The EU is kicking of its last Commission year with a bang: the first EU domestic green hydrogen auction will be launched November 23, 2023. On September 28 and October 5, 2023 resp. DG ENER, responsible for the so called H2 Import Auctions and DG Clima, who will be overseeing the EU H2 Domestic Auctions, went on stage to explain the ins and outs.

The idea of the EU Hydrogen Bank, announced in the State of the EU Union in 2022, became a EU Commission Communication on March 16, 2023 (COM2023/156). The Commission sees  the EHB as a new instrument “to cover and lower the cost gap between renewable hydrogen and fossil fuels for early projects. This will be achieved through an auction system for renewable hydrogen production to support producers through a fixed price payment, a so called premium, per kg of hydrogen produced for a maximum of 10 years of operation”.

Projects with a minimum of 5MW electrolyzer capacity could be funded and production needs to start within 5 years, The first pilot auctions are backed by €800 million from the Innovation Fund. The Bank will create an EU auction platform offering “auctions-as-a-service” for Member States, using both Innovation Fund and Member State resources (like the German H2Global Stiftung and its commercial operations HINTCO GmbH, EHA), to fund renewable hydrogen projects without prejudice to EU state aid rules”.

The four pillars of the EHB, which should be operational by the end of 2023:
1. EU domestic market auctions for green H2, coordinated by DG CLIMA 500 bln is needed for import infra.
2. International imports into the EU, coordinated by DG ENER: 335 -471 bln for 10 mln tonnes of H2 EU production, distribution and consumption
3. Transparency /coordination: assessing demand, hydrogen flows, and cost data.
4. Streamlining  financial instruments – coordinating/blending public and private funding,

On September 28 EU Energy Commissioner Kadri Simson confirmed that the bulk of total investment to produce, transport and consume 10 million tonnes of renewable hydrogen are expected to come from industry, will be in the range of EUR 335-471 billion, with EUR 200-300 billion needed for additional renewable electricity production. The investments for key hydrogen infrastructure categories by 2030 are estimated at EUR 50-75 billion for electrolysers, EUR 28-38 billion for EU-internal pipelines and EUR 6-11 billion for storage. The upscaling of the electrolyser manufacturing capacities will require investments estimated at maximum EUR 1.2 billion. An additional EUR 500 billion of investments will be needed in international value chains to enable the import of 10 million tonnes of renewable hydrogen, including in the form of derivatives.

According to the Commission’s Communication of last March estimates suggest that hydrogen imports by ship (where hydrogen needs to be imported in the form of ammonia, methanol, liquid organic hydrogen carriers or e-fuels) would require a market premium in the order of EUR 3-5/kg (including transport, storage and delivery to the end-consumer). Since renewable hydrogen is not available on the global market yet, this means that the green premium will need to be used to secure production capacity. A budget of EUR 1 billion is estimated to enable 0.04-0.06 million tonnes of renewable hydrogen production capacity per year. After 2025, the market premium is expected to decline due to decreasing production costs and increased demand for green products produced with renewable hydrogen. Furthermore, the EU Emissions Trading Scheme and the proposed European Taxation Directive are expected to make renewable and low-carbon hydrogen more attractive compared to its fossil fuel alternative.

The Commission expected in March 2023 still a decline in production costs and an increasing demand for renewable hydrogen, and suggested a total green premium of around EUR 90-115 billion for both the domestic production and import of a total of 20 million tonnes of renewable hydrogen. The sooner the production of renewable hydrogen is scaled up, the smaller this green premium is likely to be.

At a recent Belgian Hydrogen Council event on October 12, 2023 Steven Libbrechts interim director of the (Global) Hydrogen Council however indicated that increasing electricity and electrolyzer production costs are hampering First Investment Decisions globally. Even when Deloitte’s Global Green Hydrogen Outlook 2023 predicts  global trade between major regions to reach US$280 billion in annual export revenues in 2050, divided by  North Africa (US$110 billion per year), North America (US$63 billion), Australia (US$39 billion), and the Middle East (US$20 billion). North Africa and Australia have the highest export potential (44 MtH2eq and 16 MtH2eq respectively), followed by North America (24 MtH2eq) and the Middle East (13 MtH2eq). South America and sub-Saharan Africa taking part in  10% of traded volumes.