Producers of renewable hydrogen can bid for support in the form of a fixed premium per kg of hydrogen produced. The premium is intended to bridge the gap between the price of production and the price consumers are currently willing to pay, in a market where non-renewable hydrogen is still cheaper to produce.
The Hydrogen Bank complements other policy tools to build a market for renewable hydrogen, stimulate investments in the production capacity, and bring production to scale. Renewable hydrogen has a critical role to play in Europe's future energy mix, in particular for the decarbonisation of heavy industry and some transport sectors, replacing fossil fuels. By enabling a faster rollout of innovative hydrogen technologies the pilot auction will contribute to the REPowerEU Plan goal to produce 10 million t of hydrogen domestically by 2030.
Under the pilot auction, producers of renewable hydrogen, as defined in the Renewable Energy Directive and its Delegated Acts, can submit bids for EU support for a certain volume of hydrogen production. The bids should be based on a proposed price premium per kg of renewable hydrogen produced, up to a ceiling of 4.5€/kg. Bids up to this price, and which also comply with other qualification requirements, will be ranked from the lowest to the highest bid price and will be awarded support in that order, until the auction budget is exhausted. The selected projects will receive the awarded subsidy on top of the market revenues that they generate from hydrogen sales, for up to 10 years. Once projects have signed their grant agreements, they will have to start producing renewable hydrogen within five years.
Cumulation with other types of aid from participating Member States will not be possible, to ensure a level playing field for all projects regardless of location. This will prevent fragmentation at the early stages of the European hydrogen market and reduce administrative costs for upcoming national hydrogen support schemes.
The EC is also offering a new 'Auctions-as-a-service' mechanism under the Hydrogen Bank. This will enable Member States to finance projects which have bid in the auction, but have not been selected for the Innovation Fund support due to budget limitations. This allows them to award national funding to additional projects on their territory, without the need to run a separate auction at national level, reducing the administrative burden and cost for all parties. Member States' participation in the ‘Auctions-as-a-service' scheme is voluntary, and project developers must also express their interest in it during their application to be eligible. The scheme could play a significant role by preventing the segmentation of the market and incentive schemes.
Any support offered by Member States through this service will be considered as State aid. They must notify their support to the EC, and will benefit from a streamlined approval process, as the auctions are designed at the EU level in line with the Guidelines on State aid for climate, environmental protection and energy.
With 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. The Innovation Fund has also opened its 2023 call for proposals today with a €4 billion budget available for cutting-edge low-carbon technologies in various sectors. The?European Hydrogen Bank was announced by President von der Leyen in her State of the EU address in 2022 to support the EU's domestic hydrogen production and imports from international partners of renewable hydrogen. It aims to unlock private investments in the EU and in third countries by addressing the initial investment challenges and needs, closing the investment gap and connecting future renewable hydrogen supply to consumers.
Read the article online at: https://www.globalhydrogenreview.com/hydrogen/24112023/ec-launches-first-european-hydrogen-bank-auction/
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