The European Commission will launch its first auction for supporting renewable hydrogen production within the bloc this autumn, in an effort to match incentives offered by the US Inflation Reduction Act.

Winning bids will be awarded a fixed premium per kilogram of hydrogen produced over a ten-year period through the EU’s Innovation Fund, although the bloc has not disclosed what this premium will be. The Commission has budgeted €800mn ($873.76mn) for the auction and is expected to release further details this June.

The Commission also plans to introduce a competitive bidding mechanism to subsidise the production cost of components for wind and solar energy, batteries and electrolysers.

It expects a predicted increase in EU ETS revenues will underpin this scaling of support for low-carbon infrastructure and technologies and urges member states to earmark this extra revenue for energy transition spending.

€800mn — Budget for pilot auction

The Commission indicates it will relax restrictions on state aid in order to accelerate funding for the development of low-carbon infrastructure. It will also consult with member states on simplifying state aid rules on a temporary basis up to 2025.

And it has adapted its Temporary Crisis Framework—launched in response to the Russian invasion of Ukraine and ensuing energy crisis—into the Temporary Crisis and Transition Framework, including an extension of renewable energy deployment aid rules to cover renewable hydrogen and biofuel storage.

However, regulations defining ‘green’ or ‘renewable’ hydrogen—particularly in the context of backing up intermittent renewables with grid power supply—have yet to be published, which industry figures have described as a more significant challenge for project development than competition with US incentives.

---

Author: Polly Martin