EU publishes terms ahead of landmark renewable hydrogen pilot auction

The pilot auction, set to commence on 23 November, follows a series of stakeholder consultations initiated in March. The release of the T&Cs provides potential bidders with advanced insight into the final economic structure of the auction, facilitating their preparations to participate.

Energy and infrastructure expert Garrett Monaghan of Pinsent Masons said: “Although local and international policies and strategies for hydrogen policies are developing at varying paces, the significance of the EHB as an international market-maker in creating and underpinning a sustainable hydrogen market is striking.”

“It is a real step up in pace in targeting delivery of new fuel technology and related infrastructure. Despite this, there are some concerns from industry stakeholders, as with all support schemes, about the absence of a long-term inflation-proofing mechanism,” he said.

“At this point, the EHB does not appear to be a standalone ‘bank’ or entity, and may be better described as a platform and vehicle by which the Commission will deliver on a core pillar of REPowerEU – the underwriting of European hydrogen generation under a contract for difference (CfD) structure,” Monaghan added.

The auction will distribute up to €800 million in support to renewable hydrogen producers operating within the European Economic Area (EEA). The financial support will take the form of a fixed premium per kilogram of renewable hydrogen produced over a ten-year operational period. The Commission said the auction would help to address up-front production costs while the demand for renewable hydrogen remains relatively low.

Once the auction has been held, successful bidders will have a five-year implementation period in which to develop their projects. At the end of the implementation period, projects must be able to demonstrate a hydrogen production capacity of at least 100% of the capacity expressed at the bid stage. If the implementation period is exceeded, the EHB will terminate the grant agreement.

Monaghan said: “The extension of the implementation period is significant. It will be interesting to see what milestones, bonding and delivery obligations appear in the actual contracting framework.”