European Commission launches new mechanism to boost hydrogen market

June 3, 2024, by Aida Čučuk

To support the development of the European hydrogen market, the European Commission has started work on a pilot mechanism that aims to accelerate investments by providing a “clearer” picture of the market situation of both off-takers and suppliers and facilitating contacts between them.

According to the Commission, the mechanism will collect, process and give access to information on demand and supply for renewable, low-carbon hydrogen and derivatives, allowing European off-takers to match with both European and foreign suppliers. Furthermore, it will collect and process market data on the development of hydrogen flows and prices.

The Commission said that a procurement process has started to find a service provider to develop an IT platform to operate the mechanism, adding that it plans to sign a contract by the end of this year so that it can start its operations by mid-2025.

“Improving demand visibility between suppliers and consumers will help accelerate final investment decisions in Europe and contribute to securing off-take agreements. Hydrogen will play an important role in achieving our Green Deal targets, phasing out Russian fossil fuels, and supporting the decarbonisation and competitiveness of European industry,” the Commission stated.

To note, the mechanism was created under the recently-adopted Decarbonized Gases and Hydrogen Package and will be in place for five years as a part of the European Hydrogen Bank.

Maroš Šefčovič, Executive Vice-President for European Green Deal, Interinstitutional Relations and Foresight, commented: “Hydrogen is a strategic part of the EU’s clean energy transition. It is vital not only for hitting our net-zero targets, but also for maintaining our competitiveness and preserving Europe’s position as a leading global economic power. By facilitating the matchmaking between suppliers and consumers, we will contribute decisively to accelerating the development of Europe’s nascent hydrogen sector.”

Kadri Simson, Commissioner for Energy, observed: “This new mechanism will play a critical role in kick-starting a functioning European hydrogen market. There are still too few projects moving towards final investment decisions, and too few off-takers signing contracts to switch to hydrogen. This mechanism will help us better understand and identify where hydrogen demand and supply are emerging.”

“The information that will be available will help us create bridges between European off-takers and hydrogen suppliers both within and outside the EU, preparing the ground for future auctions under the European Hydrogen Bank. It will also allow us to guide the planning and development of the necessary transport infrastructure through Projects of Common European Interest and its funding through the EU Connecting Europe Facility for Energy.”

To remind, the EU has put in place a regulatory framework to support the development of a fully functioning hydrogen market by 2030. The Decarbonized Gases and Hydrogen package set out market rules, “providing legal certainty and long-term visibility to investors across the entire hydrogen value chain.” On the demand side, the revised Renewable Energy Directive introduced targets for renewable hydrogen in the industry and transport sectors.

The EU has also set up rules to define what renewable hydrogen is and how it can count towards these targets, and the Commission plans to propose a legal definition of low-carbon hydrogen by the end of the year. In addition, hydrogen supply chain projects are now considered of strategic interest, and thus eligible for faster permitting and other supportive measures, under the Net-Zero Industry Act.

In addition to the enabling regulatory framework, the Commission is involved in the development of hydrogen infrastructure and related investments. It has also established the European Hydrogen Bank to boost investments in hydrogen projects and facilitate the establishment of a full hydrogen value chain in Europe.

As per the Commission, there are 254 renewable hydrogen projects in the EU, of which 170 are in operation and 84 are under construction. Overall, approximately €18 billion has been invested in Europe from the Resilience and Recovery Facility, Member States’ schemes and several regional and innovation programs to boost the first hydrogen production projects, support fuel switching and develop infrastructure.

The Commission has approved State aid for four Important Projects of Common European Interest (IPCEIs) in the hydrogen value chain, amounting to €18.9 billion. These are expected to unlock some €27 billion in private investment. The supported projects will cover the full clean hydrogen value chain – from renewable and low-carbon hydrogen production to hydrogen storage, transmission and distribution, and hydrogen application, notably in industrial sectors.

The Commission is also supporting the emergence and implementation of value chains integrating hydrogen projects through its Hydrogen Valleys Innovation Mission, with around 100 valleys worldwide already being part of the Hydrogen Valleys platform, including more than 50 in Europe.