Average bids in second European Hydrogen bank round below €0.70/kg

Average subsidies requested by EU project developers in the second round of the European hydrogen bank were below €0.70/kg, roughly half of the pilot auction’s average.

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The European Commission has yet to announce the winners of the second auction which closed on 20 February, but preliminary info it has released indicates lower bids and less participation from fewer countries than in the pilot auction.

The commission received bids for 61 projects in 11 countries, down from 132 spread across 17 member states in the pilot.

The combined subsidy amount requested was €4.88bn to support cumulative production of 7.3mn t of renewable hydrogen over the 10-year support, which would yield a volume-weighted average (VWA) of submitted bids of €0.67/kg. In the pilot auction, overall requested support was around €12bn for 8.8mn t of cumulative output, implying a VWA of roughly €1.36/kg.

The bidding projects in the second round would have a combined electrolyser capacity of 6.3GW, down from 8.5GW in the pilot. This suggests that the average size of participating projects increased to around 103MW from 64MW. The anticipated average output per MW of electrolyser capacity rose to around 115 t/yr from 103 t/yr.

While the overall requested grant volume was down considerably from the pilot, it still exceeded the EU’s €1.2bn budget for the second round more than four times. Of the €1.2bn budget, €200mn was set aside for projects specifically targeting offtake in the maritime sector and eight of the 61 bids were for this segment, the commission said.

Projects from Spain, Austria and Lithuania could get support even if they miss out on the EU-wide budget as their national governments together made nearly €900mn available for projects in their respective member states through the “auctions-as-a-service mechanism”, effectively lifting the second round budget above €2bn.

Winners are due to be announced by May-June and will be selected purely on the bids they submitted, with those requesting the lowest subsidies to be granted the support.

The pilot auction had cleared at €0.48/kg, with seven projects selected for cumulative support of €720mn.

The lower VWA in the second auction could suggest that winning bids might be lower than this. That said, the lower VWA might be partly the result of developers that participated with high bids in the pilot – when some bids went up to the €4.50/kg ceiling – not having participated in the second round as they may have seen little chance of winning with their requested support. This could mean that bids are more closely concentrated around the VWA this round.

Lower participation may have also been the result of stricter rules around the use of Chinese electrolysers introduced for this round. Only projects that source no more than 25pc of their electrolyser components from China were eligible to participate, which may have disqualified some projects that bid in the first round.

The commission also increased the completion guarantee for this round.

A third hydrogen bank auction is due to be launched later this year, with a €1bn budget.

Source: Stefan Krumpelmann and Pamela Machado (Argus Media)

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