The European Hydrogen Bank’s (EHB’s) second auction of green hydrogen subsidies was heavily oversubscribed as developers competed for long-term support to try to bridge the gap between persistently high production costs and the price offtakers are actually willing to pay.

The latest auction drew 61 bids from projects in 11 countries in the European Economic Area. The total subsidies requested by bidders amounted to €4.8b ($5.2b), four times the allocated budget of €1.2b.

Bidding projects represent a total capacity of 6.3GW of electrolyser capacity, implying an average of just over 100MW per project.

“This continued appetite from our industry reinforces the development of a European market for clean hydrogen” Hoekstra, EU Commission

However, the auction drew roughly half the number of bids than the previous “pilot” auction last year, with the total capacity of all bidding projects about 25% lower

The previous auction drew 132 bids from 17 countries, representing total capacity of 8.5GW, implying an average of c.60MW per project.

The reduced number of bids may reflect a tightening of the qualification rules compared with the first round. It may also reflect the changing dynamics of the green hydrogen sector, where investors are focusing on the highest quality projects with the best chance of reaching FID.

The subsidies on offer are in the form of a fixed premium per kilogram of renewable hydrogen produced over a period of up to ten years. The money comes from the EU’s Innovation Fund, which is financed with revenue generated form the bloc’s emissions trading scheme.

 “The amount of bids in this second auction under the EHB again shows the attractiveness of the Innovation Fund as a tool for Europe’s industrial decarbonisation and competitiveness,” said Wopke Hoekstra, EU Commissioner for Climate, Net Zero and Clean Growth. “This continued appetite from our industry reinforces the development of a European market for clean hydrogen.”

The EU’s ambitions for hydrogen are to have 20mt/yr by 2030, half from domestic production and half from imports, although that targets looks very challenging given the pace of investment in the sector.

The European Climate, Infrastructure and Environment Executive Agency (CINEA) expects to unveil the latest EHB winning bids by the end of May. Grant agreements are expected to be signed by November 2025 at the latest, the EU said.

The subsidies on offer are designed to bridge the gap between high productions costs and the prices offtakers are willing to pay. However, first-round bids were deemed to be well below that bridging level, ranging from €0.37–0.48/kg of hydrogen produced, far below the auction’s upper limit of €4.50/kg. The range of bids in the second auction has not been released.

US on pause

The apparent scramble for subsidies in the EU comes as developers remain in limbo in the US as the Trump administration reviews the policy of offering  tax credits under the Inflation Reduction Act (IRA).

Some Republicans in the House of Representatives have in recent weeks called for clean energy tax credits, which include support for CCS as well as hydrogen, to be retained. Much of the IRA-driven investment is in the form of projects sited in Republican states.

Before the  2024 presidential election, the US had become a hotspot for investment in clean hydrogen on the back of world leading tax credits, which equate to as much as $3/kg of hydrogen produced.  The pause in IRA funding has stopped the industry in its tracks, with plans by European electrolyser manufacturers to set up production plants in the US also on hold.

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Author: Stuart Penson