EU to auction E 800 million in aid for domestic green hydrogen producers

The European Commission will launch in the European autumn a first auction of E 800 million (US$ 847 million) of aid to domestic manufacturers of green hydrogen to compensate the difference between production costs and the market price, with the aim of encouraging the development of this industry.

It will do so with money from the Innovation Fund articulated through the future Hydrogen Bank, a financing instrument specifically created for this technology in which Brussels has high hopes, said today at a press conference the European Commission Vice-President responsible for the Green Pact, Frans Timmermans.

The details of the auction will be announced in June, said Community sources linked to the Hydrogen Bank, which was announced last September with an initial allocation of E 3,000 million from the Community budget.

The Commission did advance that projects that have been financed with State aid will be able to compete in the bidding, but the countries will have to notify it to the Executive, which will take it into account in the auction to "guarantee that there is sufficient competition".

According to Brussels' calculations, the EU is a leader in green hydrogen projects, with more than 50% of global electrolyzer production capacity and also more than 50% of installed devices.

"The question is: how do we maintain that leadership when the technology moves to mass production, which it is doing not only in Europe but in the world?" asked Timmermans, who recalled that the target in 2030 is to produce 10 million tons of hydrogen and import another 10.

The Hydrogen Bank will cover the "green bonus" on the production of hydrogen from renewable electricity, which is "the difference between the cost of producing renewable hydrogen and the price the market is willing to pay".

"The exact amount will result from a competitive auction process. The auction will be won by the renewable hydrogen producers who require the least amount of support in terms of euros per kilo of hydrogen produced," he explained.

That lever seeks to solve a vicious circle in which investors wait because they don't know if they will have the hydrogen available in due course, and producers wait because they don't know if they will have the necessary investments for their projects.

"We have to mitigate the risk," said the EU vice president, who stressed that the producer will receive this subsidy for "a period of ten years" that will allow him to "create stable market conditions".

Brussels estimates that a budget of 1 billion euros would allow financing the production of 0.04-0.06 million tons of green hydrogen.

The EU executive expects demand for hydrogen to grow and the technology to become cheaper, so that the premium will be reduced from 2025 onwards.

However, reaching the EU's 2030 targets for both domestic and imported production would require "between E90,000 and E115,000 million" and "the sooner production is increased (...), the lower this premium will be", reasons the Executive.

These auctions will be specifically dedicated to the production of so-called green hydrogen (from renewable electricity) and will not serve for pink or low-carbon hydrogen (from nuclear electricity), Timmermans pointed out.

The Commission outlined these ideas as part of the presentation of its "roadmap" for developing a Hydrogen Bank as part of a broad basket of initiatives to boost European competitiveness in the energy transition technology race. Brussels had planned to present the hydrogen document in two months' time, but plans have been brought forward.

"We have moved faster because everything hydrogen is moving faster than expected. When I first talked about hydrogen in 2019, even my own collaborators said, 'what the...' And now hydrogen is living one of the most dynamic developments in the energy world. So, you have to go fast (...). The others are also moving, in Asia and in the United States. There is no time to lose," he said.

In addition to supporting hydrogen production within the EU, the bank will have a second international leg, as Brussels has set the goal for the bloc to manufacture 10 million tons of hydrogen in 2030 and import as many more, as a path to climate neutrality in 2050.

The Commission will also seek to favor imports and transport, and in this sense is also studying the organization of an auction system, and will also promote other lines of financing, for example, through joint purchases between Member States.

(With information from EFE)