The European Commission presented its proposal for a European Hydrogen Bank on Thursday 16 March.
Announced in Commission President Ursula von der Leyen’s State of the Union speech last September, the Bank is part of the Commission’s proposal for a ‘Net-Zero Industry Act’, presented jointly (see other news).
The Bank will be designed to support the deployment of renewable hydrogen within the EU, as well as imports from international partners. It therefore aims to unlock private investment along the hydrogen supply chain by effectively connecting renewable energy supply to demand and addressing early investment challenges, according to the Commission.
The ultimate goal is to reduce the cost differential between renewable hydrogen and the fossil fuels it can replace.
According to Frans Timmermans, Executive Vice-President of the European Commission, “hydrogen is a key technology if we think about our competitive advantage [...] But the question is how to keep our lead when we move to mass consumption”. While he noted that currently more than 50% of installed electrolyser capacity and more than 50% of electrolyser production capacity is in the European Union, there is a need to “fill the investment gap. At present, only 10% of hydrogen projects have a final investment decision”.
The REPowerEU strategy target is for a total of 20 million tonnes of renewable hydrogen to be produced by 2030 (10 million tonnes for domestic production and 10 million tonnes for imports).
Developing production within the EU’s borders
To develop this production, the Commission will launch an initial auction for €800 million in autumn 2023 (via the Innovation Fund). This auction will provide a subsidy to hydrogen producers in the form of a fixed premium per kilo of hydrogen produced for a maximum period of 10 years.
The Commission has also proposed to create a European platform through the Hydrogen Bank, offering an ‘auctions-as-a-service’ solution for Member States, using the Innovation Fund, but also Member States’ resources to finance renewable hydrogen projects (without prejudice to State aid rules).
Supporting imports from abroad
As regards international renewable hydrogen production, the College of Commissioners will consider a comparable, separate auction process for imported renewable hydrogen at a later stage.
By the end of the year, it will explore possible sources of funding under the EU budget or a Team Europe initiative.
Finally, the practices of the EU Energy Platform and the joint purchasing mechanism will be taken into account to explore the possibility of including a demand aggregation and joint auctioning mechanism for renewable hydrogen.
Adopting the regulatory framework and defining renewable hydrogen
“For the European Hydrogen Bank to be a success, the regulatory framework for hydrogen production and consumption must be finalised as a matter of priority” the Commission’s communication states.
It therefore calls on the EU Council and the European Parliament to facilitate the rapid entry into force of the delegated acts clarifying how hydrogen and hydrogen fuels can qualify as renewable (see EUROPE 13120/6), as well as the rapid adoption of the revision of the Renewable Energy Directive (see EUROPE 13136/2) and future rules for efficient hydrogen markets, including the definition of low carbon hydrogen.
“While the Commission is making every effort to increase the uptake of renewable hydrogen, RePowerEU has also recognised that other non-fossil hydrogen forms, including nuclear, have a role to play in replacing natural gas” the communication says.
Coordination and transparency
Through its activities, the European Hydrogen Bank also aims to increase transparency on hydrogen flows, transactions and prices. The Commission will therefore coordinate this information to build confidence in the developing hydrogen market. It can also use the information collected under European and international agreements to provide transparent price information and develop price benchmarks.
Coordination of funding for existing projects
Several funding instruments exist at EU and Member State level to support the development of hydrogen projects, such as the ‘Hydrogen Public Funding Compass of the European Clean Hydrogen Alliance’, which helps to guide interested stakeholders through EU project funding programmes. There are also InvestEU and other cohesion policy programmes.
“However, feedback from stakeholders confirms the need for additional measures to reduce the very high costs associated with risks that are not sufficiently addressed by EU financial instruments”, the Communication acknowledges.
The paper therefore envisages better coordination of EU and Member States’ financial instruments, as well as reducing uncertainties related to hydrogen supply and marketing.
To see the Commission’s communication: https://aeur.eu/f/5uy (Original version in French by Pauline Denys)