The European Commission (EC) has launched the first auction under the European Hydrogen Bank to support renewable hydrogen production in Europe, with an initial €800 million of emissions trading revenues available to producers in the European Economic Area (EEA).
The auction, which is funded by the Innovation Fund, was launched on November 23, as announced earlier this year.
According to the auction terms and conditions, producers of renewable hydrogen can bid for support in the form of a fixed premium per kilogram of hydrogen produced. The premium is intended 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.
Under the pilot auction, producers of renewable hydrogen can submit bids for EU support for a certain volume of hydrogen production. The bids should be based on a proposed price premium per kilogram of renewable hydrogen produced, up to a ceiling of 4.5€/kg. Bids up to this price, and which also comply with other qualification requirements, will be ranked from the lowest to the highest bid price and will be awarded support in that order, until the auction budget is exhausted, EC explained.
The selected projects will receive the awarded subsidy on top of the market revenues that they generate from hydrogen sales, for up to ten years. Once projects have signed their grant agreements, they will have to start producing renewable hydrogen within five years.
Bidders have until 8 February 2024 (17:00 CET) to apply via the EU Funding and Tenders Portal .
EC added that applicants will be informed about evaluation results as early as April 2024 and sign the grant agreements within nine months after the call closure.
The Commission expects the pilot auction to allow for the collection of reliable data about the EU’s renewable hydrogen project pipeline, the level of competition for this kind of support, the costs of renewable hydrogen production, and its market price. The lessons from the pilot scheme will be used to inform future auctions that could be developed for other decarbonization technologies and products. As revealed recently, the EC intends to launch a second round of auctions in 2024.
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Additionally, under the Hydrogen Bank, the EC is also offering a new “Auctions-as-a-service” mechanism that will enable Member States to finance projects that have bid in the auction but have not been selected for Innovation Fund support due to budget limitations. This allows them to award national funding to additional projects on their territory, without the need to run a separate auction at the national level, reducing the administrative burden and cost for all parties.
The European Hydrogen Bank was announced by the EC President, Ursula von der Leyen in her State of the European Union address in 2022 to support the EU’s domestic hydrogen production and imports from international partners of renewable hydrogen.
On November 23, the Innovation Fund also opened its 2023 call for proposals with a €4 billion budget available for cutting-edge low-carbon technologies in various sectors, including maritime.