The European Commission has launched the first auction under the European Hydrogen Bank, providing an initial sum of EUR800m in subsidies for the production of renewable hydrogen, as reported by ESG Today on November 24. Renewable hydrogen producers can bid for support in the form of a fixed premium for each kilogram of hydrogen they produce. This premium mechanism is designed to bridge the cost gap between manufacturing expenses and what consumers are willing to pay. In the pilot auction, producers can submit bids for EU support by February 2024, proposing a price premium of up to EUR4.5 per kilogram of renewable hydrogen. Selected projects, to be announced as early as April 2024, will need to start producing renewable hydrogen within five years and can receive subsidies for up to ten years. The second round of auction is slated for 2024.

The Commission introduced the ‘Hydrogen Accelerator’ initiative in 2022 to ramp up the production of renewable hydrogen. This initiative envisions that the EU will achieve an annual production of 10 million tons of renewable hydrogen within the blog by 2030, while the imports will also reach 10 million tons a year. Currently, the manufacturing costs of non-renewable hydrogen remain much cheaper than those produced using renewable power. Therefore, the price premium is crucial to encouraging investments in scaling up the production capacity of this renewable alternative. Notably, the price premium will be covered by the revenue generated from the EU Emissions Trading System (ETS), which has an estimated budget of EUR40bn for funding innovative net-zero technologies between 2020 and 2030.

Sources:

https://www.esgtoday.com/eu-commission-launches-e800-million-subsidy-program-to-support-renewable-hydrogen-producers/

https://ec.europa.eu/commission/presscorner/detail/en/ip_23_5982

https://energy.ec.europa.eu/topics/energy-systems-integration/hydrogen_en