Policy

EU considers extending joint gas purchasing scheme to bulk-buy green hydrogen: reports

The European Commission has proposed using the initiative — set up to replace Russian gas — to support the upcoming European Hydrogen Bank

European Commission in Brussels.
European Commission in Brussels.Photo: Shutterstock

The European Commission has proposed making the joint gas purchasing scheme — set up as an emergency measure in April 2022 to replace Russian supplies — permanent and extending it to allow member states to pool together and bulk-purchase green hydrogen, according to reporting by news agency Reuters.

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The proposed law would make participation in the joint gas purchasing scheme voluntary unless an energy supply crisis occurred again, in which case all member states would have to take part, in an effort to prevent competition for scarce fuels, according to Reuters.

While the joint gas purchasing scheme currently matches aggregated demand from companies within member states to suppliers, the European Commission is not directly involved in the resulting contracts.

The scheme had previously been floated as a potential model for future purchases of H2, but Reuters suggests that officials now aim to push this proposal into law by the end of the year, partly in order to support the European Hydrogen Bank.
The latter’s upcoming €800m pilot auction in November will be primarily focused towards stimulating renewable hydrogen project development within the EU, offering fixed premiums of up to up to €4.50/kg in order to cover the cost gap with fossil-based H2, as long as pre-contractual agreements are in place with prospective offtakers.

But the bank is also planning to host auctions to meet the EU’s target of importing 10 million tonnes of green hydrogen from outside the EU by 2030. However, this will likely require a mechanism to pool together demand from member states.

The extension of the joint gas purchasing scheme to hydrogen raises questions regarding previous announcements that Germany’s H2Global scheme would be extended to the rest of the EU and linked to the European Hydrogen Bank.

H2Global is a double-sided auction system, in which international suppliers bid to provide volumes of hydrogen at the lowest possible price and domestic buyers bid to purchase that H2 for the highest price — with the German government providing funds to fill in the gap between these two prices.

In May, Germany’s vice-chancellor Robert Habeck and the European Union’s energy commissioner Kadri Simson announced that the initiative would be rolled out to the rest of Europe, with a joint letter sent later in the summer to member states urging them to set up their own H2Global initiatives if they have not already done so.
However, while one route could be for the European Commission to pool a budget from member states and directly back Hintco (the company running the H2Global auctions) to run auctions on behalf of the European Hydrogen Bank, this would require a so-called “pillar assessment” that could take years to complete.

And the extension of the joint gas purchasing mechanism, which has already launched two tenders to buy fossil gas from international suppliers, could make a second instrument to pool demand unnecessary.

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EuropeGreen H2H2GlobalGermanyEU
Published 5 September 2023, 13:28Updated 5 September 2023, 13:28