S&P Global – EC reallocates hydrogen funds as large-scale auction winners withdraw
The European Commission is reallocating funds from its first two renewable hydrogen subsidy auctions after the withdrawal of major winners from the first two rounds.
Deutsche ReGas pulled its 210-MW H2-Hub Lubmin project in Germany from the second European Hydrogen Bank auction, while the 560-MW Zeevonk electrolyzer in the Netherlands and the 500-MW Catalina project in Spain also abandoned their EU funding.
Deutsche ReGas cited delays to implementing national legislation that had created too much uncertainty.
A Deutsche ReGas, spokesperson said in an email on Aug. 14,
Given the current uncertainty in the regulatory framework — in particular the continued absence of national implementation of the EU RED III directive, which has already prompted the European Commission to initiate infringement proceedings against, among others, Germany — we have, after thorough consideration, decided to forgo the awarded funding,
The company, said:
An unclear regulatory environment hampers market development and limits our ability to secure long-term contracts with potential industrial customers,
H2-Hub Lubmin is the second project to leave the second EU auction, after delays to the 560-MW Zeevonk electrolyzer in the Netherlands forced project partners Vattenfall and Copenhagen Infrastructure Partners to forgo the funding.
And the 500-MW Catalina renewable hydrogen project in Spain from CIP and Enagas Renovable has also terminated its grant from the first EU Hydrogen Bank auction, citing tight deadlines and a dependency on the national pipeline system, which has not yet reached financial close.
The project developers sought to obtain more flexibility on the commercial start date deadline from the EC, “but this has not been possible,” a CIP spokesperson told Platts, part of S&P Global Commodity Insights, by email.
The spokesperson, said:
For these reasons, [we have] chosen to turn down the European Hydrogen Bank grant for Catalina,
A European Commission spokesperson declined to comment on individual projects, but said grant agreements were expected to be signed in October.
The spokesperson, said by email Aug. 14,
We will communicate on those thereafter,
The EU funds for the projects that have withdrawn from the second auction will be allocated to reserve projects, while remaining funds from the first auction will be returned to the Innovation Fund for future calls.
Project development
Nonetheless, developers for both H2-Hub Lubmin and Catalina plan to progress the projects.
Catalina has received a grant from the Spanish government for Eur245 million ($285 million), and CIP and Enagas Renovable will continue work towards a final investment decision, the spokesperson said.
The Spanish funding is more than the Eur230 million allocated from the EU auction.
S&P Global Commodity Insights senior hydrogen analyst Matthew Hodgkinson, said.
The Catalina project has been awarded funding by the Spanish government which means they are ineligible to claim the EHB funding as well due to the Commission’s rules for the auction
Deutsche ReGas said it would continue to develop the Lubmin project without a subsidy, though could also apply for future European Hydrogen Bank auction rounds.
Auction prices
The withdrawn projects represent a total of almost 1.3 GW of electrolysis, or around a third of the capacity that the EC had awarded across the two auctions, with 1.5 GW receiving support under the first auction and 2.2 GW in the general category of the second round.
A further 100 MW dedicated to marine fuel offtake was also awarded in the second auction.
Hodgkinson, said:
It remains to be seen if other projects will withdraw from the process, as the low subsidies that were awarded under both rounds of the EHB only go a fraction of the way to bridging the cost differential between conventional hydrogen production and EU Renewable Energy Directive-compliant production,
Catalina won its bid for a fixed premium of 48 euro cent/kg in the first auction, which cleared at 37-48 euro cent/kg.
Meanwhile, H2-Hub Lubmin bid at 47 euro cent/kg in the second auction and Zeevonk at 60 euro cent/kg in the second auction, which cleared at 20-60 euro cent/kg for the general category.
Platts assessed the cost of green hydrogen production via alkaline electrolysis in Spain, backed by renewable power purchase agreements, at Eur8.42/kg ($9.81/kg) on Aug. 13.
The assessment reflects one possible pathway for producing EU Renewable Energy Directive-compliant green hydrogen.
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S&P Global – EC reallocates hydrogen funds as large-scale auction winners withdraw, source
