European Commission approves Danish scheme for renewable hydrogen

Under European Union (EU) state aid rules, the European Commission has approved a €170 million Danish scheme to support the production of renewable hydrogen through Power-to-X (PtX) technologies.

According to the Commission, the measure aims to contribute to the development of renewable hydrogen in line with the objectives of the EU Hydrogen Strategy and the European Green Deal, and the scheme will also contribute to the objectives of the REPowerEU plan to end dependence on Russian fossil fuels and fast forward the green transition.

The Commission concluded the following:

• The scheme is necessary and appropriate to facilitate the production of renewable hydrogen, and thus the decarbonisation of the industrial, transport, and/or energy sectors.

• The measure has an ‘incentive effect’ as the beneficiaries would not carry out the relevant investments without public support.

• Denmark put in place sufficient safeguards to ensure that the scheme has a limited impact on competition and trade within the EU. In particular, the beneficiaries will be selected following an open, transparent, and non-discriminatory bidding process and the aid will be kept to the minimum necessary to undertake the projects. In addition, the aid will bring about positive effects, in particular on the environment, in line with the European Green Deal, that outweighs any possible negative effects in terms of distortions to competition.

The scheme is expected to support the upscaling of the production of renewable hydrogen and derivatives, such as renewables-based ammonia, methanol, and e-Kerosene, using PtX technologies, a group of technologies that turn electricity into carbon-neutral synthetic fuels. The key PtX technology is electrolysis, which uses electricity to decompose water into oxygen and hydrogen gas that can be used as a fuel or in chemical processes.

It is also expected that the scheme will support the construction of up to 100-200 MW of electrolysis capacity.

The aid will be awarded through a competitive bidding process to be concluded in 2023. It will take the form of a direct grant for a ten year period.

The tender will be open to all companies planning to construct new electrolysers in Denmark. To note, beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin. This includes contributing to the deployment or financing of the additional renewable electricity needed to produce the PtX products supported under the measure.

The scheme is also expected to contribute to Denmark’s efforts to reduce its greenhouse gas emissions by 70% by 2030, compared to the 1990 level, and to reach carbon neutrality by 2050. It will also help the EU reach its 2030 target for renewable energy production, which the Commission has proposed increasing to 45%.

Margrethe Vestager, Executive Vice-President in charge of competition policy, said: “This €170 million scheme is an important step towards securing Europe’s decarbonised future as it will support the development of nascent PtX technologies.”

“It will help capitalise on Denmark’s increasingly renewables-based electricity sector to reduce emissions in sectors that are otherwise difficult to decarbonise. The scheme will support the most cost-effective projects, reducing costs for taxpayers and minimising possible distortions of competition.”

The Danish Scheme approval follows the Commission’s proposal of detailed rules to define what constitutes renewable hydrogen in the EU, with the adoption of two Delegated Acts required under the Renewable Energy Directive.

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