EU to publish H2 bank pilot results on 30 April

The European Commission will publish the results of its €800mn hydrogen bank pilot auction on 30 April, EU Innovation Fund policy officer Johanna Schiele said today.

The commission will release a wide range of information about the successful bids, expected levelised costs of hydrogen production and the intended origin of electrolysers used in the projects, Schiele told the Reuters Hydrogen 2024 conference in Amsterdam.

The ceiling price of €4.50/kg for bids submitted in the auction "was more than sufficient", she said, suggesting that successful bids may have stayed well below this threshold.

Through the mechanism, the commission will award 10-year production subsidies to the renewable hydrogen projects that submitted the lowest bids in the auction. Bids closed in early February and the commission previously said that applications were submitted for 132 projects in 17 different countries, amounting to 8.5GW electrolyser capacity that could produce some 880,000 t/yr of renewable hydrogen. But only a fraction of these will likely win subsidies in this round.

The commission is confident that successful projects will be built, Schiele said. Developers had to submit a completion bond for 4pc of the subsidy value which they will lose if they do not finish their projects. Plants have to be built within five years.

Schiele insisted that the commission is happy with the level of interest in the auction and the design it chose. The UK opted for a different path with a contracts-for-difference (CfD) mechanism that involved negotiations between the government and the developers to agree on subsidy levels, but entering into negotiations would have been a more complex and potentially more costly approach, Schiele said. Subsidy levels increased during the UK's negotiation process and could eventually amount to around £12/kg (€14/kg), partly depending on the development of natural gas prices, she added.

The EU may yet switch to a CfD approach at a later stage when the industry matures, Schiele said .

The UK government argued that its mechanism provides greater investment certainty and could unlock a pipeline of subsequent projects.

Round two

The commission expects to launch a second, larger hydrogen bank auction later this year, at around the same time as the pilot auction last year, Schiele said.

The bidding window for the pilot auction opened in December 2023 and bids closed in February.

The second auction will have a budget of around €2.2bn and will take learnings from the first round into account. A launch towards the end of the year would mark a significant delay from previous plans. Commission president Ursula von der Leyen had said that the second round could take place in spring 2024.

Meanwhile, Belgium is considering putting forward some of its own funds to use the hydrogen bank's "auction-as-a-service" mechanism in support of domestic renewable hydrogen projects, the Renewable Hydrogen Coalition's impact director Francois Paquet said at the Amsterdam conference.

Germany used that option for the pilot auction, putting in €350mn to subsidise the most competitive German projects that miss out on support in the EU-wide part of the auction. And Austria has already announced plans to top up the second round with €400mn to support domestic projects.

For Belgium, the hydrogen bank could provide a route for pushing projects forward, many of which have fallen behind schedule. The Renewable Hydrogen Coalition is trying to convince more governments across the EU to make use of the auction-as-a-service mechanism, Paquet said.

It is intended to avoid market fragmentation caused by EU countries using different subsidy mechanisms. France, Denmark, the Netherlands and Italy have organised or announced mechanisms for subsidising production projects outside of the hydrogen bank scheme.

By Stefan Krumpelmann