The European Union will commence its second renewable hydrogen auction, titled «IF24,» under the framework of the European Hydrogen Bank and funded by the Innovation Fund. With a 1.2 billion euro allocation, this initiative aims to promote the production of clean hydrogen and support producers across the region. Additionally, member states will add an additional 700 million euros approximately with “auction-as-a-service”
Daniel Fraile, Chief Policy Officer at Hydrogen Europe, tells Energía Estratégica España that these auctions are a vital tool to energise the market and achieve the bloc’s climate goals for 2050.
The December auction will serve as a key indicator of the market’s state. Fraile anticipates that developers’ bids might be slightly higher compared to the first auction, reflecting inflation and stricter regulatory requirements. However, active participation from national governments could help stabilise the market.
In the first auction, held in 2023, the European Commission allocated an initial budget of 800 million euros, securing support prices between 41 and 70 euros per megawatt hour (MWh) for selected projects. This initial phase identified key projects, although not all advanced due to barriers such as infrastructure gaps and high certification costs.
New approaches
The IF24 auction incorporates significant adjustments based on previous learnings. One notable change is the inclusion of a specific €200 million budget for projects linked to the maritime sector, reinforcing its role in the transition to cleaner fuels. Additionally, new criteria have been introduced to ensure the resilience of Europe’s industrial value chain, including a cap of 25% on inputs sourced from outside the region for electrolyser production.
Fraile sees this approach as a step forward. «It is crucial that public funds not only boost renewable hydrogen production but also enhance the competitiveness of European industry, create jobs, and reduce reliance on foreign technologies,» he states.
Lessons from the First Auction
The first auction, conducted in 2023, was a milestone in Europe’s renewable hydrogen development. With 132 bids from 17 countries, over 8.5 gigawatts of electrolyser capacity were projected. However, Fraile points out that not all projects are likely to materialise due to structural challenges.
«Although the first auction was highly successful, many projects rely on external factors such as infrastructure and long-term consumer commitments,» explains Fraile. These challenges include the absence of hydrogen transport networks, port terminals, and strict certification rules ensuring the renewable origin of hydrogen.
Infrastructure and regulatory frameworks: persistent challenges
Infrastructure remains a recurring topic in discussions about renewable hydrogen. Europe currently lacks a robust network to transport clean hydrogen from high-production regions like the Iberian Peninsula or Nordic countries to major consumers in northern Europe. According to Fraile, this is a significant bottleneck.
«Investment in infrastructure must be anticipatory, but this involves taking risks. This is where governments play a crucial role in minimising risks and ensuring long-term returns for investors,» he notes.
Germany, for instance, has implemented a model allowing investors to recoup costs over a period of up to 30 years, providing ample time for infrastructure to be optimally utilised.
In addition to physical infrastructure, regulatory frameworks present further obstacles. «Strict certification rules in Europe, such as hourly and geographical correlation for renewable electricity, artificially increase the costs of renewable hydrogen,» explains Fraile. While these measures aim to prevent CO₂ emissions increases, their implementation could delay sector development.
Expectations and future goals
On the other hand, Hydrogen Europe highlights the importance of bridging the gap between the objectives of the Repower EU programme and the sector’s current reality. Fraile explains that while renewable hydrogen is viewed as an alternative to natural gas, its implementation in certain sectors, such as residential heating, faces economic and technological barriers.
«The focus should be on sectors where hydrogen can provide higher added value, such as refineries and green steel production. Additionally, it is essential to create incentives for end consumers, promoting products with a lower carbon footprint,» Fraile affirms.
The executive concludes: «These auctions are not just necessary but strategic for measuring progress and building trust in the sector. Europe has the leadership and tools to make renewable hydrogen a reality».
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