According to newly released terms and conditions, electrolysers seeking support from the EU’s upcoming auction for subsidies will have to prove that their power supply comes from renewable energy sources.
The aim of the auction is to support renewable hydrogen uptake in industrial processes as a central measure to reduce fossil fuel consumption in hard-to-abate industrial sectors.
For this reason, “the first auctions under the Innovation Fund will target renewable hydrogen production”, the European Commission said. The auction will have a budget of €800 million.
Developers will be able to compete for a fixed premium payment with a price ceiling of €4.50/kg of hydrogen, payable over ten years and starting within five years of contracts being signed after the auction. To bid for support, electrolyser projects must be at least 5MW.
Renewable electricity sourcing strategy
To ensure there is no cross subsidy with fossil-produced hydrogen, bidders must submit both a renewable electricity sourcing strategy and a hydrogen offtake and price hedging strategy.
They must certify that the total volume of hydrogen achieves at least 70% greenhouse gas savings. The renewable electricity sourcing strategy must include pre-contractual steps towards securing renewable electricity that matches the volumes of hydrogen to be produced in terms of both volumes and time profiles.
The application must state the name of the renewable energy provider, the type of generation and whether it is a dedicated generator with a direct connection, or supplied via the grid.
Additionality
The strategy must also show that the project has considered hedges against the variability risk of electricity supply and offtake prices.
To ensure that the project archives ‘additionality’, e.g. that it makes a contribution to lowering emissions, electrolysers starting up after 1 January 2028 cannot source their renewable energy from an installation that receives state aid, unless the local grid has high renewables capacity and low greenhouse gas emissions.
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