The European Commission has granted fair competition clearance for a EUR 1.3-billion ($1.51 billion) German government support for renewable hydrogen projects.
The subsidies are offered to projects that bid but failed to win in the third auction of the European Hydrogen Bank, a European Union Innovation Fund platform to scale up the renewable hydrogen value chain in the 27-nation bloc and partner countries.
Germany, along with Spain, is offering the unselected projects another chance through the Innovation Fund’s “auction as a service” mechanism. The two countries are offering a combined EUR 1.7 billion from their national funds, according to the Commission. The mechanism allows EU27, Iceland, Liechtenstein and Norway to have a competitive selection of projects to fund using their internal budgets without holding their own auction.
“The approved [German] scheme will support construction of up to 1,000 MW of installed electrolyzer capacity, and the production of up to 10 million tonnes of renewable hydrogen”, the Commission said in an online statement. “This is estimated to avoid up to 55 million tonnes of CO2”.
“The scheme will provide support to companies planning to construct new electrolyzers feeding renewable hydrogen into the Danish Hydrogen Backbone 1 pipeline, which is a Project of Common Interest, and deliver it to buyers connected to the German Hydrogen Core Network”, the Commission added.
“The aid will not only support the production of renewable hydrogen, but also cross-border infrastructure that connects renewable hydrogen sources in the North Sea to large-scale buyers.
“Under the scheme, the aid will take the form of a direct grant per kilogram of renewable hydrogen produced. The aid will be granted for a maximum duration of ten years. Beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin (RFNBOs)”.
In clearing the German offer under the EU’s state aid rules, the Commission said, “Germany put in place sufficient safeguards to ensure that the scheme has a limited impact on competition and trade within the EU. In particular, the scheme will support beneficiaries in Denmark, the beneficiaries will be selected following a competitive bidding process and the aid will be kept to the minimum necessary”.
“Limiting the eligibility of the scheme to projects that will feed renewable hydrogen into the Danish Hydrogen Backbone 1 pipeline and deliver it to buyers off-takers that are connected to the German Hydrogen Core Network does not unduly distort competition as this infrastructure will lower the cost of renewable hydrogen in the long term”, the Commission added.
The Commission previously approved 5 renewable hydrogen support packages offered under the “auction as a service” mechanism: 1 each by Austria, Germany and Lithuania, and 2 by Spain.
Under the third auction, 9 cleaner hydrogen production projects secured a total of EUR 1.09 billion.
“Across seven countries in the European Economic Area, the projects are expected to provide almost 1.1 gigawatts of electrolyzer capacity and produce over 1.3 million tonnes of hydrogen over their first 10 years of operation, with an estimated greenhouse gas emissions avoidance of 9 million tonnes of CO2 equivalent”, the Commission said in a press release May 7.
The grant amount is a fraction of the EUR 8.4 billion requested by proposals in the bidding round. The 58 submitted bids represented about 4.3 gigawatts (GW) of electrolyzer capacity, according to a Commission statement March 20.
The Hydrogen Bank helps close the price difference between production costs and the price buyers are currently willing to pay.
“Upon signature of their grant agreements, the nine selected projects will receive a fixed premium of between EUR 0.44 and EUR 3.49 per kilogram of certified and verified hydrogen produced, for a maximum period of 10 years”, the Commission said.
Austria, Denmark, Finland, Germany and Greece each have 1 selected project under the third auction. Norway and Spain each have 2.
The third auction covered projects with maritime or aviation offtakers for the first time. Eligibility had also been expanded to include electrolytic hydrogen produced through nuclear power.
The European Climate, Infrastructure and Environment Executive Agency expects to sign grant agreements with the winning bidders by yearend.
“The selected projects will have to reach financial close within two and a half years of grant signature and enter into operation within five years”, the Commission said.
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