Hot on the heels of today's announcement that the European Hydrogen Bank (EHB) has awarded nearly €720 million in financial support from the Innovation Fund's pilot auction to seven renewable hydrogen projects, the European Commission has published the draft terms and conditions for its proposed second auction, due to be launched later in 2024. However, the landscape seems to be shifting.....

Some major goalposts moves are proposed under the draft terms and conditions for the proposed EHB second Innovation Fund auction, including:

  • An increased value of the required completion guarantee from 4% to 10% of the grant amount bid for, capable of being called on if the project does not enter into operation within 3 years - significant reduction in the 5 year period given under the pilot auction.
  • Introduction of a new 'maritime basket' for projects supplying RFNBO hydrogen to offtakers in the maritime sector, with all other projects to be grouped together under a 'general' basket. Specific 'offtaker strategy' requirements for projects bidding in the 'maritime basket'.
  • For the general basket the maximum permitted bid must be less than or equal to one third of the total available budget for that basket. For the 'maritime basket', the maximum bid must be less than or equal to one half of the basket's total available budget. Whilst the exact budgets for each 'basket' are as yet unconfirmed, a total overall auction budget of €2.2bn has been floated.
  • The maritime basket will be cleared first. If a portion of the maritime basket budget remains unawarded, that amount will be transferred to the general basket. Subsequently, if a portion of the general basket budget remains unawarded, that amount will be transferred to the maritime basket (and the clearance of the latter revised with the additional available budget).
  • The auction ceiling price has been reduced from €4.5 per kg to €3.5 per kg (for both baskets).
  • The European Commission may decide to make use of a 'flexibility rule' to allow up to an additional 20% of the total budget available (as yet undefined).
  • Request of more detailed information, in particular in relation to the electrolyser's origin and value chain.

The draft terms and conditions will now form part of a "lessons learned" exercise and will be consulted on ahead of stakeholder event to take place on 12 June 2024.

The EU has estimated the need for between €86 and €126 bn investment in core hydrogen infrastructure to reach the EU's target of 20 million tonnes of hydrogen consumption by 2030 (10 Mt of domestic production and 10 Mt of import). Whilst the proposed budget for the second Innovation Fund EHB auction is a significant increase on the first, it is still but a drop in the ocean to the funding required to truly kickstart the European green hydrogen economy.

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