Spain, Portugal take home most of €720m EU hydrogen award

6 months ago 28

The European Commission announced on Tuesday (30 April) the winners of its first auction to allocate subsidies for hydrogen production, with most of the €720 million awarded going to projects in the Iberian peninsula.

The EU’s Hydrogen Bank is the bloc’s vehicle to support the development of a hydrogen economy. It provides grants to bridge the gap between hydrogen’s high initial costs and companies’ willingness to pay.

On Tuesday, the Commission announced that seven projects had won a total of €720 million in hydrogen production subsidies. The funds will be generated by the sale of CO2 allowance in the EU’s Emissions Trading Scheme.

“The results of our first EU-wide auction for renewable hydrogen production are very encouraging,” said the Climate Commissioner Wopke Hoekstra. Berlaymont officials had previously described the auction as a test run.

Projects located on the Iberian peninsula proved dominant, followed by those close to Nordic hydropower plants. Three Spanish and two Portuguese projects collectively won more than €590m and the remaining €126m went to two projects, in Norway and Finland.

“Clearly, Iberia and the Nordics are the winners due to their large share of renewables and hydropower in their power system,” said Gniewomir Flis, a hydrogen analyst.

Hydrogen subsidies had proven so popular that a whopping 132 projects had bid for funding support of more than €12 billion.

Twenty-one German projects participated in the auction, without success.

A Finnish project that aims to use hydrogen to produce renewable methane said it needed just €0.37 per kg of hydrogen to operate competitively – the Iberian and Norwegian projects said €0.48 per kg was required.

Still, the figure is far lower than initially anticipated – bids for state support were capped at €4.5 per kg, ten times higher than what was ultimately awarded.

The “low bids submitted indicate systematic underbidding,” explained Flis. That means companies applied for fewer subsidies than needed to bridge the “green premium” gap to regular markets but hoped to find a buyer anyway.

Another auction round will take place this year, and the Commission has said it hopes to “draw on the lessons learned from this pilot auction”.

Far from hydrogen targets

Projects must start production by late 2029 or be held liable for breaking their contract.

The €720 million awarded will result in the production of 1.58 million tonnes of hydrogen in total, the Commission said. This is 1.5% of the EU’s 2030 goal of having 10 million tonnes of hydrogen produced domestically per year.

[Edited by Donagh Cagney/Zoran Radosavljevic]