European Hydrogen Bank: E.C. launches first edition of a Renewable Hydrogen Auction

To accelerate the transition to a low-carbon economy and promote innovation in sustainable technologies, the European Commission has officially announced the launch of its €800 million Innovation Fund Renewable Hydrogen Auction pilot programme.

This programme, managed by the European Commission (through its executive agency CINEA) and in collaboration with EU Member States, aims to finance significant projects that contribute to the reduction of greenhouse gas emissions in the region. Through this initiative, the EU seeks to boost the adoption of clean and sustainable technologies that are key to achieving the climate goals set out in the Paris Agreement.

What is the Renewable Hydrogen Auction pilot programme?

The Green Hydrogen Auction pilot programme is a key initiative within the framework of the European Green Deal. Its main objective is to fund projects that address climate challenges and promote the deployment of low-carbon technologies.

The budget will come from the EU’s major funding programme, the Innovation Fund, a fund established to support the transition to a sustainable economy and lower greenhouse gas emissions. This fund is financed through the sale of carbon emission allowances in the EU Emissions Trading System (ETS).

CINEA is the entity responsible for administering the auction, in close cooperation with the EU Member States, and within the European Hydrogen Bank initiative. The Commission is responsible for setting the terms and conditions of the auctions, overseeing the project selection process, and distributing the funds to the beneficiaries. EU Member States play a key role in providing strategic guidance and support to projects within their jurisdictions.

Key objectives of the programme

• Reducing the cost gap between renewable and fossil hydrogen in the EU most effectively and efficiently possible through the allocation of public support. Auctions have proven to be a success in the renewable energy sector, reducing the financing needed for renewable energy generation through price competition while mobilising private investment.
• Enabling the formation of the renewable hydrogen market. Competitive auctions with a simple and transparent set-up reveal production costs and create valuable and comparable prices that can be used to launch a European hydrogen market.
• De-risk European hydrogen projects by connecting domestic supply and demand for renewable hydrogen, reducing capital costs, and leveraging private capital. Given the size of the investment required, support from the Innovation Fund should be seen as seed funding for scaling up private and business investment.
• Reduce administrative burdens and costs through short, streamlined, and transparent procedures.

Stages of the Renewable Hydrogen Auction pilot programme

The auction consists of several stages.

• Publication of the terms and conditions of the auction: including eligibility criteria, deadlines, and procedures for project submission.  Interested projects must meet these requirements to be considered for funding. This document was published at the end of August.
• Evaluation: The most solvent projects that exceed the minimum maturity thresholds set out in the terms and conditions above are selected. The selection is based on criteria such as relevance and quality, as well as the technical, operational, and financial maturity of the projects.
• Competitive auction: Participants in the auction can apply for the amount of funding they need to carry out their projects in the form of a fixed premium (with a maximum of €4.50/kg of hydrogen produced). The auction will determine which projects receive funding, to maximise the climate impact per euro invested.
• Receipt of funding: These projects will be continuously monitored to ensure that they meet the targets set and that the planned emission reductions are achieved.

Highlights of the programme

• Eligibility Criteria: Projects must meet certain eligibility criteria to be considered for funding. This includes among others the need to be located in a State within the European Economic Area (EEA, which includes EU members and Iceland, Norway and Liechtenstein) and have a focus on new green hydrogen production (certified and certified as “renewable fuel of non-biological origin (RFNBO) hydrogen” in line with the definitions and requirements of the new Renewable Energy Directive).
• Technical requirements: minimum 5 MWe of newly installed electrolyser capacity (which must be at a single location; virtual clustering of capacities is not allowed).
• Technical, Operational and Financial Maturity: Projects must demonstrate their technical, operational and financial viability, ensuring that they can be effectively implemented and achieve their emission reduction targets. Projects must enter the operational phase within a maximum of 5 years from the signature of the contract with CINEA.
• Evaluation and Selection: Participants in the auction must follow a specific process to submit their bids for funding. The projects submitted will be evaluated by a panel of experts who will require that all criteria are approved, without entering into quantitative scores or assessments.
• Auction Process: Based on the pre-selection of eligible projects, the funds requested by the projects will be allocated according to the price submitted (starting from the lowest bid) until the total budget available for the auction is allocated.
• Cumulation of support: green hydrogen producers participating in the auction will not be eligible to receive other support for the CAPEX or OPEX of the project, as well as other State aid for operational costs or similar.

How Zabala Innovation can help you to apply for this new programme

Our consultancy firm has more than 36 years of experience in attracting and leveraging European funds, and the Innovation Fund programme is no exception. Since the launch of the programme at the end of 2020, Zabala Innovation has successfully supported more than 11 projects with a return of more than €400 million in support.

If you need help to participate in this first renewable hydrogen auction, Zabala Innovation is your partner for the journey.