Global Hydrogen Offtake Trends

The clean hydrogen industry is still in its infancy and one major obstacle it faces is the signing of offtake agreements in connection with the purchase, storage, and supply of clean hydrogen and its derivatives.

This article delves into the recent development of clean hydrogen offtake and the key drivers for growth. It is based on a new intelligence report developed in collaboration with World Hydrogen Leaders for the upcoming World Hydrogen Week, which will take place from September 30 to October 4 at the Bella Center in Copenhagen, Denmark. The free report is available here.

Do you know we have a daily hydrogen newsletter? Subscribe here for free!

Despite numerous announcements of new large-scale clean hydrogen production facilities and government incentives to support the supply side, enthusiasm on the demand side remains minimal.

According to BloombergNEF’s New Energy Outlook 2024, released in May, clean hydrogen use is projected to reach 390 million tonnes annually by 2050 in a Net Zero Scenario. This is four times the current demand for fossil-fuel-based hydrogen but nearly a quarter less than the forecast in the previous outlook.

On a government level, the US and the EU have implemented measures to strengthen demand for low-carbon hydrogen. Alongside direct subsidies that lower production costs in both markets, quotas and mandates for green hydrogen usage across member states have been established in the EU which is expected to enhance the end-user's willingness to pay a premium for green hydrogen.

In the US, the Biden Administration is preparing to launch a USD-1-billion Demand-side Support Mechanism to ensure consistent demand for hydrogen at Regional Clean Hydrogen Hubs (H2Hubs).

A key factor for hydrogen offtake growth is the availability of infrastructure. A pipeline connecting the production site with the customer location has been cited as a prerequisite in several preliminary offtake deals agreed upon in Germany in recent months, underscoring its critical role in securing binding agreements.

When analysing the offtake landscape, it is important to note that most of the offtake announcements are preliminary deals, with only a few significant binding agreements announced in 2024.

In Europe, there have been very few buyers entering any form of offtake agreements, and even fewer have committed to binding procurement deals. According to the 2024 State of the European Hydrogen Market Report by the Oxford Institute for Energy Studies, only 15%, or 0.9 million tonnes, of the supply from projects in negotiations with European buyers have resulted in binding contracts.

One of the most significant deals involves India's Acme which in March 2024 finalised a binding agreement to supply 100,000 tonnes of green ammonia annually to Yara International ASA. This deal envisages sourcing ammonia from a large-scale green hydrogen and ammonia production hub in Oman. The hub will be constructed in the Duqm Special Economic Zone with deliveries to Yara scheduled to begin in 2027.

Overall, the fertiliser, refining, and steel manufacturing industries are the primary sectors securing binding or non-binding offtake agreements for renewable hydrogen.

The 5th annual World Hydrogen Week will bring together global hydrogen pioneers in Copenhagen to explore the latest advancements, trends, and opportunities in hydrogen and its derivatives. The programme includes the renowned World Hydrogen Congress, a skills training Intelligence Day, a round-the-world projects tour, the Global Hydrogen Projects Summit and the World Hydrogen Derivatives two-day summit. New for 2024 is the ‘Innovate to Net Zero: Cross-Industry Summit’ for offtakers and their support networks. To view the full agenda, download the brochure here or register your place here.