European Commission publishes Terms and Conditions for the second renewable hydrogen auction
On 27 September 2024, the Commission published the final Terms and Conditions (T&Cs) for its second auction for the production of renewable hydrogen (IF24 Auction), via the Innovation Fund. This auction, which is a key pillar of the European Hydrogen Bank (EHB), provides financial support to producers of hydrogen categorised as Renewable Fuel of Non-Biological Origin (RFNBO).
The auction will open on 3 December 2024 and will award up to €1.2 billion support to renewable hydrogen producers located in the European Economic Area (EEA). Building upon the success of last year’s pilot auction (IF23 Auction), the second auction will further contribute to the creation of a European market for renewable hydrogen by de-risking investments with public support.
The successful bidders under the IF24 Auction will receive a fixed premium in €/kg of renewable hydrogen produced, over a maximum of ten years of operation. The Innovation Fund support will bridge the gap between production costs and the price that off-takers’ are ready to pay for renewable hydrogen.
The Terms and Conditions for the second auction include new resilience requirements, building on the lessons of the pilot auction and facilitating a contribution of EU funding to the objectives of the Net-Zero Industry Act (NZIA). Projects will be evaluated on a new criterion: “Achieving security of supply of essential goods and contribution to Europe’s industrial leadership and competitiveness”. The Commission will also ensure that support is provided to safe production processes in Europe through appropriate safety and cyber-security requirements.
Other key features of the T&Cs for the second auction include:
Higher maturity level requirements for application;
A revised price ceiling;
A dedicated budget of €200 million for projects supplying their production to off-takers in the maritime sector.
The Innovation Fund is one of the world’s largest funding programmes for commercialising and deploying net-zero and innovative technologies. Financed by revenues from the auctioning of allowances from the EU Emissions Trading System (ETS), it aims to help businesses invest in clean energy and introduce market-ready technologies to decarbonise European industry while fostering competitiveness. The Innovation Fund is also one of the key tools of the Green Deal Industrial Plan.
In March 2023, the Commission presented a new plan to stimulate and support investments in renewable hydrogen production through the European Hydrogen Bank (EHB). In addition to helping the Innovation Fund support the development of a domestic renewable hydrogen market, the EHB aims to bridge the investment gap for the EU to reach its ambitious REPowerEU targets. The pilot auction is expected to provide almost €720 million to 7 selected projects across Europe.
The auctions complement the Innovation Fund’s portfolio of support mechanisms, which includes grants, project development assistance and other blended financial instruments. It improves information transparency and price discovery, while reducing applicants’ administrative effort.
