The results of the first European Hydrogen Bank (EHB) auction are expected to be revealed in May, according to EU Energy Commissioner Kadri Simson.
Speaking yesterday in Sydney, Australia, at an event hosted by the European Australian Business Council, she said: “The first-ever national auction for renewable hydrogen production under the new European Hydrogen Bank opened last November.
The EU’s first hydrogen subsidy auction attracted enough bids to blow the budget several times over.
“The first results are already expected in May.
The results were expected in early April, with the first subsidy contracts to be signed within nine months.
In February, the European Commission revealed that the €800 million ($867 million) auction had received 132 bids for contracts that guarantee fixed-price premiums for every kilogram of renewable hydrogen produced.
The idea is that these subsidies will bridge the cost gap between green hydrogen (and its derivatives) and its fossil fuel-derived equivalents.
https://twitter.com/EurAusBiz/status/1775732231333613656
Producers were required to bid for a fixed-price premium in a closed auction up to a ceiling of €4.50 per kilogram, with the lowest eligible bids (weighted according to a range of other criteria such as sustainability) being accepted first, until the €800 million budget was exhausted.
The fixed price, formalized by a subsidy contract, would last ten years, provided that the system is put into service within five years, which means that the first greens, that is to say those who will sign their contract in February 2025, will have to put their project into service by November 2030.
In total, the 132 project offers from 17 different countries represent an electrolysis capacity of 8.5 GW, which would be almost enough to cover 10% of the EU’s target of reaching ten million tonnes of annual production of renewable hydrogen by 2030, the European Commission said, implying an annual production capacity of almost one million tonnes per year.
But the 800 million euro budget of the EHB pilot auction is unlikely to allow fixed-price premiums to be maintained even for a double-digit fraction of that capacity.
In fact, if all accepted bids benefited from a fixed price premium of €4/kg (slightly below the €4.50/kg cap), this would be enough to support around 250 MW of capacity, according to Maren Preuss, policy expert at German electrolyser manufacturer Sunfire – around 3% of the total 8.5 GW offered.
This likely means that more commercially robust projects, capable of bidding for much lower fixed prices, will have eaten up a large portion of the budget.
Even if the entire budget of 800 million euros was allocated to offers of 0.50 €/kg, it would only be enough to finance a capacity of 2 GW, less than a quarter of what has been propose.
A second European Hydrogen Bank auction, worth €2.2 billion, which was originally scheduled to take place in the spring, is now planned for the autumn.
Mr Simson added in his speech yesterday that the EU Innovation Fund, which is providing the money for the auction, is also supporting hydrogen projects through its regular grants, “providing around €2.3 billion in grants for 35 different projects”.