As green hydrogen gains traction in the energy transition, Hydrogen Purchase Agreements (HPAs) are becoming central to project viability—especially in emerging markets without liquid pricing mechanisms or consolidated infrastructure.
While Power Purchase Agreements (PPAs) helped consolidate the renewable energy sector in past decades, HPAs need to be even more strategic. They must balance revenue predictability, risk allocation, and long-term legal enforceability in a market fraught with technical, regulatory, and geopolitical uncertainties.
Below, I highlight the most important clauses—each of which must be drafted with a high level of technical precision.
1. Take-or-Pay Clause: this clause can serve as the backbone of contractual predictability. It establishes that, even if the buyer does not withdraw the agreed volume of hydrogen, they must still pay for it. Without it, the contract lacks economic foundation.
When the buyer and seller opt for a different model—such as when the buyer refuses to assume the risk of uncertain future consumption—it is possible to negotiate an alternative contractual structure based on flexibility, with a reduced firm volume and an optional volume range, each with different tariff levels. Another option is a “pay-if-available” clause, limiting the withdrawal obligation to the actual volume delivered by the supplier.
Alternative clause example: “The Buyer undertakes to purchase a minimum firm volume of 200 kg of Green Hydrogen monthly and may, at its discretion, request additional volumes of up to 400 kg, depending on the Seller’s availability. The additional volume will be priced 10% higher than the base rate.”
Clause example: “If the Buyer, for any reason not constituting a force majeure event, fails to withdraw the agreed volumes of Green Hydrogen, the Buyer shall nevertheless pay the corresponding amount for the stipulated monthly minimum volume, as outlined in Annex I.”
2. Pricing Formula: this clause demands special attention. The pricing model defines the project’s profitability. The challenge lies in finding the right balance between predictability and adaptability. Formulas based solely on volatile variables (like spot electricity prices) may lead to disputes. On the other hand, overly rigid formulas may render the operation unfeasible in changing economic scenarios. Indexes, adjustment frequency, and renegotiation triggers must be clearly defined.
The absence of a spot market compels the parties to adopt contractual formulas. The risk is twofold: poorly structured formulas or those tied to external, uncontrollable variables.
Clause example: “The price of Green Hydrogen shall be calculated based on the following formula: P = (Variable Energy Cost + Average Operational Cost) x (1 + 15% Margin), with annual adjustments based on the IPCA index.”
3. Supply and Withdrawal Obligations: an operational clause that requires technical precision. Omitting clear deadlines, volume tolerances, and failure procedures may lead to contractual imbalance and recurring litigation. It must align with the electrolyzer’s operation and hydrogen delivery logistics.
This clause governs the operational obligations of the parties. Its function is to prevent disputes over partial performance, delays, or technical interruptions.
Clause example: “The Seller commits to make available a minimum of 500 kg of Green Hydrogen per business day. The Buyer shall ensure withdrawal of such volumes during the agreed operational hours. A maximum monthly variation tolerance of 5% shall apply.”
4. Make-Up and Carry Forward Clause: although often treated as accessory, its absence exposes the project to unnecessary risks. Timeframes, compensation limits, and application criteria must align with storage capabilities and the buyer’s flexibility.
It allows volumes not delivered or not withdrawn in a given period to be compensated in subsequent periods. Without it, any operational failure results in contractual default.
Clause example: “Volumes not withdrawn during the monthly delivery period may be accumulated and withdrawn within the next three months, up to a maximum of 150% of the contractual monthly volume.”
5. Force Majeure and Acts of God Clauses: the traditional force majeure clause must be modernized for hydrogen projects. It should account for regulatory volatility and technological risks such as certification failures, supply shortages, and port restrictions. Clarity in definition and the effects of suspension avoids interpretive disputes.
More than a boilerplate clause, it must be adapted to the hydrogen project’s reality. It should foresee regulatory events, technological failures, and logistical interruptions.
Clause example: “A force majeure event shall include any legislative change that directly renders performance of this contract unfeasible or excessively onerous, including, but not limited to, suspension of tax incentives or establishment of customs barriers on hydrogen.”
6. Change in Law Clause: one of the most overlooked elements in early-stage contracts. Without it, the regulatory risk shifts entirely to one party. It should be objective, include renegotiation triggers, and be based on measurable technical criteria.
This clause ensures economic rebalance in case of regulatory change. Without it, the project may become unviable overnight.
Clause example: “In the event of legislative or regulatory changes directly or indirectly impacting the production, transport, or commercialization costs of Green Hydrogen, the Parties agree to renegotiate the economic terms of the contract, based on a joint technical opinion.”
7. Hydrogen Certification and Traceability: a critical clause for international market access. Its omission may jeopardize not only the project’s reputation but also its monetization. Certifying body, reporting frequency, and verification method must be defined from the outset.
Essential for decarbonization-driven or export-oriented projects. Without it, international sales may be rendered unfeasible.
Clause example: “The Green Hydrogen supplied shall be certified by an internationally recognized body according to CertifHy standards or an equivalent framework, with a quarterly auditable technical report.”
8. Dispute Resolution Clause: more than just naming a jurisdiction or institution, this clause should define the resolution structure: technical committees, mediation timelines, and objective criteria. It prevents commercial conflicts from escalating into emotional or pride-driven litigation.
Beyond defining arbitration, this clause must organize the resolution logic, prioritizing technical over emotional issues.
Clause example: “The Parties elect institutional arbitration to be conducted by the FGV Arbitration Chamber, headquartered in Rio de Janeiro, in Portuguese, with a mandatory preliminary technical committee as a condition precedent.”
HPAs play the role for hydrogen that PPAs played for solar and wind energy. But contractual complexity is higher—because the risks are higher.
If you are involved in the legal, financial, or regulatory structuring of hydrogen projects, mastering these clauses is not optional—it’s essential.
Negotiating robust, intelligent, and project-calibrated contracts is what separates promises from delivery in the hydrogen market.
