EU envisages subsidies for hydrogen produced with energy - draft

BRUSSELS, Mar 16 (Reuters) - The European Commission will outline a hydrogen subsidy plan on Thursday that would make clean versions of the fuel more competitive with fossil fuel-based ones, a draft document shows.

EU industries consume about 8 million tons of hydrogen, but the vast majority is produced using gas in a process that emits CO2 that warms the planet. The EU wants to switch to CO2-free hydrogen produced from renewable electricity to reduce industry emissions.

The EU will launch a hydrogen financing "bank" consisting of auctions to grant a fixed premium to hydrogen producers per kilogram of hydrogen for up to 10 years, according to a draft document accessed by Reuters and due to be published on Thursday.

The first auction this year would offer about 800 million euros. Payments would be made once the hydrogen is produced. To apply, projects will need proof that they have an interested buyer and a supply of renewable energy to power the production site.

"The bank's aim is to reduce the cost difference to a level that private buyers are willing and able to cover," the project says.

Governments will also be able to contribute national funds to EU auctions to increase the budget for projects in their own countries, so that if projects run out of EU funding, they can still receive this state aid.

The EU wants to produce 10 million tons of renewable hydrogen and import another 10 million tons by 2030. It currently produces less than 0.3 million tons of hydrogen from electricity, according to the project.

Reaching those targets would require huge investments to expand Europe's tiny fleet of electrolyzers - the equipment used to produce hydrogen from electricity - and install between 150 and 210 GW of new renewable energy capacity to power them.

According to the blueprint, that investment could cost as much as 471 billion euros ($500 billion), most of which would come from the private sector.