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NAESB to Initiate Development of Standardized Contract for Sale and Purchase of Hydrogen

This summer, the North American Energy Standards Board will initiate an industry-wide effort to develop a standardized sale and purchase agreement for hydrogen through its open development process.

The decision to move forward with project was made by the NAESB Board of Directors during its April meeting and will leverage its previous work over the last thirty years on physical commodity energy contracts, including the NAESB Base Contract for Sale and Purchase of Natural Gas and Natural Gas Liquids, NAESB said.

Discussions concerning the project have been underway at NAESB since December 2021 but were ramped up at the end of last year after the U.S. Department of Energy announced the selection of the seven Regional Clean Hydrogen Hubs and informal communications concerning NAESB undertaking the effort were received from DOE and HyVelocity Hub representatives.

The HyVelocity Hub is a collaborative comprised of non-profit research organizations, academia, and energy companies working to advance the clean hydrogen ecosystem in Texas, Southwest Louisiana, and along the U.S. Gulf Coast.

In March, following the DOE Office of Clean Energy Demonstrations announcement of a demand-side initiative to provide financial revenue and demand support for the Hydrogen Hub projects, NAESB hosted an educational webinar for the industry to learn more about the initiative and the selected Hubs.

During the webinar, DOE representatives stated that the primary purpose of the new demand-side initiative is to catalyze a mature market for clean hydrogen by incentivizing offtake agreements and facilitating the development of mechanisms that will overcome barriers to reaching final investment decisions.

One mechanism that was identified by the DOE is the establishment of standardized, consensus-based commercial terms and conditions for hydrogen contracts to provide a level of certainty and stability that will encourage long-term investments and mitigate risk concerns for counterparties engaging in hydrogen transactions.

Spurred by the information provided in the webinar, the NAESB Board Strategy Committee and subsequently, the NAESB Board of Directors voted to initiate the effort and begin industry-wide coordination on the development of the contract.

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