The European Hydrogen Bank (EHB) is the new EU flagship instrument to accelerate and support investments in renewable hydrogen production, launched by the European Commission in March 2023. The initiative seeks to establish financial tools and a coordination platform to cost-effectively ensure domestic and international renewable hydrogen volumes in the EU, following the ambitious hydrogen target addressed in the REPowerEU Plan.
The EHB is structured based on four main standpoints:
The EHB intend to create a comprehensive value chain for hydrogen, spanning from production support to initial market adoption. An auction system will serve as the main financial instrument to mitigate economic disparity for domestic renewable hydrogen production, where a EUR 800 million pool of aid will be allocated to realise this initiative. Under its framework, successful bidders (hydrogen producers) will be awarded a fixed premium per kg of verified and certified renewable hydrogen, in particular RFNBOs, for a maximum guaranteed period of ten years, in addition to the market revenues they can achieve.
The long-term objective of the EHB is to reduce the cost difference to a level that is economically feasible for private off-takers. The EHB will function in compliance with international commitments, whether bilateral or multilateral, under both local and global frameworks.
The first public tender for the domestic production of Renewable Fuels of Non-Biological Origin (RFNBO) hydrogen, funded by the Innovation Fund, is scheduled between 23 November 2023 and 8 February 2024. Successful projects will formalise a grant contract with the European Climate, Infrastructure and Environment Executive Agency (CINEA), the implementing authority for the scheme.
The Commission released the Terms and Conditions (T&C) for this inaugural pilot auction at the end of August 2023. According to the T&C, the financial support will favour only projects located within the European Economic Area (EEA). Specific pre-qualification criteria and eligibility requirements are in place to ensure the feasibility and completion of the projects.
For physical hydrogen, the subsidy would favour the RFNBO market, increasing the availability of supply while ensuring the viability of the production. However, it’s worth noting that the maximum budget restriction for each bid can reach up to a third of the aid pool (EUR 266.7 million). This could result in inequalities during grant allocation, where there are only a handful of beneficiaries, namely large-scale producers, can leverage economies of scale to secure their bids. Consequently, the criterion may hinder the development of an effective, competitive market considering that small-scale RFNBO producers might be left out of the scheme.
When it comes to the certificate market, the scheme clearly addresses that only verified and certified RFNBO hydrogen is eligible to receive the subsidy. This could imply an increase in the demand curve for RFNBO certificates and thus promote liquidity in the green gas certificate market. The price trajectory of RFNBO certificates will be influenced by end-use applications and the availability of alternative certificates in the market.
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