The European Commission launches the second Renewable hydrogen auction

The European Commission has launched the second Renewable hydrogen auction, an initiative that will mobilize about €2 billion to fund green hydrogen projects within the European Economic Area (EEA). This auction, managed by the European Climate, Infrastructure and Environment Executive Agency (CINEA), is part of the Innovation Fund and the European Hydrogen Bank.

Of this total, €1.2 billion will come from the Innovation Fund, while an additional €700 million will be provided by Spain, Lithuania, and Austria. The goal is to offer financial support to producers of hydrogen classified as Renewable Fuel of Non-Biological Origin (RFNBO), with an ambitious focus on consolidating the role of green hydrogen in the decarbonization of key sectors.

In the first edition of this initiative, Zabala Innovation secured €314 million in funding for its clients, representing 44% of the total budget for the call. “Our track record in the first auction shows our ability to position clients for success,” emphasizes María Yáñez, a consultant specializing in the call at Zabala Innovation. “To succeed, competitive pricing is crucial, but so is meeting every technical and operational criterion,” she adds.

Categories and objectives of the second Renewable hydrogen auction

The Renewable Hydrogen Auction prioritizes projects that can accelerate the adoption of renewable hydrogen in key sectors, without innovation requirements, unlike the Innovation Fund.

This year’s call is divided into two funding categories:

• General Production: €1 billion to support RFNBO hydrogen production without any restrictions regarding the offtakers.
• Maritime Sector: €200 million to specifically advance hydrogen for vessel bunkering and maritime applications.

Requirements and phases

The call sets rigorous criteria to ensure that selected projects align with the European Union’s objectives:

• Location: Projects must be in the EEA.
• Technical criteria: A minimum electrolyser capacity of 5 MW is required at a single location.
• Resilience: Electrolyser stack sourcing from China is limited to 25%, promoting resilience in European supply chains.
• Maturity and deadlines: Demonstrated technical, operational, and financial readiness. Projects must achieve financial close within 2.5 years and enter into operation by 2030.

The auction process is divided into key phases to ensure the selection of high-impact and viable projects:

• Publication of Terms and Conditions: Detailed guidelines on eligibility, submission procedures, and deadlines were released in September 2024.
• Competitive auction: Eligible projects submit funding requests in the form of fixed premium bids, capped at €4 per kilogram of hydrogen produced, indicating the average annual production in kilogram during the first 10 years of operation.
• Evaluation: All applications are ranked according to their bid price and then experts assess projects based on technical, operational, and financial maturity. Proposals must demonstrate readiness to achieve financial close within 2.5 years and operational status within 5 years of grant approval.

Precedent of the first auction

The European Commission’s pilot renewable Hydrogen Auction, which closed in February 2024, set a significant precedent in financing projects in this field. Of the 132 proposals submitted, seven innovative projects from Spain, Finland, Norway, and Portugal received funding, two of them with the support of Zabala Innovation. These projects, which achieved competitive prices ranging from €0.37 to €0.48 per kilogram of hydrogen produced, secured grants ranging from €8 million to €245 million.

The projects selected in the first Hydrogen Auction received grants to bridge the gap between the production costs of renewable hydrogen and its current market price, which is mainly influenced by non-renewable producers. This financial support will enable the winners to produce renewable hydrogen for use in key industries such as steel, chemicals, maritime transport, and fertilizer production. The projects aim to produce 1.58 million tonnes of renewable hydrogen over the next 10 years, helping to prevent the emission of over 10 million tonnes of CO2.