Isidoro Tapia will be one of the speakers of the Budapest Hydrogen Summit, to be held on 15 April.
As the Climate Bank, the European Investment Bank (EIB) is working closely with the European Commission, national governments and industry to accelerate Europe’s green transition and strengthen economic competitiveness through the Clean Industrial Deal announced in February. Renewable hydrogen has the potential to help build European leadership in green technologies and contribute to achieving the EU’s target of climate neutrality by 2050.
Hydrogen is a key sector in the European Investment Bank’s energy lending strategy, which supports renewable hydrogen, adopting a technology-neutral approach. The bank aims to develop the hydrogen market alongside the industry, member states and its clients and has been supporting projects for more than 10 years with 1.3 billion euros in financing directly linked to investments into the renewable-hydrogen value chain. Initially, the focus was on the early stages, but more recently, support has expanded across the entire value chain, including supply projects, hydrogen production and the deployment of electrolysers, as the bank is well aware of the challenges involved in this still emerging industry.
We spoke with Isidoro Tapia about the difficulties and opportunities within the industry, as well as the bank’s approach to supporting projects.
Key challenges in the hydrogen sector
Amongst the challenges, Mr Tapia mentions the need for additional renewable electricity capacity to meet hydrogen targets and the need for the evolution of the electrolyser technology, which still requires cost reductions across the value chain to become economically competitive.
“Another major challenge is hydrogen transport over long distances – currently, the infrastructure is insufficient, and the economic viability of long-distance hydrogen transportation remains uncertain,” he adds.
As he highlights, the cost of production of hydrogen at this stage is not yet financially competitive. But two drivers have an important potential: first the decrease in the cost of the technology, and second, the expected decrease in the cost of the renewable electricity used for the production of hydrogen.
Also one of the challenges is the lack of a trading market for hydrogen, so it is difficult to have a reference price. Typically, the cost varies from project to project.
Various types of support
Given the wide range of challenges, the bank strives to provide comprehensive support.
“From RDI to mobility, energy, and infrastructure, we engage in diverse projects – some serve as demonstrations, while others focus on scaling up or have commercial applications – all backed by our comprehensive financial toolkit,” said Mr. Tapia, highlighting the organisation’s broad scope of initiatives.
The bank has also been supporting the development of enabling infrastructure and connections between supply and demand. On the demand side, it has facilitated the transition to hydrogen-compatible technologies for industrial processes, accelerating the replacement of existing systems in the Nordics. On the supply side, it has supported the deploymemt of production facilities for example in Spain and Portugal.
“When prioritising our support, we aim to assist production where it’s most needed, specifically focusing on industries where energy constitutes a significant portion of their costs. Another key area of focus is innovation, with many of the operations we finance concentrated in the research and development stage. A third element is the development of European manufacturing capabilities. As with any net-zero sector, we foresee numerous opportunities for future growth, not only in renewable hydrogen but also in sectors like wind energy, batteries and other net-zero industries,” adds Mr Tapia.
Multiple financial instruments
Not only the supported projects but also the financial instruments are diverse: In some cases, the bank provides loans to the public sector, while in others, it offers financing to corporate clients. Additionally, it provides technical and financial advisory services and has supported operations under a project finance structure and deployed equity-type and venture debt instruments to back startups and innovative emerging players in the industry.
“Our lending offer is complemented by free advisory support, helping clients prepare and develop projects,” said Mr Tapia. “In some cases, this assistance addresses specific needs and refines projects to ensure they are bankable and commercially viable. We also engage in various partnerships and industrial alliances, contributing to discussions on the evolving hydrogen sector. Given the numerous regulatory developments in recent years, we closely monitor market trends to support its growth when the market fully takes off.”
Collaboration with the Hydrogen Bank auction winners
Mr. Tapia also spoke about several initiatives in different member states that they are closely monitoring, particularly the hydrogen bank auction conducted by the European Commission last year.
“Six projects won the auction, and the bank has signed financial agreements with two of them, while discussions are ongoing with the promoters of two others. This is just one example of how we are exploring new opportunities with promoters. Some member states are using the auction as a chance to increase the financing and support available for new projects. In particular, Spain, Lithuania and Austria have announced plans to top up the support. We expect to see more projects entering the pipeline, and this is something we are actively monitoring.”
The bank will be closely following the results of the new hydrogen bank auction, which are expected by the end of May.
What could drive the increase in hydrogen demand?
“At this stage, as with other industries in the past, there is still a renewable hydrogen premium – meaning the cost of renewable hydrogen production is higher than the fuels it is replacing, so economics remains a key consideration in all operations, especially new ones” said Mr Tapia.
The price could also restrain demand, yet certain incentive factors could stimulate growth. For example, discussions are still ongoing at the EU level regarding consumption obligations in various sectors, such as aviation, which will create new opportunities for demand growth.
Demand growth is also driven by supply security, but as Mr. Tapia highlights, decarbonisation plans are the primary drivers, with this shift having the most significant impact in energy-intensive industries. He also mentions the volatility of energy and gas prices as another key driver, noting that the increasing availability of renewable energy across Europe is expected to help reduce the cost of hydrogen in the future.
And we can already see how the availability of renewables is stimulating the emergence of hydrogen projects.
Market fundamentals explain project concentration
“Of the six projects that won the first auction, four were located in southern Europe and two in the Nordics. This is because northern Europe has abundant hydropower, while southern Europe relies more on solar PV and renewable electricity, making both regions attractive for hydrogen projects,” said Mr. Tapia, adding that the bank has also supported hydrogen projects in Germany and Austria, particularly those focused on innovation within the hydrogen supply chain. “A recent project in Germany, for example, focuses on innovative electrolysis technologies, specifically improving the stack and bottom design of solid oxide electrolysers.”
Regarding the Central Eastern European region, Mr. Tapia emphasised the specific challenges and unique opportunities.
“One of the key challenges is the limited availability of renewable electricity, which is significant because electricity can account for up to one-third of the overall cost of hydrogen production. However, there are also opportunities. For example, the region’s reliance on natural gas makes the transition to a locally produced energy source, such as hydrogen, more attractive in terms of supply security. Additionally, there are infrastructure opportunities, particularly the potential to repurpose some of the existing gas infrastructure following the disruption of gas flows from east to west.”
