US company Plug Power is to start offering liquid green hydrogen on a spot basis, rather than under long-term contracts, in a bold move that could help to spur the development of a traded commodity market for the energy vector.

Under the new system—which Plug says is the first of its type—buyers are able to offtake supplies from any of Plug’s operating US plants at a weekly published spot price, derived from the company’s supply and demand in a given pricing week. Plug produces about 45t/d of liquid green hydrogen.

“We believe this initiative will increase trust and transparency in the industrial hydrogen market" Marsh, Plug Power

Participating buyers will have to sign a spot pricing agreement with Plug, the terms of which have not been disclosed. Plug said it has entered into agreements with several key industry players, including one of the largest industrial gas companies.

The launch of Plug’s spot pricing programme is a key moment for the hydrogen market, and its progress is likely to be watched closely by rival suppliers.

Most producers insist that buyers sign long-term purchase contracts, as supply projects need certainty of revenue to enable them to secure financing. However, many potential offtakers have been reluctant to sign long-term deals because of uncertainty over future price trends and security of supply, holding back the industry’s development. Anders Opedal, CEO of Norwegian energy group Equinor, recently acknowledged that hydrogen buyers “are not coming to the table” as quickly as it had hoped.

Plug said its spot pricing programme gives buyers the freedom to purchase “on-demand and without the limitations of long-term take-or-pay agreements”. “The flexibility provided by this new spot market allows customers like retailers, industrial manufacturers and power plant operators to optimise their hydrogen sources efficiently, reacting swiftly to fluctuating energy demands without being tied down by long-term contracts,” it said.

Parallels have been drawn between the emerging hydrogen market and the LNG market, which took years to embrace spot trading as investment in projects required the backing of long-term contracts.

Transparency

Plug’s initiative will also help to bring price transparency to a market that remains opaque, as the terms of long-term deals are bespoke, with a wide array of pricing structures. Its weekly spot price will be published by price reporting agency S&P Global Platts, which already offers a range of global hydrogen price assessments, along with competing services such as Argus Media.

“We believe this initiative will increase trust and transparency in the industrial hydrogen market,” said Andy Marsh, CEO of Plug Power. “In five years, we anticipate most buyers will tap into the spot market to benefit from the flexibility it offers them.”

The timing of Plug’s announcement is interesting. The US hydrogen industry is effectively on hold as it awaits clarity from the new US administration on the future of subsidies. On taking office, President Donald Trump issued executive orders to pause federal funding under the Inflation Reduction Act and the Infrastructure Investment and Jobs Act for a 90-day review period.

“Though the disbursement timeline may change as with any transition to a new administration, we are looking forward to working with the new team, and we are confident our hydrogen development projects will stay on track,” Plug’s Marsh told Hydrogen Economist.

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Author: Stuart Penson