogen for your business.
The paper begins by setting out the primary considerations, focusing on the gas technical requirements. These critical requirements include:
- Volume – The distinction between traditional ‘volume’ vs ‘molecule’ today, what the end-user needs and the supply mode implications
- Gaseous state – How differing hydrogen usage applications can require different states of matter, that being liquid or gas
- Pressure – Why certain hydrogen applications require higher pressures that impact the size of compressors needed on-site or in transit
- Usage patterns – How downstream processing can either be batch or continuous, which could impact equipment and piping sizing.
- Purity – Including context on specific applications and requirements.
The paper proceeds to map out the business needs and contract terms, and what to watch out for. This section includes explanation of pricing terms, escalation clauses, fixed and variable charges, and how different contract terms are viewed by different stakeholders (buyers and sellers, for example).
Included in this section is an example of formulaic pricing for over-the-road transported hydrogen, for further context of the procurement landscape.
The paper concludes with a range of other contracting considerations, including:
- Term length
- Service level availability/reliability
- Force majeures
- Equipment ownership
- Sale of gas vs sale of equipment.
It also makes reference to CO2 emissions and how, going forward, there could be a scenario where the CO2 equivalence of hydrogen becomes a purchasing factor.
Available now
The new white paper, titled Hydrogen Purchasing Guide and Considerations, is available now via gasworld’s white papers platform.
For more information and how to download the paper, visit www.gasworld.com/white-papers.
