On Thursday 23 May, the pro-European think-tank Bruegel examined the first auction of EU subsidies for the production of renewable hydrogen (see EUROPE 13402/7), concluding that it had gone “about as well as could have been hoped”.
To support this production, the EU has created the European Hydrogen Bank (EHB), using a pay-as-bid auction mechanism, where producers bid for a fixed subsidy per kilogram of renewable hydrogen produced.
The first auction, in April 2024, allocated €720 million to seven projects.
The winning bids were lower than expected. The EHB subsidy ceiling price was €4.50/kg, but the winning bids were less than 10% of this price, with an average of €0.40/kg.
This indicates that some buyers are prepared to pay a large share of the ‘green premium’ for renewable hydrogen compared with fossil hydrogen, whose production cost is lower by €4 to €6 per kilogram.
For Bruegel, this is good news because “renewable hydrogen does not need to reach price parity with fossil hydrogen (or even close) to begin displacing meaningful volumes of the fossil incumbent”.
The winning bids all came from the Iberian Peninsula or the Nordic countries, suggesting strong investment potential in these regions, which have abundant renewable energy resources.
Despite this progress, Bruegel believes that additional financial support and regulatory measures are needed to achieve the EU’s target of producing 10 million tonnes of renewable hydrogen by 2030.
The analysis: https://aeur.eu/f/ccy (Original version in French by Pauline Denys)