Sirko Beidatsch (Expert Gas Markets EEX) on the path to a competitive hydrogen market. In times of volatile energy markets, price indices are becoming increasingly important. The European Energy Exchange AG (EEX) in Leipzig, one of Europe's leading energy exchanges, plays an important role in this field.
The vision of a competitive hydrogen market - and the role that price indices already play today
The EEX not only operates and develops the largest trading platform for power in Europe. In times of volatile energy markets, price indices are becoming increasingly important. The European Energy Exchange AG (EEX) in Leipzig, one of Europe's leading energy exchanges, plays an important role in this field. It not only operates and develops the largest trading platform for power in Europe but also has, for example, developed price indices for gas markets, which are now part of many gas supply contracts. A few months ago, leveraging the experience from existing energy markets, EEX launched a new price index for hydrogen. It is already used by many market players and is expected to be an important step towards a regulated market. Our editorial team spoke to Sirko Beidatsch, Expert Gas Markets at EEX, about price indices and the company’s vision for the hydrogen market.
Mr Beidatsch, EEX has been offering various gas price indices that can be used in gas supply contracts for some time. What are the most important indices and how have they performed in practice?
Participants in the gas market value the price indices created by EEX. One of those, the EEX European Gas Spot Index (EEX EGSI), is published daily, tracking the daily price of natural gas at the various virtual trading points in Europe (e.g. THE or TTF). In addition, we also provide the EEX Gas Index (EGIX) for Germany, a monthly index of the average price of natural gas.
The use of such indices can help to minimise the risk of price fluctuations and to simplify pricing by using them as reference points in gas supply contracts – where the price for the gas supplied is calculated based on the index value. The exact calculation of course depends on the specific terms of the contract, such as the price formula, delivery period, delivery volume, quality requirements and payment terms, which are all agreed individually by the market participants.
How did you apply your existing price index system to the hydrogen market?
As early as 2020, EEX established a Hydrogen Working Group, which now includes more than 70 companies along the entire value chain of the global hydrogen industry. The common goal has been to establish transparent, sustainable, and non-discriminatory trading markets for hydrogen as quickly as possible. One of the first steps is to create price transparency.
Although there is no OTC or exchange trading of hydrogen today, there are already price indications from bilateral supply contracts. These serve as the basis for HYDRIX, the world's first market-based price index for hydrogen, developed by EEX. Well-known and established market participants are already supporting us by reporting their offered or concluded hydrogen prices. EEX then calculates HYDRIX on a weekly basis, as an average of supply and demand prices. It is then published every Wednesday at 4 pm CET on the EEX Transparency Platform at eex-transparency.com. For now, HYDRIX covers green hydrogen in Germany, but we expect it to be extended to other “colours” and regions at a later stage. Every market participant is welcome to register and submit their price assessments – our process is secure and anonymous.
How do market participants benefit from HYDRIX?
Price transparency for hydrogen as a traded product supports the market ramp-up of hydrogen by providing certainty for all parties involved. Market participants from Chile, Australia and other regions already use HYDRIX as a benchmark. This price index serves as an important price signal for market participants, regulators, and policy makers to evaluate existing and new investments and trading transactions on a market basis. This is because the price signals come directly from the hydrogen market and are not derived indirectly and exclusively via H2 substitutes (e.g. electricity, natural gas). In addition, being published in €/MWh, HYDRIX provides a benchmark for the direct comparison of hydrogen with listed gas and electricity prices, driving increased transparency around the current and historical price development of hydrogen.
One of EEX's main objectives is to develop and expand markets together with our customers. We have been doing this very successfully for many years in the power and gas sectors, and we are at the beginning of a very exciting journey in the hydrogen sector. We are currently working with our partners within our Hydrogen Working Group to standardise products and processes for trading hydrogen and derivatives. The next step is the phased development of a hydrogen trading platform.
In fact, we have already developed a platform that will enable public and private stakeholders to technically implement auctions and other trading formats for hydrogen and its derivatives in the future. With the Leipzig-based company Hintco, a subsidiary of the H2Global Foundation, EEX has already won its first customer for the use of the platform. Utilising our new platform, H2Global will enable the purchase and sale of renewable hydrogen and hydrogen derivatives through a competitive bidding process. Long-term off-take agreements will be concluded, providing producers with the security regarding their investment, which they had lacked before. Hintco's first auctions via the EEX hydrogen platform could take place as early as the end of 2024. The long-term goal is to offer market participants a competitive market for exchange trading. Defined clearing mechanisms via our subsidiary ECC can then ensure even greater price transparency and supply security.
What are the benefits of this initiative for EEX?
It is important for us to drive and shape the energy transition. The hydrogen market will play a central role in the decarbonisation of the economy – not only in Germany, but also in Europe and many other regions in the world. Our hydrogen-focused activities are a long-term investment in the market. We are pleased to be able to use our experience from other markets to support hydrogen's ramp-up. We expect strong growth in the medium term, while we can already support at an early stage with proven structures and safety mechanisms.