Certification of green hydrogen indispensable for Rotterdam as a future price-setting region

March 26, 2024

The future of hydrogen lies in Rotterdam. Because the Hydro Generation – a group of forerunners in the energy transition – sees that Rotterdam is the place to realize innovative solutions. This includes the young company Docklab, which is working to transform global supply chains. Janjoost Jullens from Docklab will discuss the certification of green hydrogen and Rotterdam as a pricing region with Dr. Wouter Jacobs from Erasmus Commodity & Trade Center (ECTC).

In the heart of the port of Rotterdam, Docklab ‘s international team works with around 30 innovators on digital infrastructure for the energy transition, such as the spin-out FuelFWD: a digital platform for CO2 accounting and certification of biofuels, hydrogen and hydrogen carriers. Chief Strategy Officer Janjoost Jullens explains: “Suppose you sell green hydrogen from an electrolyser and convert it to ammonia, pump some of it into a ship and then have it cracked or resold. In each of those steps you must comply with regulations. Our platform enables you to do this.” The first version of the platform was developed based on existing technology.

Wouter Jacobs, director of ECTC and senior researcher at Erasmus Center for Urban, Port and Transport Economics (UPT), was involved in the project from the start and is pleasantly surprised by the progress. “Good to hear that progress is being made. This is really important for market development.” The import of hydrogen (carriers) is subject to European regulations, which remained unclear for a long time. Jacobs: “We now know that demonstrating the green component of the production of the hydrogen carrier is a requirement to make trade possible. For this we need digital, efficient certification. Docklab’s tool offers a solution for this.”

Investing in certification will soon be at the forefront

The FuelFWD platform is being set up together with certification experts and energy parties. “We prefer to set it up now with the chain, even though there are no large green hydrogen volumes and trade yet. We have committed parties to us who want to learn, dare to invest and want to be at the forefront. With their contributions, we expect to be fully operational in about 1.5 years. We are as far as we can be,” Jullens smiles.

The platform helps turn each commodity batch (a portion of a raw material) into a digital twin: a unique digital identity that summarizes all information about the batch. This digital twin is linked to a register with all events and changes in the value chain of that batch – the product journey. Then there is a digital vault in which all associated documentation is managed. “This way you are always ready for certification, and we also offer digital management of those certificates. Moreover, with this digital twin you have continuously up-to-date digital insight with which you can serve traders and end users. You say to a buyer: here you have the digital key, just click around.”

According to Jacobs, it is necessary that Docklab’s platform is also designed for various hydrogen carriers, including ammonia. In the CommodipHy report he supervised, drawn up by ECTC, ammonia is an indispensable element in realizing a hydrogen market and trade in Europe. Jacobs explains: “Ammonia trade already exists in the fertilizer industry. Ammonia prices are therefore now driven by that industry, for example based on the number of hectares of agricultural land. While ammonia can also be used as a fuel and as a hydrogen carrier, so we need to move towards more diverse pricing.”

From long-term agreement to spot market

FuelFWD thus responds to an important future demand, says Jacobs. “You want to move from long contracts between two parties – long term agreements – to a spot market. Long-term agreements are important to get production going, because you can only finance an ammonia plant if you are sure that your customer will purchase it at a certain price. A spot market arises as soon as there is a production surplus or deficit.” In case of surplus you can sell on the ‘spot’. Who needs it now? The volume is increasing and prices vary more and more every day. That also entails risk. Jacobs further explains: “As a seller, you want to get rid of that risk. At that point, investment capital steps in, such as investment banks and hedge funds. In this way the product becomes tradable on the stock exchange. One of the most important turning points from long contracts to a spot market is correct volumes and the preconditions. In short; certification and registration.”

Jullens confirms that the platform has been designed with this vision in mind. “It should lower the threshold for trading and executing transactions quickly with each other. What is different compared to the way things are done now is that it cannot be done physically but digitally. That provides speed. In addition, it is fully equipped for optionality: there is a digital ‘twin’ of your batch, which means that you can sell your products together or in parts, but you can also cut them apart – in this case converting a batch into hydrogen and ammonia.”

Rotterdam has the best credentials as a pricing region

The optionality offered by the FuelFWD platform can also be found in the port of Rotterdam. The ECTC report therefore concludes that the city has very good credentials to become the pricing region for hydrogen and hydrogen carriers. Jacobs explains: “Where a lot of supply and demand come together, you get the best price. This will attract trade. Supply and demand arise in a place that has a lot to offer. Rotterdam and the region already form the largest shipping fuel market in Europe. They are known for their expertise and facilities when it comes to the storage of molecules. In addition, there are great ambitions to install electrolysers and the Port Authority is working with Gasunie on a pipeline to serve the hinterland.” “That indeed means that as a seller you can choose: do I store it in a tank, do I sell it directly, do I let the ammonia crack into hydrogen? Rotterdam really has an advantage in terms of versatility,” Jullens agrees.

Rotterdam is actually ready to be both the hydrogen hub of Europe and therefore the price-setting region. “With all the capital, knowledge, skills and conditions available here to make the energy transition possible, it could hardly be otherwise. Well-developed economic regions always build on what is already there. The Rotterdam region has an energy economy and associated logistics; that which has made this region great in 150 years. That is why you have to be here for that transition,” advocates Jacobs.

Making international agreements

But even with the best papers you are not there yet. Other regions that take action more quickly and attract loads may easily emerge as price-setting regions. That is why Jacobs advocates making agreements with international parties. “A spot market is created, no one can control that exactly, but you can enforce it. This means that you have to bring cargo flows to it and store production. Perhaps the market is not ready yet, but you can make guarantees. Then you will be in the books. Germany is already doing that very actively.” Jullens: “It also seems important to me that you offer good facilities, build the right (digital) infrastructure and connect parties. That you make it as easy as possible to trade.”

As a spin-out of Docklab, a subsidiary of the Port Authority, FuelFWD often collaborates with all kinds of different (knowledge) partners. The municipality is also a welcome discussion partner. “We regularly talk to the municipality about accelerating the energy transition with hydrogen, and the non-physical processes that are involved. Partly thanks to the Just Transition Fund, our start-up will have the time and space to refine the product.”

As for the Hydro Generation, Jullens certainly recognizes that and he thinks it is an appealing term. “I walked into it backwards,” he laughs. He hopes that more innovative thinkers and doers will join the group of pioneers in Rotterdam. “And in the meantime, I am committed to developing the matching software in addition to the rapidly developing ‘hardware’, such as infrastructure.”

Source: https://www.ondernemen010.nl/actueel/certificering_van_groene_waterstof/
Photo: Eric Fecken