The European Commission aims to launch a second auction of electrolytic hydrogen production subsidies by the end of the year after an initial pilot auction was heavily oversubscribed.

The pilot auction drew 132 bids spanning 17 countries, with requests for funding “far exceeding” the budget of €800m ($865m), the European Commission said. Bids were submitted for projects totalling 8.5GW of electrolyser capacity, enough to meet 10% of the EU’s 2030 green hydrogen production target.

Subsidies in the form of a fixed premium per kg of renewable hydrogen produced, for up to ten years, will be paid out via the European Hydrogen Bank, a financial vehicle aimed at supporting domestic EU green hydrogen production and imports. The bank is financed through the EU’s Innovation Fund, which in turn is funded with about €40b raised from the auctioning of allowances under the EU Emissions Trading System between 2020 and 2030.

132 – Number of bids in pilot auction

The Commission hailed the strong demand for subsidies in the pilot auction as evidence that the private sector is ready to mobilise the capital needed to build out production of green hydrogen. Projects must meet green hydrogen definitions set out under the EU’s Renewable Energy Directive and its delegated acts.

“The applications are in and the enthusiastic market response to the pilot auction shows the European hydrogen industry is ready to scale up,” said Kurt Vandenberghe, director-general for climate action at the Commission.

Received bids will be ranked by price, and applicants will be informed of the results in April/May 2024, when successful bidders will be invited to prepare and sign grant agreements. Agreements will be signed by November 2024 at the latest. The selected projects will have to start producing renewable hydrogen within five years of signing agreements.

---

Author: Stuart Penson