The European Commission has published the terms and conditions for its pilot auction worth EUR 800 million, aimed at supporting European renewable hydrogen production.
The auction, funded by the Innovation Fund under the umbrella of the European Hydrogen Bank, is intended to be opened on November 23, the European Commission said.
Following stakeholder consultations ongoing since March, the publication of the terms and conditions gives potential bidders advance information about the final economic design of the auction and helps them start preparing their bids.
According to the plan, the auction will award up to EUR 800 million to renewable hydrogen producers in the European Economic Area (EEA). The support will take the form of a fixed premium, expressed in euros per kilogram, for renewable hydrogen produced over ten years of operation, therefore targeting the gap between the production costs and the demand side’s willingness to pay.
If the level of participation in the pilot auction is high, it will be followed by annual auction rounds
The commission stressed that the new auction mechanism would expand the portfolio of support mechanisms that the Innovation Fund currently provides through grants, project development assistance, and other blended financial instruments.
“If the level of participation in the pilot auction is high, it will be followed by annual auction rounds and could be expanded to clean products beyond renewable hydrogen. This awarding mechanism is expected to enable a faster rollout of innovative technologies needed for the green transition, especially in hard-to-abate sectors,” the European Union’s executive body said.
The auction is designed to achieve four objectives.
One is to reduce the cost gap between renewable and fossil hydrogen in the EU as effectively and efficiently as possible by allocating public support. Another motive is to allow for price discovery and renewable hydrogen market formation.
The third goal is to derisk European hydrogen projects, connect domestic renewable hydrogen supply and demand, bring capital costs down, and leverage private capital.
Finally, short, lean, and transparent procedures should reduce administrative burdens and costs, according to the commission.