EC publishes terms & conditions ahead of hydrogen bank pilot auction

The European Commission (EC) has published terms and conditions for its upcoming pilot auction dedicated to European renewable hydrogen production under the umbrella of the EU Hydrogen Bank.

The auction is funded by the Innovation Fund and is intended to open on 23 November 2023. It will award up to €800 million (around $870 million) to renewable hydrogen producers in the European Economic Area (EEA).

The support will take the form of a fixed premium in €/kg of renewable hydrogen produced over ten years of operation, therefore targeting the gap between the production costs and the demand’s willingness to pay.

Following stakeholder consultations ongoing since March 2023, the EC has now published terms and conditions to give potential bidders advance information about the final economic design of the auction and help them start preparing their bids.

As described, the auction is designed to achieve the following four objectives:

• Reducing the cost gap between renewable and fossil hydrogen in the EU;
• Allowing for price discovery and renewable hydrogen market formation;
• De-risking European hydrogen projects; and
• Reducing administrative burdens.

The new auction mechanism will expand the portfolio of support mechanisms that the Innovation Fund currently provides through grants, project development assistance, and other blended financial instruments, the Commission explained.

If the level of participation in the pilot auction is high, it will be followed by annual auction rounds and could be expanded to clean products beyond renewable hydrogen. This awarding mechanism is expected to enable a faster rollout of innovative technologies needed for the green transition, especially in hard-to-abate sectors.

In March 2023, the Commission presented a new plan to stimulate and support investments in renewable hydrogen production through the European Hydrogen Bank (EHB). This initiative is set out to accelerate investment and bridge the investment gap for the EU to reach its ambitious REPowerEU targets.