European Commission approves support for green hydrogen production in Germany

The European Commission has approved an operating support scheme for Germany to produce renewable hydrogen through the “auctions as a service” mechanism offered by the European Hydrogen Bank. The support is set to total 350 million euros over 10 years, and the scheme is expected to produce 75 000 tonnes of renewable hydrogen. The European Commission announced the decision in a press release.

According to the published information, the approved operating support scheme will help build up to 90 MW of electrolysers to produce so-called renewable hydrogen. Support will be paid in the form of a fixed premium, with projects competing for the amount in an auction.

The press release did not specify the maximum support amount, but assuming the approved measure’s entire budget is used, it would be around 4.5 euros/kg. This corresponds to the maximum premium in the European Hydrogen Bank’s pilot hydrogen auction, which was launched on 23 November last year.

“The measure will help Germany achieve its ambitious target of at least 10 GW of domestic electrolyser capacity by 2030 and contribute to the EU’s goal of reaching a share of at least 42.5% of renewable energy in gross final energy consumption, with the aim of reaching up to 45%,” the Commission said.

Bids in pilot European auction reach 8.5 GW

Investor interest in the first hydrogen auction organised by the European Hydrogen Bank was enormous. According to the published information, the total electrolyser capacity represented by bids submitted in the auction was 8.5 GW. Bids were submitted for a total of 132 projects in 17 different countries, meaning the average electrolyser capacity per project was 64.4 MW.

The European Commission said the projects could produce a combined 880 000 tonnes of renewable hydrogen per year. If all the projects are realised, they would meet 10% of the 10 million tonnes per year domestic production target set under the REPowerEU initiative.

However, as the auction budget was limited to 800 million euros, only a small proportion of the projects will be successful. The EU set a cap of 4.50 euros/kg for the fixed premium, but successful bids are likely to come in well below this level.

This is also indicated by the already completed Danish auction, in which successful bids were around 0.85 EUR/kg. At this price, the European pilot auction’s budget would be enough to subsidise approximately 94 thousand tonnes of hydrogen per year, or less than 11% of the potential 880 000 tonnes per year.