Most project capacity of second EU Hydrogen Bank auction withdraws

Projects totaling 1.9 GW of electrolyzer capacity have withdrawn from the second European Hydrogen Bank subsidy award auction having already secured grant awards, with the seven projects accounting for the vast majority of the 2.3 GW awarded.

The European Commission has invited a further 10 projects from the reserve list to prepare grant agreements, though the combined capacity of these comes to just 774 MW, with fixed premium bid prices of Eur0.64-1.22/kg ($0.75-$1.44/kg) compared to the 20-60 euro cent/kg of the withdrawn projects.

"Out of the 15 initially invited projects, seven chose not to proceed with the grant agreement procedure or were unable to provide the signed completion guarantee," the European Commission said in an auction update on its website.

Most of the reserve projects are based in Spain, which has access to low-cost renewable power.

The commission said the withdrawals were a sign that the auction was working as it should.

"The auction's completion guarantee is working as expected in weeding out companies that have bid too low, or were forced to reassess their project maturity or financial viability between bidding and having to provide the completion guarantee," EU Innovation Fund Policy Officer Johanna Schiele said in a LinkedIn post Sept. 18. "This ensures that we do not block public funds for projects that will ultimately not be realized."

Industry group Hydrogen Europe told Platts that a lower capacity was expected, as the reserve projects had higher bids, but these still represented "very low bid prices."

All of the projects to have withdrawn are under the "general" category, with the three "maritime" category projects proceeding with grant agreement preparation.

The general category projects now have bid prices in the range of Eur0.33-1.22/kg, with bids for the maritime projects at Eur0.45-1.88/kg.

Selected projects must sign a completion guarantee within two months of being invited to sign a grant agreement, amounting to 8% of the total grant request.

"This requirement works as a maturity check on the project and functions as a penalty for projects signing the support contract, but then not achieving financial close or entry into operation within the required schedule," the EC said in an auction Q&A document.

The commission said that changes to market conditions, offtakers and infrastructure availability could alter the economics for projects, with developers re-evaluating bids and maturity levels before signing completion guarantees.

Second EU hydrogen bank auction - project status

*Calculated based on the2021-2025 ETS benchmarkof 6.84 mtCO2e/mt hydrogen. Excludes any additional abatement from hydrogen substitution in end use.

Source: European Commission, S&P Global Energy

Grant agreements

The EC expects to announce the final list of projects that will sign grant agreements by the end of 2025.

Once grant agreements are signed, projects must reach financial close within 2.5 years and start production within 5 years.

Successful projects receive a fixed premium subsidy per kilogram of renewable hydrogen produced over 10 years.

Any remaining budget will be returned to the Innovation Fund for future funding rounds, the EC said.

The average levelized cost of EU Renewable Fuel of Non-Biological Origin-compliant hydrogen ranges from Eur5.50-11.10/kg, the EC said, leaving a substantial price premium to be covered by customers.

Platts, part of S&P Global Energy, assessed the cost of green hydrogen production via alkaline electrolysis in Spain, backed by renewable power purchase agreements, at Eur7.62/kg on Sept. 17.

The assessment reflects one possible pathway for producing EU Renewable Energy Directive-compliant green hydrogen.

The majority of projects submitting proposals to the EU Hydrogen Bank are for proton exchange membrane electrolysis, despite the technology's higher cost compared with more established alkaline electrolysis. And project developers are overwhelmingly opting for European kit.

The main offtake sector is from industry, which also has amongst the highest willingness to pay, with offtake prices around Eur6.95/kg, compared with Eur7/kg for mobility, and Eur5.68/kg for the energy sector, according to EC analysis of the bids.

The main power supply for projects bidding for the fund is from onshore wind, mostly combining a grid connection with a renewable power purchase agreement.

Large-scale withdrawal

In August, two large-scale projects withdrew from the auction process, while a project from the first auction also pulled out.

Deutsche ReGas pulled its 210-MW H2-Hub Lubmin project in Germany, while the 560-MW Zeevonk electrolyzer in the Netherlands and the 500-MW Catalina project in Spain also abandoned their EU funding.

Deutsche ReGas cited delays to implementing national legislation that had created too much uncertainty, and delays to the Zeevonk electrolyzer in the Netherlands forced project partners Vattenfall and Copenhagen Infrastructure Partners to forgo the funding, as they could not meet key delivery milestones.

The 500-MW Catalina renewable hydrogen project in Spain from CIP and Enagas Renovable has also terminated its grant from the first EU Hydrogen Bank auction, citing tight deadlines and a dependency on the national pipeline system, which has not yet reached financial close.

Developers for both H2-Hub Lubmin and Catalina plan to progress the projects.