European Hydrogen Bank’s auction four times oversubscribed

The European Hydrogen Bank’s second auction for the production of renewable hydrogen has attracted 61 bids for projects in 11 countries in the European Economic Area (EEA) . Total grant support requested is more than EUR 4.8 billion, four times the available budget.

Nevertheless, issues remain about competitiveness and the speed of introduction of clean hydrogen – in the meantime, a Danish electrolyzer manufacturer filed for protection from creditors.

The uptake of green and low-carbon hydrogen in Europe has been sluggish. Few electrolyzers came online and their capacity is modest. The technology remains far from competitive, while even companies that do require the fuel struggle to obtain sufficient quantities.

The aerospace industry seems to have put on hold the development of hydrogen-fueled airplanes. In road transportation, the share of hydrogen cars and buses remains minuscule, though some forecasts are extremely optimistic. For some industries, like the production of iron (mostly for steel), clean hydrogen may become irreplaceable in terms of decarbonization.

The need to store excess energy from wind and solar power plants and the lack of alternatives in sectors such as steel production are the basis for a European green hydrogen market

In other uses, depending also on the current technological constraints and investment costs, the market will have its say. For instance, hydrogen can be mixed into fossil gas for use in households. In any case, green or renewable hydrogen is one of the solutions to store excess energy from wind and solar power plants.

Slow demand growth has strained finances in the green hydrogen industry despite massive subsidies. But the European Union still has high ambitions within its reindustrialization plans. Electrolysers are an important element of the so-called zero carbon technologies, which it aims to master and sell throughout the world.

Grants come from EU ETS revenues

Following the pilot auction through the European Hydrogen Bank, the second call showed substantial demand for subsidies for renewable hydrogen. The round attracted 61 bids from projects in 11 countries in the EEA . Total grant support requested is more than EUR 4.8 billion, four times the available budget from the Innovation Fund. It uses revenue from the EU Emissions Trading System (EU ETS)

The sum includes EUR 200 million for renewable hydrogen or its derivatives for maritime transportation. Eight hydrogen producers applied in the segment, to supply offtakers in the maritime sector. The call opened on December 3 and participants submitted applications until February 20.

Public funding mitigates risks for investors

The purpose of renewable hydrogen auctions is helping create a European market, where public funding mitigates risks for investors. Selected beneficiaries receive a fixed premium over a maximum of ten years of operation.

Offtakers with the highest bids are paired with producers that offer renewable hydrogen at the lowest prices, and the Innovation Fund covers the difference. Before the current round, the European Commission has cut the ceiling price to EUR 4 per kilogram from EUR 4.5 per kilo. Equipment from China is limited to 25% per project.

Proposed electrolyzers would cover 7.3% of European Union’s renewable hydrogen production target

All bids taken together account for a total electrolyzer capacity of 6.3 GW of electricity. Over ten years, the planned facilities would produce more than 7.3 million tons of renewable hydrogen. It would cover 7.3% of the EU’s REPowerEU target for domestic production by 2030.

“The amount of bids in this second auction under the European Hydrogen Bank again shows the attractiveness of the Innovation Fund as a tool for Europe’s industrial decarbonisation and competitiveness. This continued appetite from our industry reinforces the development of a European market for clean hydrogen. As a key driver of our goal to achieve climate neutrality by 2050, hydrogen plays a crucial role in cutting emissions from hard-to-abate sectors. It will strengthen Europe’s industrial leadership in emerging clean technologies, ensuring long-term economic resilience and global competitiveness,” said European Commissioner for Climate, Net Zero and Clean Growth Wopke Hoekstra.

Winners will be known by the end of May

After evaluation, eligible bids will be ranked. The list is scheduled to be issued by the end of May, while the selected beneficiaries should sign grant agreements by November, the announcement reads. The projects have to reach financial close within 2.5 years and start producing renewable hydrogen within five years of signing the deal.

EU member states can benefit from an auctions-as-a-service mechanism, whereby the results of the auction can attract further national funding for additional projects, in full respect of the EU state aid rules. Under the second auction of the European Hydrogen Bank, Spain, Lithuania and Austria have contributed EUR 836 million overall within the accompanying scheme.

Next auction call before year-end

The European Commission is planning to kick off the next round before the end of the year. In the pilot auction in 2023, seven projects were selected. By the end of last year, six of them signed grant agreements, for EUR 695 million altogether. The sites are in Spain, Portugal, Finland and Norway.

The IF24 program of the Innovation Fund still has calls open until April 24 for EUR 2.4 billion for net zero technologies and EUR 1 billion for the production of battery energy storage systems (BESS).

Furthermore, the European Commission is designing the international part of the European Hydrogen Bank that would attract imports of renewable hydrogen. The point is to bring together EU countries’ financial resources for international auctions.

Danish electrolyzer manufacturer filing for bankruptcy

Green Hydrogen Systems revealed it would file for an in-court restructuring today. The Denmark-based electrolyzer manufacturer explained it couldn’t secure the necessary financing.

It pointed to slower-than-anticipated market adoption of the technology and the development of hydrogen-related production projects, slower-than-anticipated development and commercialization of its X-Series electrolyzer as well as adverse green hydrogen market developments overall. In the upcoming process, some or all assets could be sold.

“Green Hydrogen Systems has a unique product and the potential to play an important role in the future hydrogen market and in the green transition. We continue to believe that this potential could have been realized had the financing been secured,” Chairman Thomas Broe-Andersen said.

The company went public in 2021. Since then it lost almost 99% of its market capitalization.