European Commission Approves $7B Italian State Aid for Green Hydrogen

Italy has received clearance from European Union market guardrails for a EUR 6 billion ($6.96 billion) government support package to enable a renewable hydrogen production capacity of 200,000 metric tons a year.

“Both hydrogen produced via electrolysis powered by electricity from renewable energy sources and hydrogen produced from biogenic sources through biological, bio-thermochemical and thermochemical processes is [sic] eligible under the measure”, the European Commission said in an online statement.

The aid, which will run through 2029, takes the form of two-way contracts for difference. “Under these contracts, a strike price for hydrogen will be determined through a competitive bidding process”, the Commission said.

“If the price of an alternative fuel that would be used by the hydrogen consumers falls below that strike price, Italy will pay hydrogen producers the difference. If the price of the counterfactual fuel exceeds the strike price, the beneficiaries will pay the difference to the Italian state”.

Teresa Ribera, European Commission executive vice president for the energy transition, said, “This scheme will support the production of renewable hydrogen in Italy for sectors where it can contribute the most to reducing emissions. The scheme will contribute to the clean, just and competitive transition”.

The Commission assessed that the package “is necessary and appropriate to facilitate the production of renewable hydrogen for the decarbonization of the transport and industrial sectors”.

“The aid has an incentive effect as beneficiaries would not produce renewable hydrogen without the public support”, it added.

“The aid is proportionate as it will be granted following a competitive bidding process based solely on the strike price offered by bidders”.

Additionally emission reductions from projects to be supported by the aid “outweigh the negative effects on competition”, the Commission concluded.

Last week the Commission said it had approved a French government aid offer for one gigawatt (GW) of electrolytic capacity to produce hydrogen. France plans three bidding rounds.

“The first tender concerns 200 MW [megawatts] of electrolysis capacity with an estimated budget of EUR 797 million”, the Commission said in a press release March 23. “Hydrogen produced under this scheme will be exclusively sold for direct industrial use, to limit the use of hydrogen to cases where no economically viable electrification alternative exists.

“The aid will take the form of a fixed premium. Contracts will be concluded for a 15-year period.

“Beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin as well as low-carbon fuels, as set out in the delegated act on renewable hydrogen and the recently adopted delegated act on low-carbon hydrogen.

“The aid will contribute to offsetting the additional costs related to the cost of electricity needed to produce the renewable and low-carbon hydrogen in comparison with cheaper fossil hydrogen.

“The scheme will contribute to France’s effort to achieve 4.5 GW of electrolyzer capacity by 2030 and eight GW of capacity by 2035. France expects that the scheme will lead to up to 1,100 kilotons of CO2 [carbon dioxide] being avoided annually, which will contribute to France fulfilling its EU climate targets”.

Under the Hydrogen Strategy adopted 2020, the EU aims to enable 10 million metric tons of renewables-fueled hydrogen production capacity by 2030. The strategy aims to install at least 40 GW of electrolysis capacity for renewable hydrogen by the end of the decade.

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