The EU launched its European Hydrogen Bank (EHB) auctions on 23 November, allowing green hydrogen projects to bid for the first tranche of funding from a €3b ($3.27b) pot.

Applicants were asked to submit applications via the European Commission's Funding and Tenders Portal, with the window closing on 8 February 2024.

The Commission will assess the bids and announce the winning projects on an undisclosed date next year.

“We are launching the first auction of the EHB backed by €800m in funding. This will attract private sector financing and result in commercial offtake agreements,” said European Commission President Ursula von der Leyen.

The first phase of the mechanism will pay out a total of up to €800m to renewable hydrogen producers as a fixed premium over ten years of operation.

The auction system is based on the volume of hydrogen produced and the price offered. Projects must have a minimum production capacity of 5MW, and the budget will be allocated to the projects with the lowest financial support needs based on their proposed hydrogen production price.

The maximum fixed premium offered to any project will be €4.5/kg of hydrogen produced, while the maximum awarded to any one project must be less than €266.7m.

“We are launching the first auction of the European Hydrogen Bank” Von der Leyen, European Commission

Successful applicants will have five years from signing a contract with the EHB to bring their projects up to the capacity outlined in their bid.

Alongside their applications, companies will have to submit supporting documents such as a renewable electricity sourcing strategy, an offtake and price hedging strategy, an electrolyser procurement strategy, and environmental and grid permit applications.

They will also be required to provide a letter of intent from a bank or financial institution outlining an intent to provide finance to the project company to complete construction under specified circumstances.

The rules and guidelines for the auction have been broadly welcomed by industry body Hydrogen Europe—although the organisation previously told Hydrogen Economist that the EHB is significantly undercapitalised and that the restrictions outlined by the delegated acts need to be loosened if the sector is to flourish in Europe.

The EHB will help improve the attractiveness of the EU to project developers that are tempted by incentives put in place by the US Inflation Reduction Act (IRA).

However, a study by the German Council of Economic Experts earlier this year found that lower energy and electricity prices in the US are likely to have a significantly greater impact on the attractiveness of the region than the IRA itself.

Second phase

The Commission has also announced that it will launch the second round of auctions from the EHB for the remaining €2.2b of funding set aside for hydrogen projects in early 2024.

In addition, the Commission will create a “one stop shop” under the EHB to guide project developers to different types of EU funding. And it will create a platform where offtake demand can be matched with supply.

“In parallel, we are also working on the international leg of the EHB,” said von der Leyen. “This will secure diversified imports of renewable hydrogen from reliable suppliers abroad.” However, she did not mention any specific auction dates or mechanisms for the international leg of the EHB.

Industry bodies such as Hydrogen Europe have suggested that auctions could be based on existing instruments such as H2Global—a German scheme that held its first auction in December last year, focused solely on imports of green ammonia, green methanol and sustainable aviation fuel.

The ten-year purchase agreements are backed by €900m in finance from the German government.

The EU has already signed partnership deals with Egypt, Kenya, Libya and various Latin America countries to produce hydrogen and ship it to the EU. And it is helping to fund a 10GW green hydrogen and ammonia project in Brazil that would ship the fuel to Croatia and then on to offtakers in Southeastern Europe. The funding is part of a €2b EU investment in the hydrogen value chain in Brazil carried out through the global gateway scheme.

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Author: Tom Young