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2nd European Hydrogen Bank Auction Results: Mandates and finance must work together for green hydrogen

Our message in a nutshell: more money exclusively for green hydrogen directed smartly at end uses supported by mandates.

Last week the results of the second European Hydrogen Bank auction for green hydrogen were released by the European Commission.  

This year there is a general budget and a separate budget dedicated to green hydrogen-derived marine fuels. The projects will receive between EUR 8 million and EUR 246 million with total funding of EUR 992 million from the EU’s Innovation Fund. If all these projects go ahead (so far one of the seven projects in the first auction have dropped out) they will produce 2.2 million tonnes of green hydrogen over 10 years. 

In the general budget: 

  • 12 winning projects requested a subsidy of between 0.2 EUR/kg to 0.6 EUR/kg which is similar to last year’s pilot auction. 

  • Winning projects were located in Spain (8), Germany (2), the Netherlands and Finland (1). 

  • The largest projects are based in Germany and the Netherlands. 

In the maritime budget: 

  • The 3 winning projects are all in Norway and requested a subsidy of between EUR 0.45 /kg to EUR 1.88 /kg. 


Takeaways 
 

For all the persistent talk regarding the high cost of green hydrogen, the subsidy these projects have requested is small. For example, the average cost of green hydrogen in Spain across the bidders was EUR 5.5 EUR/kg while the maximum support awarded in Spain was just EUR 0.48/kg. This will of course reduce the cost for producers and their customers but ultimately it also shows that some customers are willing to pay a green premium over unabated fossil hydrogen. 

It is likely that the EU’s demand mandates for green hydrogen introduced under the Renewable Energy Directive (REDIII) partly explains this willingness to pay. Industrial users of hydrogen must use 42% green hydrogen instead of unabated fossil-based grey hydrogen by 2030. The national rules governing these mandates have not materialised quickly enough. While we need to see an acceleration of this work, it is clear that some hydrogen users are already positioning themselves to source new supply. 

Three projects in Germany and the Netherlands will receive over half of all funding under the auction, which is a big departure from last year where Iberia and the Nordics were the winners. These are of course key hydrogen demand centres, so are customers betting that production close to home is the safer bet even if a little pricier? 

Norway’s maritime success: all three projects selected under the maritime budget are in Norway. As a major shipping nation, this is perhaps not a surprise. One of the winners, Norwegian Hydrogen’s Rjukan project which will produce liquid hydrogen for coastal vessels, is unusual in that the company is already producing green hydrogen. As their CEO Jens Berg says: “We are beyond excited. The funding strengthens our commitment to deliver green hydrogen to our customers. We look very much forward to increasing our capacity significantly through the Rjukan project”. 

More money is needed. With less than EUR 1 billion allocated to 15 projects across 10 years, the money will not go a long way even if a further auction with a similar budget is set for later this year. EU member states are also beginning to use the ‘Auctions-as-a-Service' feature. Spain, Lithuania, and Austria are allocating up to EUR 836 million in national funding for projects in their countries using the EU Hydrogen Bank platform. It is essential that more member states join in. 

H2Global and the international pillar: the big missing element with the EU Hydrogen Bank has been full scale support for imports of green hydrogen at the European level. H2Global’s double-sided auctions are effectively taking on this role with Germany and the Netherlands taking the lead in partnership with export nations such as Canada and Australia. Depending on the success of the upcoming second tender under H2Global, it may be worth the EU Hydrogen Bank looking at deploying the double auction model domestically too so that producers and customers contract with a government-underwritten entity.   

Limited public funding should prioritise green hydrogen. There are limits to public funding of course. We continue to applaud the EU for prioritising green hydrogen. Opening the floodgates to funding for blue hydrogen projects does not move us away from fossil fuels.  

There are cautionary tales here: Korea Southern Power Company (Kospo) was the only company chosen as a supplier under the Korean government’s first “clean” hydrogen power auction at the end of 2024 which was theoretically open to all types of “clean”. Kospo’s winning bid was to supply blue ammonia despite green hydrogen’s superior climate credentials. We also heard last week that Japan’s Contracts for Difference (CfD) subsidy programme for clean hydrogen was oversubscribed. While the results are not yet public, the risk is that unless green hydrogen is specifically supported, blue hydrogen with dubious emission reductions credentials could dominate. 

Unless the EU severely limits its support for blue hydrogen, with all the cost and emissions reduction uncertainty that blue hydrogen brings, this would be a real blow to green hydrogen and the industries it seeks to decarbonise so fully. Let’s remember that Mario Draghi's report "A Competitiveness Compass for the EU" emphasises the crucial role of renewables in driving Europe's economic competitiveness.  

 

Joe Williams, 
Deputy CEO, GH2