EU issues terms and conditions for second hydrogen bank auction

The European Commission (EC) has published the final terms and conditions (T&Cs) for its second auction for the production of renewable hydrogen (IF24 Auction), via the Innovation Fund.

The auction, a key pillar of the European Hydrogen Bank (EHB), provides financial support to producers of hydrogen categorized as a renewable fuel of non-biological origin (RFNBO).

It will open on December 3, 2024, and will award up to €1.2 billion support to renewable hydrogen producers located in the European Economic Area (EEA).

The successful bidders under the IF24 Auction will receive a fixed premium in €/kg of renewable hydrogen produced, over a maximum of ten years of operation.

EC claimed that the Innovation Fund support will bridge the gap between production costs and the price that off-takers are ready to pay for renewable hydrogen.

The terms and conditions for the second auction include new resilience requirements, and projects will be evaluated on a new criterion: “Achieving security of supply of essential goods and contribution to Europe’s industrial leadership and competitiveness.” EC said it will also ensure that support is provided to safe production processes in Europe through “appropriate” safety and cyber-security requirements.

Other key features of the T&Cs for the second auction include higher maturity level requirements for application, a revised price ceiling and a dedicated budget of €200 million for projects supplying production to off-takers in the maritime sector.

To remind, EC launched the first auction under the EHB in November 2023. It received 132 bids from 17 European countries. 119 proposals were found to be eligible and admissible, and were then ranked according to their bid price, and evaluated by the European Climate, Infrastructure and Environment Executive Agency (CINEA). In April 2024, seven renewable hydrogen projects in Europe were selected through this first competitive bidding process.

According to the EC, the auctions complement the Innovation Fund’s portfolio of support mechanisms, which includes grants, project development assistance and other blended financial instruments.

In other news, the EC has launched a 4-week call for feedback on the draft delegated act which clarifies the methodology for evaluating the emission savings of low-carbon hydrogen and fuels.

This secondary legislation is required under the revised EU hydrogen and gas market legislation that entered into force over the summer of 2024, the EC said, adding that the draft text complements the rules already in place for renewable hydrogen and RFNBOs and is consistent with their methodology for a life cycle assessment of the total greenhouse gas emissions of these fuels.

EC revealed that the feedback from this consultation will feed into the deliberations on the final text. Upon finalization, the text of the delegated act will be passed to the European Parliament and the Council of Ministers for a 2-month period. If the institutions do not object during this time, the delegated act will be formally published in the Official Journal and entered into force.

To note, low-carbon fuels are said to have an important role to play in the energy transition as they cause fewer emissions than unabated fossil fuels and can support the uptake of renewable fuels.