The EU Commission has launched its first European Hydrogen Bank auction with €800 million (£695m) in subsidies available for renewable hydrogen production.
The European Hydrogen Bank was announced by EU president Ursula von der Leyen in 2022 to support European domestic hydrogen production as well as imports from international partners.
Funded via emissions trading revenues through the EU Innovation Fund, producers of renewable hydrogen can bid for support in the form of a fixed premium per kilogram of hydrogen produced.
The Commission said the premium is intended to bridge the gap between the price of production and the price consumers are currently willing to pay, in a market where non-renewable hydrogen is still cheaper to produce.
The Hydrogen Bank aims to compliment other policy tools to build a market for renewable hydrogen, stimulate investments in EU production capacity and bring that production to scale, the Commission said.
© Supplied by APEU commissioner for climate action Wopke Hoekstra said hydrogen will be a key technology to decarbonise Europe’s industry and help deliver its 2030 and 2050 climate targets.
“Today’s first EU-wide auction for renewable hydrogen production sends a clear signal that Europe is the place to invest in renewable hydrogen production, and in hydrogen-based industries,” Mr Hoekstra said.
“Developing a solid hydrogen market in the EU will make us more competitive, offer new growth opportunities to industry, and provide quality jobs for European companies and citizens.”
Connecting H2 supply and demand
EU executive vice-president for the European Green Deal Maroš Šefčovič said today’s launch is about connecting supply and demand for renewable hydrogen.
“It is about creating transparency about price points, which will help kickstart a European hydrogen market,” he said.
“In turn, this will help accelerate the EU’s clean energy transition while maintaining our competitiveness and preserving Europe’s position as a leading global economic power.
“The European Hydrogen Bank is a great opportunity to support European industry’s net-zero transition.”
© Supplied by OrstedMr Šefčovič said the EU is hoping for a positive response to the scheme from the market and member states.
He has previously said the EU will be “assertive” in promoting a “made in Europe” approach to ensure green industries like hydrogen stay on the continent.
Hydrogen critical for decarbonisation
The Commission said by enabling a faster rollout of innovative hydrogen technologies, the pilot auction will contribute to the REPowerEU Plan goal to produce 10 million tonnes of hydrogen in Europe by 2030.
Renewable hydrogen producers can submit bids for EU support for a certain volume of production based on a proposed price premium up to a ceiling of €4.5/kg (£3.9/kg).
Bids will be ranked from the lowest to highest bid price and will be awarded support in that order until the auction budget is exhausted, the Commission said.
Selected projects will receive the award subsidy on top of the market revenues they generate from hydrogen sales for up to 10 years.
Once projects sign on to their grant agreements, they will need to start producing renewable hydrogen within five years.
© Supplied by OrstedProducers will not be able to access other types of aid from participating EU member states to “ensure a level playing field for projects regardless of location”.
“This will prevent fragmentation at the early stages of the European hydrogen market and reduce administrative costs for upcoming national hydrogen support schemes,” the Commission said.
EU launches ‘Auctions-as-a-Service’
The EU also announced a new ‘Auctions-as-a-Service’ mechanism under the Hydrogen Bank.
It said this mechanism will allow EU member states to finance projects which bid in the auction but do not get selected for Innovation Fund support due to budget limitations.
This will allow countries to award national funding to additional projects on their territory without needing to run a separate auction at national level, reducing administrative costs.
Participation the scheme will be voluntary for EU member states and bidders must opt-in during their application to be eligible.
Any support offered will be considered as state aid under EU guidelines, the Commission said.
Pilot scheme for future decarbonisation
Interested parties will have until February 8 next year to apply with the winners set to be announced as early as April.
The Commission said it will use lessons from the pilot scheme to inform potential future auctions for other decarbonisation technologies and products.
A second round of auctions will be launched later in 2024.
With an estimated budget of €40 billion from the EU Emissions Trading System between 2020 and 2030, the Innovation Fund is the EU’s largest funding programme for the deployment of innovative net-zero technologies.
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