EU to Grant Hydrogen Subsidies As Part of Net Zero Industry Act

The European Commission presented a hydrogen subsidy scheme on Thursday, as part of its Net-Zero Industry Act. The Commission aims to make green hydrogen cost competitive with fossil fuel derived hydrogen. Currently, European industries use around 8 million tons of hydrogen, but the majority of that amount is produced using natural gas, a process which emits CO2. The EU wants to switch to green hydrogen produced from renewable electricity to cut industry emissions.

The bloc also announced it will launch a “hydrogen bank” for funding that would include auctions to award a fixed premium to hydrogen producers per kilogram of the fuel for up to 10 years.

The first auction, set to be launched this year, will offer around €800 million of subsidies. The payments will be made once the hydrogen production is commenced. To apply, projects would need proof that they have an interested buyer and a renewable energy supply to power the production site.

“The goal of the bank is to reduce the cost gap to a level that private off-takers are willing and able to cover,” the Commission document says.

Governments will be able to put national funding into the EU auctions to increase the budget for the projects in their own countries. That way, if a project misses out on the EU funding, they can still receive state aid.

The EU wants to produce 10 million tons of renewable hydrogen and import another 10 million by 2030. It currently produces less than 0.3 million tons of green hydrogen.

Achieving those targets would require massive investments to increase Europe’s small number of electrolyzers – the equipment needed to produce hydrogen from renewable electricity – and install 150 to 210 GW of new renewable energy capacity to power them.

That investment could cost up to € 471 billion, most of it expected to come from the private sector.

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