The European Commission is offering a new “auctions-as-a-service” mechanism to member states, which would allow them to provide subsidies to green hydrogen projects in their own countries without having to set up their own national systems and support schemes.
This would “reduce the administrative burden and cost for all parties”… and “could play a significant role by preventing the segmentation of the market and incentive schemes”, the Commission says.
The national contributions would be, effectively, tagged on to the EU-wide green hydrogen auctions, the first of which opened on Thursday, with a second due to be held in the spring of 2024.
EU subsidies would be awarded to the projects with the lowest bids until each auction’s Innovation Fund budget is exhausted, then the next-cheapest projects from the contributing country would be awarded subsidies from that nation’s budget, providing that they are still under the EU’s price cap (currently set at $4.50/kg) and meet state-aid rules.
“National contributions would not enter the EU or Innovation Fund budget at any point and, therefore, remain State resources,” explains a European Commission “concept note”.
Contributions would be entirely voluntary, and bidders would have to agree to be considered for this additional national funding. Member states would also have to abide by the decisions of the auction organiser, the Commission’s Climate, Infrastructure and Environment Executive Agency (CINEA).
Kurt Vandenberghe, director-general of the Commission’s directorate-general for Climate Action (DG-Clima), told European Hydrogen Week last week: “Member states can come in and plug in national resources to increase the leverage of the auction, so that, for example, if Germany were to say, ‘we add some resources to the European auction’, they can then use this auction, they don’t have to invent a new one, and it would only fund projects or bids from Germany.
“Many member states have a lot of resources now through recovery resilience funds, through ETS [Emissions Trading System] revenues, through cohesion funds. So we want to make [national green hydrogen incentives] easy.
“And I personally am even more excited about the potential of these auctions as a service, joining up the European level with the member states. That really would make a big difference for getting the hydrogen market going.”
Jorgo Chatzimarkakis, CEO of influential trade association Hydrogen Europe, told Hydrogen Insight that auctions-as-a-service was “the best way” to encourage member states to invest in green hydrogen production.
“[EU member states] need to abide by [EU] competition rules, and here we need to abide by auctioning rules,” he said. “Otherwise we might create an unjust [playing] field. This is a learning from the gas crisis where the Germans with the deep pockets bought [natural gas] at whatever price [was offered], so the price [of gas] went up. That’s why we need joint rules.”
Click here to read the European Commission’s “concept note” on auctions-as-a-service.