Portugal has unveiled details of its first national green hydrogen tender — offering ten-year contracts to renewable H2 producers, with the hydrogen then controversially being sold on to natural-gas suppliers for blending into gas networks.

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The gas suppliers will be obliged to replace at least 1% of the volume of their natural gas with green H2 or biomethane, which will also be the subject of a new auction.

According to Ordinance 15/2023, which was published today by the Ministry of Environment and Climate Action, a new government body, known as the Last Resort Wholesale Trader, will purchase renewable hydrogen and biomethane at a competitive electronic auction before selling it onto gas suppliers.

It sets a maximum price to be paid by the Last Resort Wholesale Trader of €127 ($135) per MWh, and €62/MWh for biomethane.

The legal order states that the quantities up for auction will be 120GWh a year of hydrogen and 150GWh a year of biomethane, with these figures based on the higher heating value (HHV) of each.

Hydrogen has an HHV of 39.41kWh per kilogram, so this seems to represent just 3,045 tonnes of H2 per year.

The sales of hydrogen and biomethane will be accompanied by guarantees of origin that can be sold by the Last Resort Wholesale Trader together or separately from the renewable gases. The body will be responsible for stabilising the supply from variable renewables sources and assume all network access costs.

No date has been set for the auction, but the ordinance states that the exact procedures of the tender must be submitted to the government by the Directorate-General for Energy and Geology by 30 May 2023, and be published by 30 June.

The document was signed the secretary of state for the environment and energy, João Saldanha de Azevedo Galamba, on 30 December.

Last month, the Portuguese government scrapped mandatory environmental assessments for green hydrogen projects, thus making it easier for production facilities to be built.

Blending hydrogen into the natural-gas grid is highly controversial, with studies showing that it is wasteful, expensive and does little to benefit the climate.