Yesterday (30th August), the European Commission published the terms and conditions for the much-anticipated European Hydrogen Bank, arguably the most important support mechanism for hydrogen offtakers in Europe.
Hydrogen Europe welcomes the speed of the announcement, less than 12 months since Commission President Ursula von der Leyen’s State of the Union speech announced the bank. The first pilot auction, with a budget of €800 million from the ETS Innovation Fund, will take place in November this year during the European Hydrogen Week.
Jorgo Chatzimarkakis, CEO of Hydrogen Europe, said: “We are extremely pleased to see that the pilot auction will be launched so soon. It is so encouraging to see that this is embedded in the presentation of the Hydrogen Bank which shows the responsiveness of the EU to the fast global upscale of activities in the hydrogen sector. That’s the speed that our industry needs to compete with the US Inflation Reduction Act and China.”
Daniel Fraile, Chief Policy Officer of Hydrogen Europe, added: “We are delighted to see that the Commission has taken on board most of the points raised in the consultation. We commend them for clarifying and expanding upon the rules, which will help ensure a smooth bidding process in November.”
The newly published details represent a much-improved framework. Eligible projects will now have five years (instead of 3.5) to be commissioned from time of award; while the ceiling price of the premium has been set at €4.5 per kilo of hydrogen (instead of €4/kgH2); and the completion bond is set at 4% of expected revenue (instead of 7.5%).
In another positive development, disclosure requirements are less specific. There is no longer a requirement to show that the electricity used has only been procured through a power purchase agreement (PPA), with promoters instead having to provide broader information on the business cases and electricity procurement strategy for at least 60% of the expected production volumes.
However, the premium is not indexed to inflation, a detail which threatens to derail all the good work done so far, considering the current market conditions and recent evidence in the UK offshore wind sector of a lack of indexation causing developers to pull out of multi-billion-euro projects.
“The lack of indexation in the offshore wind sector means companies have not been able to mitigate rising material and construction costs, leading to companies cancelling multi-billion-euro projects. This same issue could be a dealbreaker for hydrogen and the whole European Green Deal. To fix this issue in the pilot auction would be an important signal for all clean technologies.” said Chatzimarkakis.
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