The European Commission launched the first auction round of the European Hydrogen Bank in Brussels today. To this end, €800 million in revenue from emissions trading was made available via the Innovation Fund. Hydrogen producers can now bid for a fixed subsidy premium per kilogram of hydrogen produced. The subsidy is intended to close the gap between the production and sales price, as non-green hydrogen currently still offers lower production costs.
As part of the pilot auction, producers of green hydrogen can bid for an EU subsidy for a certain production volume. The Renewable Energy Directive and its delegated acts define when hydrogen can be classified as renewable or "green". Interested producers can apply via the EU funding and tendering portal until February 8, 2024.
According to an official press release, an online information day will be held on November 30, where project applicants can submit questions to the European Climate, Infrastructure and Environment Executive Agency (CINEA). CINEA will conduct the auction. In April 2024, it should be finished evaluating the bids so that applicants can be informed of their evaluation results and grant agreements can be signed.
With the pilot auction, the Commission also wants to collect data on the hydrogen projects planned in the EU as well as on the interest in funding, the hydrogen production costs and the market price. The experience gained will be used to develop future auctions for other decarbonization technologies and products. As Commission President Ursula von der Leyen announced on November 20, the Commission intends to launch a second round of auctions as early as spring 2024.
Up to 4.50 € per kg
The bids are to be based on a proposed price premium per kg of renewable hydrogen produced, which can reach up to an upper limit of €4.50/kg. Bids up to this price that also meet other qualification requirements will be ranked from lowest to highest depending on the level of their bid price, according to the EU's official presentation. They will then be awarded the contract in this order until the auction budget of €800 million is exhausted.
The selected projects will receive the approved funding in addition to the market revenue from hydrogen sales - for up to 10 years. Once the grant agreements have been signed, the EU stipulates that the projects must start producing renewable hydrogen within five years. Mixing with other financial aid from the participating member states should not be possible in order to ensure a level playing field for all projects, regardless of their location. Further information on the "Auction-As-A-Service" model can be found here.
The hydrogen bank is one of the political instruments with which the EU intends to develop a market for hydrogen from renewable energies. The aim is to promote investment in production capacities and thus enable the large-scale hydrogen production necessary to achieve the climate targets. The pilot auction is therefore part of the REPowerEU plan to be able to produce 10 million tons of green hydrogen by 2030.
EU innovation fund: €40 billion for decarbonization
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 program for the deployment of net-zero technologies, according to official figures. The fund also opened its call for proposals today (23/11) for 2023, with a budget of €4 billion available for low-carbon technologies in various sectors.
The European Hydrogen Bank was announced by Commission President von der Leyen in her State of the Union speech in 2022 to support domestic hydrogen production in the EU and imports of renewable hydrogen from international partners. The then EPP Frank Timmermans confirmed the plans during the European Hydrogen Week in October 2022 and specified the funding volume in March 2023.
