EU's first hydrogen auction names its winners

The European Commission announced on Tuesday the winners of its first auction to award subsidies for hydrogen production. The funds will be allocated from the sale of emission allowances used under the EU Emissions Trading System. Most of the successful bidders will develop their projects on the Iberian Peninsula.

The European Commission announced that it had awarded nearly €720 million to seven European renewable hydrogen projects selected in the European Hydrogen Bank’s first auction. The funds for the auction come from the EU Emissions Trading System.

The winning bidders will produce renewable hydrogen in Europe and receive subsidies to bridge the price gap between their production costs and the market price of hydrogen, which is currently set by non-renewable producers. The renewable hydrogen produced will be used in sectors such as steelmaking, chemicals, shipping and fertilisers.

Success on the Iberian Peninsula

A total of 132 projects applied for subsidies. Projects on the Iberian Peninsula proved dominant, followed by projects located near Nordic hydropower plants. Three Spanish and two Portuguese projects secured more than €590 million combined, while the remaining €126 million went to two projects in Norway and Finland.

"It is clear that the Iberian Peninsula and the Nordic countries are the winners thanks to the large share of renewables and hydropower in their energy systems," hydrogen industry analyst Gniewomir Flis told Euractiv.

The winning bidders plan to produce a total of 1.58 million tonnes of renewable hydrogen over ten years. This represents 15% of the EU’s 2030 target, which is to produce 10 million tonnes of hydrogen domestically per year. The selected projects are located in 4 European countries. Developers submitted bids ranging from €0.37 to €0.48 per kilogram of renewable hydrogen produced and also met other qualification requirements.

Hydrogen within five years

The subsidies awarded to the 7 projects range from €8 million to €245 million. The projects must begin production by the end of 2029 or they will be liable for breach of contract.

"The low bids submitted point to systematic underbidding," Flis explained.

This means the companies asked for less subsidy than was needed to bridge the gap between the “green premium” and the market price, but hoped they would still find buyers. The range of bids submitted, including unsuccessful ones, was very wide, from €0.37 to €4.5 per kilogram of renewable hydrogen.

"The results of our first EU-wide auction for renewable hydrogen production are very encouraging," said Climate Commissioner Wopke Hoekstra. Berlaymont officials had previously described the auction as a test run.

The next auction round will take place this year, and the Commission said it hopes to "build on the lessons learned from this pilot auction".