Last September, the European Commission published the terms and conditions of the second auction to be held by the European Hydrogen Bank for the production of this renewable fuel, the financing of which will be provided by the Innovation Fund. Support that will serve to cover the gap between production costs and the price that buyers are willing to pay for renewable hydrogen.
The new tender, which It will open on December 3 and close in February 2025presents several new features compared to the previous auction, which took place in November 2023 and in which three of the seven selected projects were Spanish.
On the one hand, the amount allocated to finance the projects increases by 400 million, passing of a budget of 800 million in the first auction to 1.2 billion in the second. An increase with which the Commission intends to close the investment gap to achieve the goal of deploying 20 million tonnes of renewable hydrogen in Europe by 2030.
Of the budgeted amount – and this is another novelty –, 1 billion will go to general hydrogen projects of renewable fuels of non-biological origin (RFNBO) and the 200 million remaining to projects aimed at the maritime sector.
The reasons for including the maritime issue in the second auction are due, on the one hand, to the commitment of the Commission of support the decarbonization of maritime transport since its inclusion in the EU ETS Directive (European Emissions Trading System) and compliance with the objectives of the FuelEU Maritime Regulationwho is looking for a 80% reduction in GHG emissions intensity from marine fuels by 2050. The fact that projects aimed at supplying the maritime sector participated in the first auction has also had its weight.
To the 1,200 million budgeted, something will be added in this year’s auction more than 700 million from contributions from three European countries. The incorporation of Spain, Austria and Lithuania to the Auctions as a Service (AaaS) mechanism – which serves to support those renewable hydrogen production projects in their respective countries that are not awarded in the auction – raises the endowment of the Innovation Fund. Spain will allocate between 280 and 400 million, Austria will contribute 400 million and Lithuania 36 million.
Let us remember that this service was already part of the first hydrogen auction, being Germany the first State to participate with 350 million of its national budget, which were added to the 800 million from the Innovation Fund.
Financing closing in two and a half years
In addition to increased funding and clear support for the maritime sector, the second European hydrogen auction includes stricter project preparation criteria and an emphasis on profitability and resilience.
Specifically, some Project maturity requirements in auction qualification criteria for the second round – in the evaluation carried out before the offers are classified –, in order to guarantee the best quality of the offers.
In addition to a maximum start-up time of 5 years (the same as in the previous auction), applicants now also have to reach a intermediate milestone of financial closure within a maximum period of two and a half years. If you do not do so, the support contract will be terminated and a completion guarantee will be requested. This commitment must be supported by prior agreements with the main renewable electricity suppliers and hydrogen buyers, and through the presentation of a feasibility study of the project.
The proposals selected in the new auction will receive a fixed premium payment for up to ten yearswhich will be disbursed once the projects come into operation.
Regarding The required completion guarantee is increased from 4% to 8% of the amount of the requested subsidy.. Besides, The projects will have to compete with a reduced maximum price that is set at €4/kg of hydrogen from the RFNBOinstead of €4.5/kg at last year’s auction.
The Chinese origin of electrolyzers is limited
To ensure consistency between this auction and the goals of the Net Zero Industry Act (NZIA), resilience requirements are added to the auction qualification criteria.
First, projects will be evaluated according to a new criterion: “Achieving security of supply of essential goods and contribute to leadership and industrial competitiveness of Europe“as part of the qualification criteria. To achieve this, projects have to contribute to a diversified supply chain and, therefore, avoid depending solely on a third country that could threaten the European security of the supply of electrolyzers.
The Commission’s analysis indicates that there is a significant risk of increased and irreversible EU dependence on imports of electrolysers originating in China, which may pose a threat to the Union’s security of supply. Consequently, Assembled electrolyzers may not contain more than 25% of their components of Chinese origin..
There needs to be sufficient evidence in the application to support the claims. During execution, compliance with the claims made therein will be monitored. In case of non-compliance, sanctions such as reduction of the subsidy or even termination will be applied.
In addition to this criterion, when the project comes into operation, it must demonstrate compliance with the ISO 22734:2019 safety standard for “hydrogen generators through water electrolysis: industrial, commercial and residential applications” and deliver a cybersecurity plan.
Furthermore, in the bidding phase, projects must present a electrolyzer procurement strategywhich will allow the European Commission to monitor the origin of purchased equipment, the intensity of critical raw materials, the recycling strategies in place, the standards that the equipment meets and whether original equipment manufacturers receive foreign financial contributions.
Throughout the project monitoring period, existing mechanisms that already protect European industry from unfair competition will be maintained, such as the Regulation on EU foreign subsidies or the possibility of EU trade defense investigations.
Mibgas launches the first auction of renewable h2 in Iberia
MIBGAS Derivatives and DH2 Energy They launch the first auction for the purchase of renewable hydrogen in the Iberian market. The process began on November 15 with the publication of the documentation on the MIBGAS website. The auction is aimed at all companies interested in acquiring renewable hydrogenat a national and international level, without restrictions regarding the type of application of hydrogen.
Different lots will be offered, depending on the volume of supply and the duration of the contract, starting from a base price for each of them. The first phase is prequalification. The subsequent phase will be the qualification phase and, subsequently, another phase will be opened, only among qualified companies, for the presentation of offers. This last phase will be competitive.
Participants will be able to submit offers for the purchase of renewable hydrogen generated by DH2 Energy’s Hysencia plant. The plant is located in Aragón and its construction is scheduled to begin in mid-2025, while its entry into operation will occur in the first half of 2027. The plant has 35 MW of electrolysis capacity, 49 MWp of photovoltaic power and 10 grid-connected MW, which was the winner in the first auction of the European Hydrogen Bank.
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