The European Commission (EC) today gave more details about the planned establishment of the European Hydrogen Bank, saying that it should become operational by the end of the year and will be resting on four so-called pillars.
A communication published by the EC says the objective of the bank is to create an initial market for renewable hydrogen by connecting supply with the emerging demand by European off-takers. It will promote both domestic production and imports.
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Last September, when EC president Ursula von der Leyen first unveiled the plan to launch such a bank, she said it will be able to invest EUR 3 billion (USD 3.2bn) to help build the future market for hydrogen.
“In the absence of a sufficient green market premium for early projects, the strategy behind the European Hydrogen Bank is to cover and, eventually also to lower, the cost gap between renewable hydrogen and the fossil fuels it can replace,” the newly-released document says.
Two of the four bank pillars set out in the communication take the form of new financing mechanisms that should support production both in the EU and internationally. As part of the first one, the Commission is currently designing the pilot auctions on renewable hydrogen production. The first auction is expected to be held in the autumn of 2023 with a budget of EUR 800 million. As part of it, hydrogen producers will get a subsidy in the form of a fixed premium per kg of hydrogen produced for up to 10 years of operation.
The second pillar also takes the form of an auction but this time focused on imports. As part of the scheme, suppliers from third countries or EU off-takers contracting with third-country producers will be able to apply for a green premium.
The third bank pillar is linked to transparency and coordination – assessing demand, infrastructure needs, hydrogen flows, and cost data – and the fourth one comprises the coordination and blending of existing financial instruments with new public and private funding, both in the EU and internationally.
The REPowerEU plan that was unveiled a year ago set targets of 10 million tonnes of domestic renewable hydrogen production and the same volume of imports per year by 2030. Presently, the EU Member States consume an estimated 8 million tonnes of hydrogen, primarily produced from natural gas. The EC points out that in order to achieve its target for domestic production, the bloc would need to have on its disposal between 80 GW and 100 GW of installed electrolysis capacity versus 160 MW available today.
Ultimately, the EU would need to attract a total investment in the range of EUR 335 billion to EUR 471 billion in order to be able to produce, transport and consume 10 million tonnes of renewable hydrogen, including EUR 200 billion-300 billion for additional renewables. At the same time, an additional EUR 500 billion will need to be spent on international value chains to facilitate the desired import volumes. The vast majority of the estimated investment in the hydrogen sector will have to come from private funding, the Commission noted.
The EC also stressed that finalising the hydrogen regulatory framework must be prioritised to ensure the success of the European Hydrogen Bank. “The Commission therefore calls on the European Parliament and the Council to facilitate a swift entry into force of the delegated acts clarifying how hydrogen and hydrogen-based fuels can qualify as renewable and to conclude negotiations and to swiftly adopt the proposed Renewable Energy Directive and the future rules for efficient hydrogen markets, including the definition for lowcarbon hydrogen,” the document says further.
(EUR 1.0 = USD 1.072)
Pump supplying hydrogen to a fleet of vehicles. Photographer: Claudio Centonze. Source: EC - Audiovisual Service.
