The European Commission (EC) has raised the bid ceiling for green hydrogen production subsidies under its upcoming European Hydrogen Bank (EHB) auction to €4.5/kg ($4.9/kg), up from the already generous €4/kg fixed premium subsidy floated earlier this year.
On paper, this makes the EU subsidies on offer far more ample than the maximum $3/kg green hydrogen production tax credit available in the US — but in reality most projects are unlikely to ever receive that much.
In the final terms for the pilot €800m EHB auction published this week, the EC also appeared to slightly loosen the requirements intended to deter speculative bids from early-stage projects, increasing the eligibility criteria to include projects that come into operation up to five years after signing the 10-year grant contract.
Bidders will be required to provide a guarantee, issued by a bank or other financial institution, for 4% of the maximum grant amount, to be called on in the event the project fails to enter into operation by this cut off point.
Draft terms previously stipulated that successful bidders must bring their projects to maximum capacity within 3.5 years of signing the grant contract.
Originally scheduled for December, bidding will now begin on 23 November.
The first EHB auction will be structured as a “pay-as-bid” static auction, with applicants submitting a single bid during the qualification phase for a ten-year fixed premium (in €/kg), which is then ranked compared to other bids on price.
Successful applicants will be awarded the fixed premium they specified in their bid, up to €4.5/kg, in order of ranking until the €800m budget is exhausted.
In practice, this means that those bids approaching the €4.5/kg ceiling risk not getting onto the final list at all.
And, unlike the production tax credit, which has no nominal budget, the first EHB auctions are limited to €800m, meaning that the lowest priced bids have the best chance of success.
Further terms have also been confirmed, restricting the total grant money for any bid to €266.7m, meaning that no single project can gobble up more than a third of the total budget.
Projects with electrolyser capacity of less than 5MW are excluded from the scheme, with no pooling of capacity among schemes in disparate locations allowed.
And payments will happen semi-annually and only for projects that are producing green hydrogen verified as compliant with the EU’s strict definition of renewable fuels of non-biological origin (RFNBOs) under its Delegated Acts.
UPDATED: to reflect that the EHB auction is now scheduled for 23 November