EU Hydrogen Bank pilot auction: European Commission publishes Terms & Conditions

On 30 August 2023, the European Commission published its final Terms and Conditions for the first EU-wide renewable hydrogen production auction. The EU Hydrogen Bank Pilot Auction is funded by the Innovation Fund, now entering its fourth year since inception.

EU Hydrogen Bank pilot auction: Explained

The EU Hydrogen Bank pilot auction opens on 23 November 2023 and will award up to € 800 million to renewable hydrogen producers in the European Economic Area (EEA). The support will take the form of a fixed premium in €/kg of renewable hydrogen produced over ten years of operation, therefore targeting the gap between the production costs and the demand’s willingness to pay. The auction is designed to achieve four objectives:

  1. Reducing the cost gap between renewable and fossil hydrogen in the EU as effectively and efficiently as possible by allocating public support. Auctions have proved to be a success in the renewable power sector, bringing down the required funding for renewable power generation through competition on price while mobilising private investments;
  2. Allowing for price discovery and renewable hydrogen market formation. Competitive auctions with a simple and transparent set-up reveal production costs and create valuable and comparable price points that can serve to kick-start a European hydrogen market;
  3. De-risking European hydrogen projects, connecting domestic renewable hydrogen supply and demand, bringing capital costs down and leveraging private capital. Given the size of the investment needed, support from the Innovation Fund should be seen as the seed funding for increased private and corporate investments;
  4. Reducing administrative burdens and costs thanks to short, lean, and transparent procedures.

The new auction mechanism will expand the portfolio of support mechanisms that the Innovation Fund currently provides through grants, project development assistance, and other blended financial instruments. If the level of participation in the pilot auction is high, it will be followed by annual auction rounds and could be expanded to clean products beyond renewable hydrogen. This awarding mechanism is expected to enable a faster rollout of innovative technologies needed for the green transition, especially in hard-to-abate sectors.

What is the Innovation Fund?

The Innovation Fund is one of the world’s largest funding programmes for commercialising and deploying net-zero and innovative technologies. It is financed by revenues from the auctioning of allowances from the EU Emissions Trading System (ETS). The grant aims to help businesses invest in clean energy and bring technologies to market that can decarbonise European industry while fostering competitiveness. In March 2023, the Commission presented a new plan to stimulate and support investments in renewable hydrogen production through the European Hydrogen Bank (EHB). This initiative aims to accelerate investment and bridge the investment gap for the EU to reach its ambitious REPowerEU targets. The EHB is organised around four pillars:

  1. Supporting the creation of a domestic market of renewable hydrogen;
  2. Supporting international imports into the EU;
  3. Promoting transparency and coordination on market developments;
  4. Streamlining existing financial instruments.

How can you prepare as an applicant?

Do you wish to apply for the EU Hydrogen Bank pilot auction? You can already familiarise yourself with the Terms and Conditions. The EU Hydrogen Bank pilot auction opens on 23 November 2023.

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