The second European Hydrogen Bank auction, organized with a budget of 1.2 billion euros, promises to solidify renewable hydrogen as a key component of the energy transition.

However, industry experts point out significant challenges in its design, such as guarantee requirements, tight deadlines, and restrictive technological criteria. Nonetheless, they acknowledge these as opportunities to support viable projects.

Javier Robador, manager of H2CYL, highlights that this new auction introduces positive elements, such as the 25% cap on Chinese technological components for electrolyzers.

“We highly appreciate the limit on electrolyzer capacity from China, but it should be extended to the rest of the plant equipment,” he says.

Still, in an interview with Energía Estratégica España, the executive warns that the financial guarantee requirements are designed to favor the market’s large players, which “creates more obstacles for the development of small projects, which should be prioritized to diversify the industry,” he argues.

Prices and strategic opportunities for Spain

Price remains a key factor in the competitiveness of the submitted projects. According to Brais Armiño Franco, partner at AtlantHy, “Spain has the potential to produce the cheapest hydrogen on the continent.”

In the first auction, Spanish prices reached 5.8 euros per kilogram on average, surpassed only by Greece and Sweden.

Spain and Portugal are identified as leaders in this call, repeating their prominence from the first auction.

In the first auction, launched in November 2023, three of the seven selected European projects were Spanish, two of which secured more than a third of the 694 million euros allocated when signing financing agreements.

The maturity of projects in the region is a decisive factor. “We see many projects continuing to progress and defining themselves technically, which ensures their ability to compete in this call,” he points out.

Robador, for his part, draws attention to the lack of equity in the conditions. “It doesn’t make sense to demand such high guarantees for 5 MW projects when large developers are focused on much larger projects,” he says.

This criticism aligns with the views of other experts who see the need for a more inclusive design.

Armiño highlights that the low price reflects the technical maturity of Spanish projects.

“Many projects in Spain are in a position to submit, and they will, reinforcing their strategic position in the European market,” he assures.

However, the consultant also criticizes the limitations of the auction design. “The most competitive projects will be those directly linked to industries like chemicals or shipping, sectors with a high capacity for purchase commitment,” he explains. This approach, he adds, excludes emerging projects that could be equally relevant.

Tight deadlines and expectations for results

The set deadlines are also a point of debate. According to Robador, the five-year period for commissioning is reasonable, but the requirement for a final investment decision in just 2.5 years could be problematic for some developers. “If you already have an agreement with a potential consumer, this deadline might be excessive,” he comments.

On the other hand, Alejandro Diego Rosell, Professor at EOI and Consultant at Nuvix Consulting, emphasizes that the success of the auction will depend on how it is implemented. “If they execute it well, this could be a game-changer; if not, it will be a big ‘almost,’” he warns.

The objective: selected projects must be operational by 2030, contributing significantly to the EU’s climate goals.

Auctions as a Service: An Innovation

The “Auctions as a Service” model represents an innovative approach within the European Union’s hydrogen funding strategies. Implemented under the Innovation Fund framework, this system allows member states to leverage the structure of European auctions to support projects that, despite their technical quality, fail to secure funding due to budgetary limitations.

What does it involve? The mechanism allows member states to channel national funds to support projects that participated in the European Hydrogen Bank auctions but were not selected.

These projects, having met the strict evaluation criteria of the Innovation Fund, can be funded without the need for additional national bidding processes. This significantly reduces administrative burden and optimizes resources for both states and developers.

Spain, Austria, and Lithuania have joined the scheme. Together, the three countries will allocate over 700 million euros in national funds to support renewable hydrogen production projects in their respective countries, raising the Innovation Fund allocation to nearly 2 billion euros.

The Spanish government, in particular, will allocate between 280 and 400 million euros, making it a key player in the transition to cleaner energy.

In this regard, Rosell emphasizes that the real value of this initiative lies in the “Auctions as a Service” model, as it “allows countries like Spain or Austria to support projects rejected in the main call.”

This shift in the auction process, according to the expert, is “smart and pragmatic” and has the potential to “recycle” projects still in the market that can significantly contribute to the energy transition.

Future Expectations

Looking ahead, experts expect the auction budget to increase in future calls. According to Chatzimarkakis of Hydrogen Europe, “We hope the remaining 1 billion euros will be allocated to future auctions to ensure that projects continue to receive the necessary support.”

The second European Hydrogen Bank auction represents a crucial step in Europe’s energy transition. However, as Rosell concludes, “the road will be complex, but necessary to make a mark in clean energy.”