Air Liquide signs PPA to produce renewable hydrogen

LONDON (ICIS)–French industrial gases firm Air Liquide said on 15 June it had signed a power purchase agreement (PPA) with European energy company Statkraft to enable wind power to run its electrolysis plant in Oberhausen in the west of Germany. The agreement outlines a future market development path for hydrogen following the publication of the delegated act on renewable fuels of non-biological origin.

Under the PPA, electricity from Statkraft’s portfolio of onshore wind farms in Germany is expected to supply Air Liquide’s electrolyser for three years from 2024. The contracted capacity is 45MW.

The electrolysis plant, named ‘Trailblazer’, is expected to start operations by the end of 2023 with 20MW capacity, which could at a later stage be expanded to 30MW.

A Statkraft spokesperson said the output of the hydrogen plant is approximately 2,900 tonnes of renewable hydrogen per year.

The electrolyser will be integrated into the existing infrastructure of Air Liquide on the Rhine and Ruhr rivers to provide key industrial and transport consumers with renewable hydrogen and oxygen.

According to ICIS Analytics, Statkraft is among Europe’s largest sellers of PPAs with 2.2GW in its books.

Furthermore, Statkraft trading and origination vice president Sascha Schroder said this was the firm’s first green PPA to produce hydrogen, emphasising the importance of the conversion of industrial processes that could sustainably reduce emissions in Germany in the long run.

PPA MARKET DEVELOPMENT

The signing of a PPA from an industrial gases producer specifically for hydrogen production marks a new and growing area of market growth for PPAs.

Speaking to ICIS, Rommero Carrillo, director of business development at PPA reference price provider Pexapark, noted that currently the PPA market consists of “utility offtakers, corporates seeking to meet ESG requirements, and large industrials seeking to price hedge for power.

“We see PtX [power-to-X, a term for technologies that convert power into low-carbon synthetic fuels] become the fourth pillar of PPA offtakers.”

Carrillo explained that electrolyser operators would drive the PPA market forward, “which is currently dominated by corporates, followed by utility offtakers.” When speaking on the type of PPA product that electrolyser operators would seek to use, Carrillo said “the flexible nature of electrolysers means they can manage profile risk, hence they will be driving pay-as-produced (PAP) PPA structures”.

By opting for PAP products, electrolyser operators would be able to “provide a level of support to the cannibalisation that we have been seeing in the market affecting solar in Spain and Germany, and wind in the Nordics,” Carrillo said.

HYDROGEN REGULATION, PPAs

PPAs are key to multiple components of regulation for hydrogen producers in Europe, provided they wish to secure subsidy support or wish to claim their hydrogen to be “renewable” according to the conditions set out by EU legislators.

Carrillo noted that the use of a three-year PPA shows the infancy of the hydrogen market, saying that long-term PPAs may be more likely in the future: “This will be especially true for projects that have project finance by a lender and who seek to meet delegated act requirements beyond 2030,” he said.

As well as this, initial information regarding the EU Hydrogen Bank also indicated a requirement for long-term PPAs, Carrillo said. The Hydrogen Bank aims to provide a fixed subsidy over a 10-year period, prioritising the lowest bidder via auction format.