European Commission approves €350M German renewable hydrogen scheme

The European Commission has approved a €350 million German scheme to support the production of renewable hydrogen through the European Hydrogen Bank’s ‘Auctions-as-a-Service’ tool.

According to the Commission, the German measure is in line with the objectives of the REPowerEU Plan and the European Green Deal Industrial Plan and will contribute to further reducing imports of Russian fossil fuels and fast forward the green transition.

The Commission assessed the measure under EU State aid rules and found that:

• the scheme is necessary and appropriate to facilitate the production of renewable hydrogen and thus the decarbonization of the industrial, transport and/or energy sectors,
• the measure has an incentive effect, as the beneficiaries would not carry out the relevant investments without public support,
• Germany put in place sufficient safeguards to ensure that the scheme has a limited impact on competition and trade within the EU, and
• the aid will bring about positive effects, in particular on the environment, in line with the European Green Deal, that outweigh any possible negative effects in terms of distortions to competition.

The approved scheme will support the construction of up to 90 MW of electrolysis capacity and is expected to incentivise the production of up to 75,000 tonnes of renewable hydrogen, the Commission said, noting that this will help Germany achieve its ambition to have at least 10 GW of domestic electrolysis capacity by 2030 and contribute to the EU target of a minimum of 42.5% renewable energy production by 2030, with the aim of reaching 45%.

The support provided under the German scheme will be open to companies planning to construct new electrolyzers in Germany and will take the form of a direct grant per kilogram of renewable hydrogen produced, the Commission revealed, adding that it will be granted for a maximum duration of ten years and beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin (RFNBOs).

Margrethe Vestager, Executive Vice-President in charge of competition policy, stated: “This €350 million scheme is an important step in boosting renewable hydrogen development. The scheme will support the most cost-effective projects in Germany, reducing costs for taxpayers and minimising possible distortions of competition. Germany is the first Member State to make use of this auction, which offers an accelerated solution for awarding public support in this important sector.”

To note, the European Hydrogen Bank is an initiative to facilitate EU-domestic production and imports of renewable hydrogen in and to Europe.

As per the Commission, its objective is to close the investment gap and connect the future renewable hydrogen supply to consumers to meet the intended target of 20 million tonnes by 2030, contributing to the REPowerEU objectives and the transition to climate neutrality. The Innovation Fund hydrogen auctions implement the EU-domestic leg of the European Hydrogen Bank.

On December 20, 2023, the Commission and Germany announced Germany’s participation as the first Member State in the European Hydrogen Bank ‘Auctions-as-a-Service’ scheme. Under this concept, Member States may choose to use the EU-wide pilot auction mechanism under the Innovation Fund to also allocate a pre-defined amount of national funding to renewable hydrogen production projects on their territory.

To remind, in March 2024, the European Commission approved a €900 million French scheme to support companies investing in the use of biomass and renewable hydrogen in energy and fuel production, to foster the transition towards a net-zero economy.

In 2023, the Commission approved a €246 million Dutch scheme to support the production of renewable hydrogen and the construction of at least 60 MW electrolysis capacity, a €450 million Italian scheme to support the production of renewable hydrogen, as well as a €170 million Danish scheme to support the production of renewable hydrogen through Power-to-X (PtX) technologies.