Policy

€4bn allocation | France to subsidise 1GW of green and nuclear hydrogen production by 2026

Paris releases details of upcoming tenders — explicitly excluding production of H2 for use in heating or blending

Agnès Pannier-Runacher, French minister for the energy transition.
Agnès Pannier-Runacher, French minister for the energy transition.Photo: Getty/Corbis via Getty Images

France has released draft details of its upcoming tenders, worth a combined €4bn ($4.2bn), for investment aid and operating grants to support 1GW of electrolysis capacity over the next three years.

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While the French government had previously floated that both renewable and low-carbon H2 production would be supported, the consultation explicitly states that projects producing the latter through carbon capture and storage will not be eligible for aid.
This effectively means that France will support H2 produced by electrolysers drawing on zero-carbon electricity sources — ie, nuclear power or renewables that do not meet the criteria set out by the EU in order for the resulting H2 to count as a renewable fuel of non-biological origin (RFNBO).

The state support will take the form of operating grants in part calculated on the difference in carbon price between grey and green hydrogen production.

As previously announced, 70 out of 100 “points” for selection will account for the price paid out per tonne of CO2 avoided — with each offer compared against the lowest price submitted.

The French government is mulling three possible ways to calculate this weighting, with the aim of incentivising lower bids for subsidies. But across all three formulas, the higher auction bid, the higher the chance of having "points" docked — reducing chances of winning any aid.

The remaining 30% of points are spread across a variety of factors, including:

  • Optimisation of electricity use, such as a commitment to curtail electrolysers in response to the grid
  • Third-party guarantees of supply chain decarbonisation
  • So-called “pooling” of multiple industrial users per project
  • Proof of renewable H2 being produced at least 50% from additional upstream renewables rather than existing assets — two years before additionality requirements in the EU’s delegated acts are set to kick in.

The French government also plans to award a financial guarantee towards commissioning, worth up to €50,000 per MW of power installed, although this is limited to 50% of project investment costs.

The first tender for 150MW of electrolysers will be held next year, although this cap can be extended by 10-20% (ie 15-30MW) depending on the inclusion of the “last highest-rated request”, with projects due to be commissioned by 31 December 2026.

The second auction will be for 250MW in 2025, while the final one in 2026 seeks to support 600MW—although these later tenders will not have the same cap extension as the first.

However, because the minimum capacity eligible for aid is 30MW, this means that only five developers will be supported by the first auction, with no apparent cap on a single project being the sole winner.

France also appears to set strict limits on the end-users of the hydrogen that it is supporting. In addition to explicitly ruling out the use of the H2 in heating or blending into the gas grid, the draft terms and conditions also require that all volumes that receive aid must be used within France, with any exports resulting in termination of the contract.
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FranceEuropeGreen H2NuclearSubsidies
Published 20 September 2023, 07:27Updated 21 September 2023, 12:36