Out-Law News 2 min. read
30 Nov 2023, 2:23 pm
The European Commission has initiated the first auction under the European Hydrogen Bank, allocating €800 million from emissions trading revenues to support the production of renewable hydrogen in Europe through the Innovation Fund.
The EU Innovation Fund has an estimated budget of €40 billion from the EU Emissions Trading System between 2020 and 2030. The Innovation Fund is the EU's largest funding programme for the deployment of innovative net-zero technologies to reduce greenhouse gas (GHG) emissions. The Innovation Fund has also opened its 2023 call for proposals with a €4 billion budget available for cutting-edge decarbonization technologies in various sectors, including CleanTech manufacturing.
Producers of renewable hydrogen can bid for a share of the funding through the Hydrogen Bank which, if successful, they will receive in the form of a fixed premium per kilogramme of hydrogen generated, to close the cost gap between the production price and consumers' willingness to pay – especially in a market where non-renewable hydrogen is produced at lower prices.
“This auction is a clear signal. The ramp-up of the European hydrogen market is in full swing. The Innovation Fund is an important and powerful puzzle piece in this process. The Innovation Fund already secured about €6.5 billion for CleanTech projects between 2020 and 2023,” said Dr. Sönke Gödeke, energy law expert at Pinsent Masons.
This initiative complements other strategic initiatives to promote investment in the generation of hydrogen from renewable energy sources, with a focus on its crucial role in the decarbonisation of heavy industry and certain transport sectors.
The pilot auction will allow producers of renewable hydrogen to submit bids for EU funding based on a proposed price premium per kilogramme of hydrogen generated, subject to a cap of €4.5/kg. The projects that are selected by the Hydrogen Bank will receive the granted subsidies for up to 10 years in addition to the market revenue they derive from hydrogen sales.
The European Hydrogen Bank is also introducing a new "auctions as a service" mechanism. This is intended to enable EU member states to finance projects that were not considered for funding by the Innovation Fund due to limited budgets. The European Hydrogen Bank is part of wider EU measures to promote private investment in renewable hydrogen to close the investment gap connecting future renewable hydrogen supply to consumers, and to achieve climate neutrality by 2050.
Hydrogen producers should submit bids by 8 February 2024. The Hydrogen Bank will host an online information day on 30 November 2023, and announce successful bidders in April 2024.
The pilot auction aims to collect reliable data on the renewable hydrogen project pipeline in the EU, competition for funding, production costs and market prices. This data will serve as a basis for future auctions and support the European Commission’s energy transition programme, REPowerEU.
“Renewable hydrogen has a critical role to play in Europe's future energy mix, mainly for the decarbonisation of heavy industry replacing fossils. This first European Hydrogen Bank auction will contribute to the REPowerEU Plan goal to produce 10 million tonnes of hydrogen domestically by 2030,” said Florian Huber, expert on energy law at Pinsent Masons.