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2024

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Oversubscribed | EU’s maiden hydrogen subsidy auction attracted enough bids to blow the budget many times over

Author:

Hydrogeninsight


 

The €800m budget will only be enough to cover a small fraction of the project capacity seeking funding

 

Green hydrogen producers vying for subsidies in the EU’s maiden renewable H2 subsidy auction — known as the European Hydrogen Bank (EHB) — are likely to have bid in enough capacity to exhaust the €800m ($862m) budget several times over, figures from the European Commission (EC) have revealed.

 

The startling data suggests that demand for green H2 subsidies in Europe far outstrips supply by several magnitudes, and that the EHB’s subsequent €2.2bn auction expected this spring can also expect to be oversubscribed.

 

As Hydrogen Insight reported last week, the EHB received 132 bids for contracts guaranteeing fixed price premiums for each kilogram of renewable hydrogen produced — the idea being to bridge the cost gap between green H2 (and its derivatives) and fossil-fuel-derived equivalents.

 

Taken together, these bids from projects in 17 different countries amounted to a total planned electrolyser capacity of 8.5GW, figures revealed yesterday (Monday).

 

This would be nearly enough to cover 10% of the EU’s target of reaching ten million tonnes of annual renewable hydrogen production by 2030, the EC said, implying annual production capacity of close to one million tonnes per annum.

 

But the €800m budget of the EHB’s pilot auction is extremely unlikely to sustain fixed-price premiums for even a double-digit fraction of this capacity.

 

In fact, if all bids accepted were granted a fixed price premium of €4/kg (slightly below the bid ceiling of €4.50/kg), this would be enough to support around 250MW of capacity, according to Maren Preuss, policy expert at German electrolyser maker Sunfire — around 3% of the total 8.5GW bid for.

 

This is likely to mean that more commercially robust projects able to bid for much smaller fixed price premiums will have gobbled up much of the budget.

 

Even if the entire €800m budget was settled for bids for €0.50/kg, it would only be enough to finance 2GW of capacity — less than a quarter of that bid in.

 

Producers have put forward bids for a fixed-price premiums in a closed auction up to a ceiling of €4.50/kg, with the lowest eligible bids (weighted against a range of other criteria such as sustainability) picked first, continuing until the €800m budget is exhausted.

 

The fixed price, formalised with a grant contract, would last for ten years, on the condition that the scheme is commissioned within five years, meaning that the first green — ie, those that sign their contracts in November 2024 would need to commission their projects by November 2029.

 

Winners are expected to be announced in early April and the first grant contracts signed within nine months.

 

“The applications are in and the enthusiastic market response to the pilot auction shows the European hydrogen industry is ready to scale up,” said Kurt Vandenberghe, the EC’s director-general for Climate Action.

 

“Renewable hydrogen is an important solution in Europe’s endeavour to reach climate neutrality by 2050. The success of this pilot auction is the result of thorough engagement and consultation with relevant stakeholders and a solid regulatory framework which provides certainty to investors. We now have a scheme that provides efficient and targeted public support in full alignment with market needs.”

 

Source:Hydrogeninsight

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