The European Commission approved hydrogen funding competitions in Spain and the Netherlands, which would offer a combined EUR 2.1 billion to renewable hydrogen producers. The announcements, made at the end of July, capped a breakthrough month in which almost EUR 9 billion was injected into the European hydrogen sector in new funding competitions and final project awards.
On 26 July, the European Commission approved a Spanish scheme to offer EUR 1.2 billion of European recovery funds in direct grants to hydrogen production schemes under its Temporary Crisis and Transition Framework (‘TCTF’).
Three days later, the Commission granted a Dutch government application to tender EUR 998 million under the CEEAG State Aid mechanism to support the development of at least 200 MWel of electrolyser capacity in the form of direct grants and revenue support.
The two announcements brought the total of new funds made available in July to support the European hydrogen sector via competitive processes to EUR 2.9 billion. A further EUR 800 million was pledged in the month by the governments of Italy, Finland and Canada, with the latter supporting renewable hydrogen derivative exports to Germany (see below).
July had already seen EUR 6 billion announced in final awards to named hydrogen projects targeting the European hydrogen market via the German and Spanish IPCEI initiative, the H2Global tender result and backing for a Lithuanian fertiliser scheme.
Finally, the month ended a lull in investment decisions, with four commitments across Germany, Spain and Belgium adding at least 430 MWel to electrolyser capacity under construction in Europe.
The Spanish scheme, backed by EUR 1.2 billion in Recovery and Resilience Facility funds, is intended to support the development of large ‘hydrogen valleys’, a cluster of production and consumption assets with a common infrastructure, ecology ministry (MITECO) stated on 30 July.
The funding would be open to renewable hydrogen producers with a minimum capacity of 100 MWel at a single production location, or 50 MWel for multiple sites within the same hydrogen valley, allowing projects within 100km of each other to apply jointly. A maximum EUR 400 million would be allocated to any one project.
While cost competitiveness of bidding projects, in terms of euros per megawatt of capacity, would account for 70% of the selection criteria, factors including project maturity, developer experience, environmental factors and local employment would also be considered according to MITECO. In a separate measure to ensure sufficient maturity, winning projects would need to have an offtake agreement in place for 60 per cent of the volumes.
In keeping with European regulation, projects would need to meet RFNBO (Renewable Fuels of Non-Biological Origin) criteria including temporal correlation, for 60 per cent of the hydrogen produced, while all hydrogen produced over 10 years would be expected to meet the low carbon threshold of a 70 per cent reduction in emissions relative to fossil hydrogen.
The cost of connected renewables could also be included up to 30 per cent of the bid amount, although only in the instance of a direct connection to the electrolyser.
*50 MWel if joint application from same ‘Hydrogen Valley’
The award comes as part of a coordinated attempt by the Spanish government to drive renewable hydrogen production assets and lay the foundations of the infrastructure necessary to transport and store the fuel.
In a separate development, Spain’s council of ministers approved transmission system operator (TSO) Enagás to proceed with infrastructure schemes which had secured European Projects of Common Interest (PCI) status. These included a 3,500km domestic network, cross-border interconnectors with Portugal and France and two storage sites.
These developments follow the separate grant of EUR 794 million to support the construction of 652 MWel of electrolyser capacity across seven project projects as part of the IPCEI HyUse programme, announced by MITECO earlier in July.
In contrast to the Spanish measure, the Dutch OWE support scheme countenanced production projects on a smaller scale despite a larger overall budget and ostensibly generous terms.
The minimum threshold for projects was set at 0.5 MW of capacity. Funding would be available for up to 80 per cent of the project investment with a fixed premium also granted for each unit produced, according to the Commission statement.
The follows the first round of the OWE programme, which awarded EUR 246 million in May 2024 to 101 MWel of electrolysers with individual scales of between 1 MWel and 44.2 MWel capacity. Changes from the previous round include lifting criteria on maximum capacity, extension of the time to build the facility and the ability to stack the subsidy with European funding initiatives including the IPCEI.
The terms of the OWE scheme appears to reflect a change of strategy in the face of headwinds faced by projects backed by previous funding rounds.
In December 2022, the country’s government awarded EUR 783.5 million to seven renewable hydrogen production projects with a total capacity of 1.15GWel under the IPCEI Hy2Use scheme. However, only Shell’s 200MWel Holland Hydrogen project has proceeded to date, threatening the country’s policy objective to attract 500 MWel of installed electrolyser capacity by 2025 and 3-4 GWel by 2030.
Industry sources have also cited high grid connection charges as one particular challenge. The cost of a grid connection charged by Transmission System Operator (TSO) TenneT can add EUR 2.07 per kilogram on a levelised cost basis, according to Dutch project developers surveyed by state agency TNO. For context, this component alone exceeds the European Commission’s EUR 1.8 per kilogram goal for the cost of hydrogen by 2030.
Elsewhere, the HyCC-led H2eron project in Delfzijl cancelled an electrolyser order in December 2023, citing lack of regulatory certainty over e-fuels demand.
The new scheme opens the possibility of IPCEI and European Innovation Fund (EIF)-supported projects topping up subsidies to secure a way forward. The latter group include TotalEnergies’ 300 MWel EnergHys project, which would help decarbonise the neighbouring Zeeland refinery. On 24 July, the Paris-based major took FID on its 50 per cent-owned 795MW Oranjewind Dutch offshore wind farm, with the explicit goal of supply 350 MW of renewable hydrogen for refinery decarbonisation.
Any progress on renewable hydrogen production in the Netherlands will ultimately depend on the approach of the new coalition government which took office in July 2024.
While the Dutch and Spanish awards were the most significant fresh funding allocated in July, they were flanked by commitments to the sector from within and outside of Europe.
On 12 July, the Commission also announced the approval of EUR 400 million and EUR 200 million in Italy and Finland respectively. The Italian scheme would fund industrial decarbonisation through renewable hydrogen and energy efficiency under the TCTF, with the funding taking the form of direct grants and loans. The Finnish scheme supports RFNBO projects through European recovery funds in the form of direct grants.
Finally on 31July, the Canadian government committed CAD 300 million (EUR 200m) to be offered at competitive auction to renewable hydrogen and ammonia projects exporting to Germany. The support is expected to be available through the H2Global auction mechanism.
Additionally, the month also saw EUR 6 billion allocated in capital or revenue support to individual projects:
In addition to the new announcements of support, July also saw a number of hydrogen production projects take FID after a pronounced slowdown in the first half of the year.
Most significantly, northwest German utility EWE signed off on its 280 MWel Emden electrolyser on the back of German government support under the IPCEI HyInfra wave announced in the month. In all, the Oldenburg-based firm received EUR 510 million for the Clean Hydrogen Coastline, which includes production, transmission and storage assets, and is underpinned by an offtake agreement with ArcelorMittal’s Bremen steel plant.
Shell marked a second German FID on its 100 MWel REFHYNE II scheme, which would provide renewable hydrogen to decarbonise operations at its Energy and Chemicals Park south of Cologne. The project earlier received a EUR 32.4 million grant from the European Climate, Infrastructure and Environment Executive Agency (CINEA).
Fellow European energy major BP also announced an investment decision for the first phase of the HyVal electrolyser at its Castellón refinery near Valencia, where hydrogen would be used for both decarbonisation of operations and SAF. The initial phases was reportedly only 25 MWel of an
eventual 2GW capacity, although BP also pledged an FID before year-end at its Lingen refinery in Germany, which received EUR 125 million in IPCEI funding earlier in the month.
Finally, Belgium’s HyOffWind consortium moved ahead with its 25MWel electrolyser at the port of Zeebrugge, which was also supported by a EUR 30 million subsidy from recovery funds under the NextGenerationEU initiative.
The investments ended a period since the end of September 2023 when few substantial projects advanced. The latest wave of FIDs continued the trend of the largest hydrogen production projects being anchored by offtakers in the steel and refining sectors.
The swathe of regulatory and commercial announcements in July has proven to be conveniently timed for European policymakers.
The month also saw the release of a critical report by the European Court of Auditors, the findings of which cited:
The audit conceded the Commission had been partially successful in creating necessary market conditions while projects also suffered from factors including material price inflation.
Ultimately, July’s hydrogen market progess still leave daunting production targets in place. The month’s four FIDs only account for one per cent of the original 40GW target for 2030 set out in the original European Hydrogen Strategy, which is itself less than half the amount required to meet the increased RePowerEU goals.
The reinjection of momentum into the project markets partially blunts the auditor’s criticism of overlapping support schemes. Indeed, in some countries, the ability to stack support through subsequent layers of funding may serve to unblock a becalmed market.
Factors beyond the scope of the auditor’s remit may now prove more important. Crucially the lull in project activity between September 2023 and June 2024 also marked the peak of European Central Bank’s rate tightening cycle as well as a period of uncertainty in the run up to European elections. Since then, some, though by no means all, of the macroeconomic and political risks to the sector have abated.
In the short term, the proof of the market’s progress will be determined by whether the rest of Germany and Spain’s IPCEI projects can follow EWE’s Clean Hydrogen Coastline to a swift FID. If it is to come close to policy targets, the sector can ill afford another hiatus.
Veyt specialises in data, analysis, and insights for all significant low-carbon markets and renewable energy.
