EU starts European Hydrogen Bank pilot auction

The European Commission issued a public call for the European Hydrogen Bank pilot auction with an initial budget of EUR 800 million. Renewable hydrogen producers will be able to bid for a fixed premium of up to EUR 4.5 per kilogram for a maximum of 10 years to support their projects.

Just over a year after European Commission President Ursula von der Leyen unveiled a plan for a support mechanism, the countdown has started for the European Hydrogen Bank pilot auction. Developers of projects for renewable hydrogen production facilities can apply until February 8 via the European Union’s Funding and Tenders Portal.

Bids for a fixed premium of up to EUR 4.5 per kilogram will be ranked from the lowest to the highest, and the subsidies will be awarded in that order until the initial budget of EUR 800 million is exhausted. Projects need to have at least 5 MW in capacity.

The beneficiaries will get support on top of sales revenues for a maximum of 10 years. They will have to start producing renewable hydrogen within five years after signing the agreement, the public call reads.

The support system will connect supply and demand, the European Commission’s Executive Vice-President for the European Green Deal, Interinstitutional Relations and Foresight Maroš Šefčovič said.

“It is about creating transparency about price points, which will help kickstart a European hydrogen market. 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,” he stressed.

Green hydrogen subsidies to be sourced from EU ETS

The funds will be sourced from the Emissions Trading Scheme (EU ETS) and channeled through the Innovation Fund, the European Commission said. The European Hydrogen Bank mechanism is aimed at accelerating the takeoff of hydrogen in the segments of industrial production and transportation that are hard to decarbonize.

The EU is introducing the premium 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 REPowerEU plan stipulates that domestic production needs to reach 10 million tons by 2030.

Member states have the opportunity to award subsidies without separate auctioning to projects that ended up below the line

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, the commissioners pointed out. They argued it would prevent fragmentation at the early stages of the market and reduce administrative costs for upcoming national hydrogen support schemes.

In addition, member states can participate in the so-called auctions-as-a-service scheme under the Hydrogen Bank. It will enable them to finance projects that didn’t win support due to budget limitations, without separate auctioning.

Next Hydrogen Bank auction to be worth EUR 2.2 billion

Applicants will be informed about evaluation results as early as April and sign grant agreements within nine months after the call closure, the statement adds. Von der Leyen earlier said the plan is to hold the second round in the spring and that it would be worth EUR 2.2 billion.

“We are delighted to hear that the auction is being launched on time and we are certain it will be fruitful. The Hydrogen Bank auctions are crucial to the success of the European hydrogen industry, and we will learn a lot from it in the next months,” Chief Executive Officer of Hydrogen Europe Jorgo Chatzimarkakis said.

An Innovation Fund call was also launched for the European Economic Area (EEA), with an budget of EUR 1.4 billion. It is for large (capital expenditure above EUR 100 million), medium (EUR 20 million to EUR 100 million) and small (EUR 2.5 million to EUR 20 million) decarbonization projects, cleantech manufacturing, and pilot projects. Hydrogen is set to feature heavily, Hydrogen Europe said.