AUCTION PLATFORM

Auction Platform To Support Renewable Hydrogen Deployment

by Chelsea Bailey

Through the European Hydrogen Bank (EHB), the European Commission is holding an auction system for renewable hydrogen production to support producers through a fixed price payment per kg of hydrogen produced for a maximum of 10 years of operation.

The first pilot auctions are currently being designed and are due to be launched in autumn 2023, backed by €800 million from the Innovation Fund.

A centralised auction platform will be run, where successful bidders could access the Innovation Fund and Member States could further support renewable hydrogen deployment through their own budgets via the platform.

EHB will establish a full hydrogen

Value Chain

Intended to be operational by the end of the year, the EHB is based on four pillars. Two of these are financing mechanisms, focusing on creating the EU domestic market and international imports into the EU.

The third pillar is linked to transparency and coordination. It focuses on assessing demand, infrastructure needs, hydrogen flows, and cost data. The final pillar is streamlining existing financial instruments. This is coordinating and blending these with new public and private funding, both in the UK and internationally.

By bridging the cost cap in the EU between renewable and fossil hydrogen and increasing revenue stability, the EHB will increase the bankability of projects and bring overall capital costs down.

The European Commission also proposes to create an EU auction platform through its Hydrogen Bank, offering “auctions-asa-service” for Member States, using both the Innovation Fund and Member State resources to fund potential renewable hydrogen projects, without prejudice to EU State aid rules.

The European Hydrogen Bank will establish a full hydrogen value chain in the EU, alongside the Net-Zero Industry Act. Those industries that make early decisions to redirect or focus on cleantech deployment will benefit.

Kadri Simson European Commissioner for Energy

“Auctions-as-a-service” offers a digital, neutrally-operated marketplace in which suppliers and buyers come together under fixed rules. It creates optimal purchasing conditions that can lead to a reduction in costs, ensures no lobbying takes place, and saves effort and time.

On the international dimension of the EHB, the European Commission is exploring how it can be designed to promote EU support for renewable hydrogen imports. It proposes to offer a green premium for renewable hydrogen imports via a similar auction system as used for the domestic market.

The scheme will see applicants submitting a single bid during the qualification phase for a ten-year fixed premium (in €/kg), which is then ranked compared to other bids on price.

Producers could be able to bid for a fixed premium subsidy of up to €4 ($4.36) per kilogam of hydrogen in the EU’s first competitive auction. It makes Europe’s support regime potentially more generous than the US hydrogen tax credits, which offers producers up to $3/kg.

Talking on the release of the EHB, Kadri Simson, Commissioner for Energy, said: “As part of the Net-Zero Industry Act, the Commission today adopted a plan to set up the European Hydrogen Bank. The European Union is a powerhouse for research and innovation, and we want to keep it that way!”

Commission is focusing on facilitating the financing of the hydrogen industry.

To achieve the 10mt of domestic renewable hydrogen production predicted in the REPowerEU plan, total investment needs are estimated at €335-471 billion including €200-300 billion needed for additional renewable energy production. Most of this will come from private funding, but public funding will play an important role in leveraging private investment.

As far as national resources are concerned, the State aid framework provides possibilities to crowd-in private investments and to roll out net zero.

Continuing, Kadri explained that hydrogen has a huge role in the transition to decarbonisation: “Renewable hydrogen will also play an important role in the EU’s transition to climate neutrality by 2050. The European Hydrogen Bank will establish a full hydrogen value chain in the EU, alongside the Net-Zero Industry Act. Those industries that make early decisions to redirect or focus on cleantech deployment will benefit.”

Hydrogen needs investment to scale up

Through its work with the EHB and other InvestEU implementing partners to seek ways to scale up support to investment in the net zero industry supply chain, the European

Additionally, with the adoption of the Temporary Crisis and Transition Framework and the endorsement of the General Block Exemption Regulation, the Commission has adapted State aid rules to further allow flexibility for the Member States to grant aid to speed up and simplify.

Also, several Union funding programmes, such as the Recovery and Resilience Facility, InvestEU, cohesion policy programmes or the Innovation Fund are available to fund investments in net zero technology manufacturing projects.

The Innovation Fund is providing a promising and cost-efficient avenue to support the scaling up of manufacturing and deployment of renewable hydrogen.