As both Bloomberg and the World Hydrogen Council end of 2023 have been calling for an urgent need for action to push H2 demand, what is currently happening to boost the picture in 2024?
EU’s Fit for 55 strategy and EU Emissions Trading System carbon trading scheme could nudge first users of grey hydrogen to replace 42% of their hydrogen volume with green hydrogen. The ReFuelEU Aviation initiative, sets a 1.2% of fuels supplied to aircrafts at EU airports to be hydrogen-based by 2030. Air France, KLM and Delta Air Lines signed a seven-year sustainable aviation fuel offtake agreement with US-based synthetic fuel producer DGFuels, made from over 800 megawatts of electrolysers, according to Bloomberg New Energy Finance.
The FuelEU maritime initiative requires shipping companies to reduce emissions by 2% by 2025 and to pay a carbon price under the EU ETS scheme by 2026, with ammonia and methanol as carriers.Maersk has signed the largest green shipping fuel offtake contract so far through a binding offtake agreement for methanol with Chinese renewable energy developer Goldwind.
However lack of transparent pricing, as ydrogen offtake contracts are often bilateral and are undisclosed to other players, is hampering progress. The EHA in EU H2 Auctions webinars, organized last year by the EU Commission Directorate Energy (for H2 imports) and Directorate Climna (for EU produced green hydrogen), asked to disclose at least the areas of demand if not the largest user groups in the results of the EU Auction. The EEX Hydrogen Index in Germany, still in start up phase, could be a good instrument as well , though development is still at an early stage.
The outcome of the first EU H2 Auction launched in November 2023 far exceeds the currently available budget of €800 million, provided by the Innovation Fund. All 132 bids coming from 17 EU countries taken together provide for a total planned electrolyser capacity of 8.5 gigawatts (GWe), leading to a total production volume of 8.8 million tonnes of renewable hydrogen. On a yearly basis, this would cover close to 10% of the EU’s REPowerEU ambition of 10 mln tonnes H2 for domestic renewable hydrogen production in 2030.
Paloma Aba Garrote, Director of the European Climate, Infrastructure and Environment Executive Agency (CINEA), said that successful projects will expand CINEA’s portfolio of net-zero investments that shape the emerging markets for decarbonised products.
Producers of renewable hydrogen, as defined in the Renewable Energy Directive and its Delegated Acts,have made their bids to receive support in the form of a fixed premium per kilogram of renewable hydrogen produced. This premium bridges the gap between the cost of production and the price buyers are currently willing to pay for renewable hydrogen rather than fossil hydrogen. The Commission is also offering a new “Auctions-as-a-service” mechanism to enable Member States to benefit from the EU-level platform and award national funding to additional projects, in full respect of State aid rules. Germany is the first EU country to make use of the “Auctions-as-a-service” feature, putting up €350 million from its national budget for renewable hydrogen production projects located in Germany in case eligible bids for German projects cannot receive Innovation Fund support due to budget limitations.
In this context the EU Commission approved a Dutch government’ intention to introduce a €246 million scheme to support the production of renewable hydrogen through the construction of at least 60 MW of electrolysis capacity. The aid will be awarded through a competitive bidding process planned to be concluded in 202. The tender will be open to all companies established in the European Economic Area and operating, or wishing to build and operate, a hydrogen production unit in the Netherlands. The aid will take the form of a direct grant for a 7-to-15-year period. Beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin, set out in recently adopted delegated acts on renewable hydrogen. This includes contributing to the deployment or financing of the additional renewable electricity needed to produce the renewable hydrogen supported under the measure.
The scheme will contribute to the Netherlands’s efforts to achieve 500 MW of electrolyser capacity in 2025 and 3-4 GW by 2030. It will also support the EU’s ambitions to install at least 6 GW of renewable hydrogen-based electrolysers and the production of up to 1 million tonnes of renewable hydrogen by 2024, and at least 40 GW with a production of up to 10 million tonnes of domestic renewable hydrogen in the EU by 2030. The Netherlands expects that the scheme will lead to the equivalent of around 55 kilotons of CO2 being avoided every year until 2030, which will contribute to the Netherlands’ efforts to reduce its greenhouse gas (GHG) emissions by 55 % by 2030 and to achieve climate neutrality by 2050, compared to 1990 levels.
The 132 bids in the EU H2 Auction will be ranked according to their price and evaluation results are expected by April/May 2024; Grant Agreements will be signed by November 2024 at the latest. The selected projects will have to start producing renewable hydrogen within five years of signing the grant agreement. They will receive the awarded fixed premium subsidy for up to 10 years and only upon certified and verified renewable hydrogen production.
In parallel to finalising the evaluation, the Commission will draw the lessons learned from this pilot and consult industry stakeholders on the draft Terms & Conditions for the second round of the hydrogen auction, which it aims to launch before the end of the year.
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