European Hydrogen Bank: Results from the pilot auction show increased competitiveness for renewable hydrogen
The results of the first auction for the “European Hydrogen Bank” indicate that renewable hydrogen is competitive. In total, seven EU-wide projects shared 720 million euros to produce 1.58 million tons of renewable hydrogen over a ten-year period and thus avoid over 10 million tons of carbon dioxide emissions.
The winners of the auction secured funding per kilogram of hydrogen produced from the Innovation Fund, the EU’s emissions trading system. This narrows the gap between production costs and the price hydrogen users are willing to pay. The winning bids were between 0.37 and 0.48 euros per kilogram of hydrogen, which is significantly below the ceiling price of 4.5 euros set for the projects in Spain, Portugal, Norway and Finland.
Jorgo Chatzimarkakis, CEO of Hydrogen Europe, emphasized the importance of competitiveness and innovation in the selection of these projects. He noted that the high participation rate shows the industry’s commitment and indicates that the budget for future auctions needs to be increased beyond the 2.2 billion euros that the European Commission has reserved. Even if this support were to be awarded to all projects, it would still be a minor part of the renewable hydrogen volume that Europe needs to meet the 2030 Green Deal targets.
The individual grant agreements are expected to be signed by November 2024, and the project developers must start production within five years of the signature.
A further analysis of the situation shows that the winning bids in the auction do not fully reflect the market due to budget constraints and the relatively low number of participating projects. The high cost of hydrogen in some projects reflects the strict rules for renewable hydrogen production, and the limited number of bids indicates that many project managers are encountering challenges with support rules.
The European Commission plans to conduct a second auction later in the year using insights from that pilot auction. It is suggested that future terms and conditions should manage funding, completion grants, and timing of project start-up more effectively based on lessons learned from the first auction.
For more information:
European Commission press release: European Hydrogen Bank auction provides €720 million for renewable hydrogen production in Europe
Draft T&Cs for the 2024 auction: Innovation Fund IF24 Auction – Draft Terms and Conditions
