The European Union will launch its second renewable hydrogen auction on December 3, 2024, known as “IF24,” as part of the European Hydrogen Bank program and funded by the Innovation Fund. With a budget of €1.2 billion, the initiative aims to promote clean hydrogen production and support producers across the region. In addition, member states will contribute around €700 million more with “auction as a service.”

Daniel Fraile, Chief Policy Officer at Hydrogen Europe, comments to Energía Estratégica España that these auctions are a key element in energizing the market and achieving the EU’s climate goals for 2050.

The December auction will serve as a barometer to assess the state of the market. Fraile anticipates that prices offered by developers may be slightly higher compared to the first auction due to inflation and new regulatory requirements. However, the active participation of national governments could balance the situation.

In the first auction, held in 2023, the European Commission allocated an initial budget of €800 million, achieving support prices ranging from €41 to €70 per megawatt-hour (MWh) for selected projects. This initial phase helped identify key projects, although not all moved forward due to barriers like lack of infrastructure and high certification costs.

New Approaches in the Second Auction

IF24 includes significant adjustments based on previous lessons. One of the most notable changes is the inclusion of a specific €200 million budget for projects linked to the maritime sector, reinforcing its role in the transition to cleaner fuels. Additionally, criteria have been incorporated to ensure the resilience of the industrial value chain in Europe, such as the 25% cap on inputs from outside the region in electrolyzer production.

Fraile views this approach positively. “It is crucial that public funds not only drive renewable hydrogen production but also strengthen the competitiveness of the European industry, creating jobs and reducing dependence on foreign technologies,” he says.

Lessons Learned from the First Auction

The first auction, held in 2023, marked a milestone in the development of renewable hydrogen in Europe. With 132 bids from 17 countries, more than 8.5 gigawatts of electrolyzer capacity were projected. However, Fraile emphasizes that not all projects are likely to materialize due to structural challenges.

“Although the first auction was very successful, many projects depend on external factors, such as infrastructure or long-term commitments from consumers,” explains Fraile. These challenges include the lack of hydrogen transport networks, port terminals, and strict certification rules to ensure the renewable origin of hydrogen.

Infrastructure and Regulatory Framework: Persistent Challenges

A recurring theme in discussions about renewable hydrogen is infrastructure. Currently, Europe lacks an adequate network to transport clean hydrogen from high production capacity regions, such as the Iberian Peninsula or Nordic countries, to large consumers in northern Europe. According to Fraile, this is one of the main bottlenecks.

“Investment in infrastructure must be anticipatory, but that involves taking risks. This is where governments play an essential role in minimizing those risks and ensuring a long-term return for investors,” he comments. Germany, for example, has implemented a model that allows investors to recover their costs over a period of up to 30 years, giving enough time for the infrastructure to be used optimally.

In addition to physical infrastructure, the regulatory framework also presents challenges. “Strict certification rules in Europe, such as the time and geographic correlation of renewable electricity, artificially increase the costs of renewable hydrogen,” explains Fraile. While these measures aim to avoid an increase in CO₂ emissions, their implementation can delay the sector’s development.

Expectations and Goals for the Future

On the other hand, Hydrogen Europe highlights the importance of closing the gap between the Repower EU program’s goals and the reality of the sector. Fraile explains that, although renewable hydrogen is seen as an alternative to natural gas, its implementation in certain sectors, such as residential heating, faces economic and technological barriers.

“The focus should be on sectors where hydrogen can provide greater added value, such as refineries and green steel production. Additionally, it is essential to create incentives for end consumers, promoting products with a lower carbon footprint,” he says.

Fraile concludes: “These auctions are not only necessary but strategic to measure progress and strengthen confidence in the sector. Europe has the leadership and tools to make renewable hydrogen a reality.”