The first EU-wide auction (IF23 Auction) for the production of RFNBO (renewable fuel of non-biological origin) hydrogen was launched on 23 November 2023 and closed on 8 February 2024. The auction attracted 132 projects bids from 17 European countries.
After evaluation, seven renewable hydrogen projects were selected and will receive nearly €720 million in project support from the Innovation Fund. Altogether, the selected projects will cover 1.5 Gigawatts electric (GWe) of electrolyser capacity, and produce a total volume of 1.58 million tonnes of RFNBO hydrogen over ten years.
The renewable hydrogen produced by the selected projects will be used in sectors such as steel, chemicals, maritime transport, fertiliser production and more. Moreover, these projects will employ alkaline, proton exchange membrane (PEM) electrolysers, or a combination of both.
Out of 132 bids, 119 proposals were considered eligible and admissible. After being evaluated by the implementing body of the Innovation Fund, the European Climate, Infrastructure and Environment Executive Agency (CINEA), the projects were ranked from lowest to highest bid and awarded support in that order.
The submitted bids ranged from €0.37 to the ceiling price of €4.5 per kilogram of hydrogen produced.
The seven selected projects submitted bids between €0.37 and €0.48 per kilogram of RFNBO hydrogen produced and, based on the pay-as-bid design of the pilot auction, will receive an Innovation Fund grant ranging between €8 million and €245 million.
The following selected projects will produce renewable, electrolytic hydrogen:
After signing the grant agreement, the selected projects will have to start producing renewable hydrogen within a five-year period. Furthermore, selected projects will only be awarded their fixed premium subsidy for up to 10 years upon certification and verification of renewable hydrogen production.
Individual grant agreements are expected to be signed by November 2024, at the latest.
By helping Europe decarbonise its industry and transition away from fossil fuels, hydrogen will play a crucial role in achieving the EU’s climate neutrality goals. In relation to this, the IF23 Auction for renewable hydrogen is a key element of the European Hydrogen Bank (EHB), which establishes a financing and coordination platform to secure cost-efficient and renewable hydrogen throughout the EU.
Overview
The Innovation Fund is one of the world’s largest funding programmes for the deployment and commercialisation of low-carbon and innovative technologies. Currently, the Innovation Fund awards support for projects in the form of regular grants for proposals, auctions, project development assistance and financial instruments such as Invest EU.
In addition to the existing grants programme, the European Commission has developed a new support mechanism of competitive bidding (‘auctions’). Auctions expand the portfolio of support mechanisms available under the Innovation Fund, fostering faster and more cost-efficient support for the roll-out of low-carbon technologies needed for the green transition.
As part of the ‘Fit for 55’ package, the Commission proposed to set up a competitive bidding instrument in the proposal to revise the EU ETS directive, along with several other proposals to make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net GHG emissions by at least 55% by 2030, compared to 1990 levels.
Competitive bidding was also highlighted as a support mechanism for hydrogen production and uptake in the REPowerEU Plan, specifically as a central measure to reduce fossil-fuel consumption in hard-to-decarbonise industrial sectors and diversify energy imports away from Russian fossil fuels.
Further, the revised EU ETS Directive introduced competitive bidding procedures as a new possible mechanism for allocating support provided by the Innovation Fund.
The Innovation Fund pilot auction for hydrogen production is a key element of the European Hydrogen Bank (EHB), which establishes EU financing instruments and a coordination platform to cost-effectively secure domestic and international renewable hydrogen volumes in the EU.
Auctions operationalise the domestic pillar of the EHB, as detailed in the figure below:
To learn more about the auction results check this presentation
This is an extract from an article “Competitive bidding: A new tool for funding innovative low-carbon technologies under the Innovation Fund” taken from the official website of European Commission. The original release can be accessed here
