EU launches pilot EUR-800m green hydrogen auction

The European Commission on Thursday launched the first auction under the European Hydrogen Bank, offering EUR 800 million (USD 873m) of support for the production of renewable hydrogen.

Producers of renewable hydrogen will be able to bid for subsidies in the form of a fixed premium per kilogram of hydrogen produced, up to a cap of EUR 4.5 per kg. Qualifying proposals up to this ceiling will be ranked based on the bid price until the budget of EUR 800 million is exhausted.

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Producers will have to start producing renewable hydrogen within five years of signing their grant agreements and will receive the support for up to 10 years.

Importantly, the EC said that member states will be allowed to finance projects that have not been successful in the auction thanks to a new mechanism under the Hydrogen Bank called “Auctions-as-a-service.” Member states will be able to award national funding without having to run a separate auction and will benefit from a streamlined approval process for this state aid. This additional mechanism is intended to reduce red tape and cost, while helping to prevent segmentation of the market and incentive schemes.

The deadline for bids is February 8, 2024, with evaluation results expected as early as April 2024. The grant agreements will be signed within nine months after the call closure.

The Commission expects the pilot auction to provide it with information about the EU's renewable hydrogen project pipeline, hydrogen costs and the appetite for this kind of subsidy. It plans to launch a second round in 2024.

Funding for the auction comes from the Innovation Fund, which has an estimated budget of EUR 40 billion from the EU Emissions Trading System between 2020 and 2030. The EC today also opened a EUR-4-billion call for proposals for decarbonisation technologies under the Innovation Fund.

Under its REPowerEU Plan, the EU aims to produce 10 million tonnes of hydrogen domestically by 2030.

"Today’s first EU-wide auction for renewable hydrogen production sends a clear signal that Europe is the place to invest in renewable hydrogen production, and in hydrogen-based industries," said Wopke Hoekstra, Commissioner for Climate Action. "Developing a solid hydrogen market in the EU will make us more competitive, offer new growth opportunities to industry, and provide quality jobs for European companies and citizens," Hoekstra added.

(EUR 1 = USD 1.091)