Shell should have been ineligible for the €150m ($162m) subsidy it received for its 200MW Holland Hydrogen 1 green H2 project, but the oil giant — basking in record profits due to high fossil-gas prices —managed to get its hands on the eight-figure sum after the European Commission succumbed to pressure from the Dutch government, according to local investigative reporting agency Follow the Money.

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However, the Netherlands' Ministry of Economic Affairs and Climate Policy disputes this interpretation, telling Hydrogen Insight that the project was found to be eligible for state aid late in the process due to the discovery of a loophole.

Shell announced in July 2022 that it had taken a final investment decision (FID) on what may well be Europe’s largest green hydrogen plant when it comes on line in 2025, despite having no subsidies lined up.

A senior Shell executive told Hydrogen Insight’s parent publication Recharge at the time that the decision took “quite a lot of guts, knowing that not everything is in place”, despite the company planning to consume most, if not all, of the project’s green hydrogen at its own oil refinery in Rotterdam.

The oil giant, which reported a record annual profit of $40bn in 2022, then tried to attract government funding for the project, but under EU state-aid rules that would require the European Commission to grant it the status of an Important Project of Common European Interest (IPCEI).

The problem for Shell was that in order to be eligible for IPCEI status, projects had to show that they would not be financially viable without subsidies — and the company had demonstrated the opposite by announcing a final investment decision despite a lack of state support.

Ministry officials raised concerns in advance that Shell’s investment announcement would jeopardise the company’s funding request.

Citing internal communications obtained under freedom of information legislation, Follow the Money said Dutch Prime Minister Mark Rutte put pressure on the Ministry of Economic Affairs and Climate Policy to ensure that the Dutch H2 projects, including Holland Hydrogen 1, were cleared for financial support by the EU, and ministry officials then worked with Shell to find ways to circumvent EU rules.

But the ministry tells Hydrogen Insight that it did not work with Shell to find a loophole, merely that it had asked for clarification with the EU on what it described as an “unclear” process.

According to Follow the Money, Shell argued that its July announcement — which said it had “taken the final investment decision to build Holland Hydrogen 1” — did not count as taking an FID.

Shell further told the ministry that all orders placed were conditional and could be cancelled if Holland Hydrogen 1 did not get state aid.

On 7 September, the European Commission stated that the Holland Hydrogen IPCEI application should be withdrawn as it did not meet the conditions to receive state aid, but in late September, the Commission granted the project IPCEI status, which led to the Dutch government awarding it a €150m grant in December.

The ministry has told Hydrogen Insight that a loophole had been found late in the day that projects were able to take FID and still be eligible for state aid as long as no legally binding agreements had been signed.

Nevertheless, the ministry also agreed that awarding IPCEI status to such projects was against the spirit, if not the letter of the rules.

Follow the Money also questioned whether the plant should have been eligible for Dutch subsidies in the first place, given that the planned offtake within the oil major’s own refinery would go against the grant’s requirement that benefits are not limited solely to the subsidy recipient.

Shell may have got around this issue as it announced in July that some of the supply might also be used to power hydrogen trucks.

Holland Hydrogen 1 is due to use a 200MW alkaline electrolyser supplied by Thyssenkrupp Nucera and be powered by the yet-to-be-built 759MW Hollandse Kust Noord offshore wind farm in the Dutch North Sea.

This article was updated on 22 May to add responses from the Dutch Ministry of Economic Affairs and Climate Policy.