Banking on hydrogen

With an estimated budget of €40 billion funded via 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.

The Commission notes that the Hydrogen Bank, first announced by President von der Leyen in her 2022 State of the European Union address, complements other policy tools aimed at building a market for renewable hydrogen, stimulating investments in production capacity, and bringing production to scale. In particular, the Bank aims to “unlock private investments in the EU and in third countries by addressing the initial investment challenges and needs, closing the investment gap and connecting future renewable hydrogen supply to consumers.”

By enabling a faster rollout of innovative hydrogen technologies, the pilot hydrogen support auction aims to contribute to the REPowerEU Plan goal to produce 10 million tonnes of hydrogen domestically by 2030.

Under the pilot auction, producers of renewable hydrogen, as defined in the Renewable Energy Directive and its Delegated Acts, can submit bids for EU support for a certain volume of hydrogen production. The bids should be based on a proposed price premium per kilogram of renewable hydrogen produced, up to a ceiling of 4.5€/kg. Bids up to this price, and which also comply with other qualification requirements, will be ranked from the lowest to the highest bid price and will be awarded support in that order, until the auction budget is exhausted. The selected projects will receive the awarded subsidy on top of the market revenues that they generate from hydrogen sales, for up to ten years. Once projects have signed their grant agreements, they will have to start producing renewable hydrogen within five years.

Cumulation with other types of aid from participating Member States will not be possible, to ensure a level playing field for
all 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 says.

Auctions-as-a-service

The Commission is also offering a new “Auctions- as-a-service” mechanism under the Hydrogen Bank. This will enable Member States to finance projects that have bid in the auction, but not been selected for Innovation Fund support due to budget limitations. This allows them to award national funding to additional projects on their territory, without the need to run a separate auction at national level, “reducing the administrative burden and cost for all parties.” Member States’ participation in the Auctions- as-a-service scheme is voluntary, and project developers must also express their interest in it during their application to be eligible. According to the Commission, the scheme “could play a significant role by preventing the segmentation of the market and incentive schemes.”

Any support offered by Member States through the Auctions-as-a-service scheme will be considered as state aid, the Commission cautions, but “will benefit from a streamlined approval process”, as the auctions are designed at the EU level in line with the Guidelines on state aid for climate, environmental protection and energy.

Next steps

Bidders have until 8 February 2024 (17:00 CET) to apply via the EU Funding and Tenders Portal.

Applicants will be informed about evaluation results as early as April 2024 and grant agreements will be signed within nine months of the call closure.

The Commission says the pilot auction will allow it to collect reliable data about the EU’s renewable hydrogen project pipeline, the level of competition for this kind of support, the costs of renewable hydrogen production, and its market price. The Commission plans to use lessons from the pilot scheme to “inform future auctions that could be developed for other decarbonisation technologies and products.”

A second round of EHB hydrogen support auctions is anticipated for 2024.