The European Hydrogen Bank

Last year, EU Commission Vice-President and Climate Action Commissioner Frans Timmermans announced that the European Commission wanted to boost the ramp-up of the hydrogen economy with a European hydrogen bank. 800 million euros were made available for the first round of auctions, which ran for 11 weeks. According to the European Commission, 132 bids were received from projects in 17 EU member states during the auction period. The total support requested "far exceeded" the available budget.

An overview of developments to date and an outlook for the future.

The European hydrogen strategy

On 8 July 2020, the EU presented the European hydrogen strategy "A hydrogen strategy for a climate-neutral Europe". According to this strategy, an electrolysis capacity of 40 GW is to be installed between 2025 and 2030, producing around 10 million tonnes of green hydrogen per year. The European Clean Hydrogen Alliance was also launched in July 2020. The alliance of politics and industry was a first attempt to coordinate investments in the hydrogen ramp-up.

Development of the hydrogen bank

In September 2022, EU Commission President Ursula von der Leyen put forward the idea of a European hydrogen bank to solve the hydrogen economy's chicken-and-egg problem. With a budget of up to 3 billion euros, it would subsidise the "two pillars" of the hydrogen economy: Production in Europe and the import of a further 10 million tonnes per year.

EU Climate Action Commissioner Timmermans confirmed her initiative in his keynote speech at the Brussels "European Hydrogen Week" in October 2022, saying that the hydrogen bank would be the "jumpstart" for the hydrogen economy.

The plans were then concretised in 2023: Hydrogen producers could bid on a fixed subsidy premium per kilogramme of green hydrogen produced. The Renewable Energy Directive and its delegated acts determine when hydrogen can be classified as green. The hydrogen bank will pay a fixed amount per kilogramme of hydrogen produced to the selected producers for a maximum of 10 years. The subsidy is intended to close the gap between the production and sales price. The subsidy is intended to make green hydrogen competitive and, in the long term, drive conventional, grey hydrogen out of the market.

Renewable Energy Directive

The European Council and the European Parliament reached a provisional agreement on the Renewable Energy Directive on 11 April 2023. The agreement stipulates that 42% of the hydrogen used in industry should come from renewable fuels of non-biological origin (RFNBO) by 2030.

By 2035, this share is to rise to 60 %. Member States can reduce it by 20% if their national contribution to the EU's binding overall targets corresponds to the expected contributions and if the share of hydrogen produced from fossil fuels is less than 23% in 2030 and less than 20% in 2035.

Selection of subsidies

Bids will be based on a proposed price premium per kg of renewable hydrogen produced, up to a maximum of €4.50/kg. Bids up to this price that also fulfil 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. "The producers of green hydrogen who require the lowest support in euros per kilo of hydrogen produced will be awarded the contract in the auction," says Timmermanns. They will then be awarded the contract in this order until the auction budget of 800 million euros has been exhausted. In April/May 2024, the Hydrogen Bank intends to finalise the evaluation of the bids so that applicants can be informed of their evaluation results and grant agreements can be signed. If the application is successful, the funded companies should then prepare their grant agreements and sign them "by November 2024 at the latest".

The selected projects will receive the approved funding in addition to the market revenue from hydrogen sales. Once the grant agreements are signed, the projects must start producing renewable hydrogen within 5 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.

Summary of the first auction round

In the first round of auctions, the Hydrogen Bank received 132 bids from projects in 17 EU member states. The total support requested "far exceeded" the available budget.

The total electrolyser capacity of the projects submitted to the hydrogen bank amounts to 8.5 GW. Over a period of 10 years, a total of 8.8 million tonnes of green hydrogen could be produced. This would cover almost 10% of the EU's REPowerEU target for the domestic production of green hydrogen in 2030.

Second round of auctions in spring

In parallel to the final assessment, the Commission intends to summarise and evaluate the findings from the pilot phase. The pilot auction should also be used to collect data on the planned hydrogen projects as well as on the funding interest, hydrogen costs and the market price. The experience gained will also be used to develop future auctions for other decarbonisation technologies and products. The CINEA will then consult industry stakeholders on draft conditions for the second round of the hydrogen auction. As Commission President Ursula von der Leyen announced on 20 November, the Commission intends to launch a second round of auctions as early as spring 2024.

Kurt Vandenberghe, Director-General for Climate Action at the EU, spoke of an "enthusiastic market response to the pilot auction". The large number of applications received shows that the European hydrogen industry is ready.

wire and Tube 2024

If you are interested in exciting presentations on all areas of the piping industry, come to wire and Tube in Düsseldorf between 15 and 19 April 2024. Not only will many well-known companies be on site as exhibitors, but they will also present a wide range of keynote speeches on the subject. Topics such as skilled labour/recruiting and the hydrogen economy will also be discussed. See you soon in Düsseldorf.