On July 22, 2024, the transmission system operators submitted a draft application to the BNetzA to build the envisaged H2 core grid. With a planned total length of 9,666 km (6,006 mi), it will predominantly consist of converted natural gas pipelines (about 60 percent). The Doing Hydrogen route that was intended as a new construction line in the draft from November 2023 and was supposed to connect the former West Berlin is missing, however. This change was particularly criticized in the capital region.
The industry and trade chambers of the German state of Brandenburg announced in a statement in August 2024 that the “planned rapid conversion of the OPAL line coming from Lubmin (Mecklenburg-Vorpommern, MV) to hydrogen is expressly welcomed.” However, the deletion of the line section from Glasewitz (MV) to Ketzin (Brandenburg) was criticized and an absolutely necessary revision of the core grid application was called for.
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As essential reasons for consideration the IHK cited, among other things, the “threat to all project development activities in the area of hydrogen in the northern and western Brandenburg regions,” which also includes, for example, a planned 130-MW electrolysis plant at the Falkenhagen (Prignitz) location. In addition, there are already numerous renewable energy systems in the region of interest that would have to be regularly curtailed due to existing network bottlenecks. Making use of the regulated renewable electricity by producing hydrogen is therefore absolutely essential in order to minimize redispatch costs.
The two-week consultation period ended on August 6, 2024, so no later than two months after submitting the application documents will approval of the final core grid occur on the side of the BNetzA. The first lines are to be converted to hydrogen as early as next year.
Online marketplace brings together supply and demand
Like a dating site, the international hydrogen marketplace Localiser has been connecting the players in the hydrogen value chain for two years. Around 500 companies have been registered so far. The marketplace now also includes other European countries.
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Hydrogen is considered an environmentally friendly alternative to fossil fuels and plays an important role in decarbonizing industrial processes, storing renewable energy and promoting climate-neutral transportation. In updating its hydrogen strategy, the federal government assumes that the demand for hydrogen will increase to 95 to 130 TWh annually by 2030, mainly due to changes in industry and transport. The hydrogen economy is developing dynamically, but the question arises as to how the demand for hydrogen can be met.
The company Localiser RLI GmbH has on behalf of the ministry of economic affairs, labor and energy of the German state of Brandenburg and the Berlin senate department for economics, energy and enterprises developed the Wasserstoffmarktplatz (hydrogen marketplace). It was created as part of the development of the hydrogen roadmap for Brandenburg and the capital region. This free platform enables all players along the entire hydrogen value chain to network internationally. The hydrogen supply and demand is shown geo-referenced on maps. This makes searching for and offering hydrogen much easier.
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“The new marketplace makes the potential of the hydrogen economy visible and quickly brings together players along the entire value chain. Such an instrument has been missing so far and is unique in the country,” stated Kathrin Goldammer, managing director of Localiser RLI GmbH. Together with Oliver Arnhold, she leads the company.
The platform went online at the end of March 2022, and by April 2024, around 500 companies were registered on the hydrogen marketplace.
The hydrogen marketplace is expanding Six months after release of the platform, Localiser expanded the area of the watering hole that is the hydrogen marketplace. The Wasserstoffmarktplatz, which was initially only available in Berlin and Brandenburg, has been expanded to cover all of Germany, so hydrogen requests and offers from all of the German states can now be entered free of charge. Oliver Arnhold, managing director of Localiser, states, “We noticed the exponential growth in hydrogen demand throughout Germany and saw the hydrogen marketplace as the perfect solution for nationally networking hydrogen players.”
Due to the positive feedback from Germany, Localiser RLI GmbH decided, in partnership with the project HyTruck, to also offer the hydrogen marketplace internationally. The platform will be gradually expanded to cover all of Europe and will later be able to display global hydrogen supply and demand geo-referenced. The hydrogen marketplace is currently available in Denmark, Estonia, Finland, Ireland, Lithuania, Latvia, Norway, Poland, Sweden and the United Kingdom. Other countries will follow soon.
Use of the hydrogen marketplace is free of charge. Players in the hydrogen economy can register via the website of the company Localiser (localiser.de). After completing the form, you will receive an e-mail with a link to register in the app. Clicking on the link will take you to a subpage of the app where you will need to enter your details and create a user account. After logging in, users have access to their project.
The platform enables the visualization of many data sets, from renewable energies to infrastructure (roads, rail, grid and gas) and CO2 emissions. It also automatically suggests possible partner companies. In addition, the hydrogen marketplace provides an overview of the status of the infrastructure, including hydrogen refueling stations and future pipelines. This gives users comprehensive insight into the local hydrogen market.
The hydrogen marketplace is being continuously expanded and improved by Localiser RLI GmbH. In September 2023, the new matching function was introduced. This function automatically suggests potential business partners for each hydrogen player, making networking much easier. The marketplace provides an overview of all hydrogen offers and requests. It is possible to filter according to specific criteria such as company, category and project status. Clicking on a result opens a chat window that allows registered users to directly contact other companies. A summary of all matches can also be viewed in this overview. The marketplace can also be integrated on other websites as a white label.
Oliver Arnhold and Kathrin Goldammer have set up the hydrogen marketplace, Source: Reiner Lemoine Institut
Register at www.localiser.de/en/wasserstoff-infrastruktur-planen
37th BImSchV enables extra revenue for renewable fuels
Germany’s greenhouse gas reduction quota (GHG quota) is a climate policy tool which is designed to cut the country’s transport emissions and encourage the use of renewable energy in the mobility sector. It implements the provisions of the European Union’s Renewable Energy Directive in German law and aims to meet the minimum renewables share required in the transport sector for 2030 and beyond.
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The high GHG emissions from transportation are attributable to the use of fossil fuels. This is the reason why petroleum companies, or rather fossil fuel distributors, are obliged to compensate for a certain percentage of their emissions and to invest in lower-emission alternatives. This percentage is termed the GHG reduction quota and is set at a minimum of 9.25 percent for the year 2024. The level will then be raised continually, reaching 25 percent in 2030.
To meet these targets, the German Federal Immission Control Act (BImSchG) allows certain fulfillment options, such as biofuels, charging current or electrolytic hydrogen, to earn credit through quota trading, thus making it possible to generate attractive amounts of additional revenue. Companies which are subject to quotas pay distributors of renewable fuels for the emissions savings, enabling them to meet their targets and thereby avoiding a penalty of EUR 600 per metric ton of CO2. The 37th Ordinance on the Implementation of the Federal Immission Control Act (37th BImSchV), in particular, regulates renewable fuels of non-biological origin or RFNBOs while the 38th BImSchV, for example, governs charging current.
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Renewable fuels of non-biological origin In March 2024, the German parliament passed an amendment to the 37th BImSchV which covers RFNBOs. It makes a wide spectrum of different electrolytic fuels eligible under the GHG quota, including green hydrogen. Nevertheless, the new ordinance only affects fuels that are brought into circulation from July 1, 2024.
The provisions mostly apply to the production of RFNBOs and hence directly to producers. However, the companies that are eligible for the quota and entitled to earn revenue under the scheme are not the producers but the RFNBO distributors, which are generally the operators of RFNBO refueling stations. Furthermore, the use of RFNBOs in the refinery is also possible. In this case, the refinery itself is considered a distributor and is therefore eligible under the quota scheme.
Fundamentally, for green hydrogen and RFNBOs to count for the GHG quota, the power purchasing criteria need to be met as set out in the Delegated Regulation EU 2023/1184, in addition to a minimum GHG saving of 70 percent, calculated according to the provisions in the second Delegated Regulation EU 2023/1185. To provide evidence of this, production plants, including potential suppliers, have to be certified in a certification system recognized by the European Commission (e.g., REDcert EU or ISCC EU).
Only once certification has been obtained can the produced RFNBO be counted – provided the minimum saving of 70 percent is met. These rules apply as part of the German GHG quota for RFNBOs as used in the transport sector, but also set standards for RFNBOs as used in other EU states and in other end-use sectors (but without the possibility of earning quota revenue).
Once RFNBO certification systems have been recognized by the European Commission, the relevant market participants can seek certification. Prior to this, it is not possible to produce RFNBO and use it for the GHG quota. Pre-certifications are, however, possible and can speed up the certification process in certain circumstances but they are not legally valid in relation to the 37th BImSchV and also do not provide for retrospective recognition of renewable fuels that have been produced.
Partially renewable fuel The power purchasing criteria from EU 2023/1184 are replicated exactly in national law and can therefore likewise be found in the 37th BImSchV. A distinction needs to be made between fully and partially renewable fuel. Fully renewable fuel must generally meet all power purchasing criteria (see fig. 2), including the conclusion of a green power purchase agreement (green PPA), in other words a contract for the supply and purchasing of renewable electricity, for example between the operator of a wind farm and the operator of an electrolyzer. Partially renewable fuel is not required to meet these criteria. Thus the first stage is to check whether the fuel meets the full RFNBO classification under the ordinance.
An electrolyzer could, for example, purchase mains electricity and have to redeem only the electricity guarantees of origin in line with the average renewables share without fulfilling the other power purchasing criteria (whereby no biomass-based guarantee of origin is permitted to be used). In such cases, the average renewables share of the electricity consumed in Germany, known as RES-E, would be referenced two years before the year of production. If the renewables share were, for instance, 50 percent, a maximum of 50 percent of the fuel produced in this way would be recognized as RFNBO.
In practice, however, production via this kind of power purchasing alone is not possible in Germany since the relatively high emissions factor for mains electricity is taken into consideration and this usually means the minimum saving of 70 percent is not met. The assignment of total emissions to products such as heat and oxygen that have been recovered from the production plant could provide a remedy, like proportional production together with production from fully renewable fuel via the use of a green PPA.
Emissions can be assigned in the case of the electrochemical production of hydrogen, heat and oxygen, for example, using the economic value of the products. However, if all products have an energy value, emissions must be assigned according to the energy content. This improves hydrogen’s GHG footprint.
Fig. 2: Overview of current regulations
Fully renewable fuel Alongside partially renewable fuel, the production of fully renewable fuel is also possible. For a fuel to qualify as fully renewable, the criteria need to be met as set out in fig. 2 according to the particular power purchasing scenario, whereby 100 percent of the fuel produced can be counted as RFNBO. If a proportion of the production uses electricity that does not meet these requirements, the result would be proportionally less than 100 percent (depending on the renewables share in the power grid at the particular production site).
Example An electrolyzer purchases 70 percent of its electricity via a green PPA (Scenario 2 from fig. 2) and 30 percent on the spot market, including the redemption of electricity guarantees of origin. If the renewables share in the grid is 50 percent, then this would mean a maximum of 70 percent plus 15 percent, in other words 85 percent RFNBO; the remaining 15 percent could be marketed as low-carbon hydrogen but cannot be used for the GHG quota. Whether 85 percent is actually classed as RFNBO, will only be decided if it is clear whether the minimum saving of 70 percent is met for the overall amount.
The method for calculating this minimum saving and the GHG intensities of various RFNBOs is presented in the second delegated regulation and its annex (EU 2023/1185). It therefore also determines the starting value for emissions savings that can be marketed within the framework of the German GHG reduction quota. Here, the 37th BImSchV refers directly to the delegated regulation.
More clarity on revenue potential As a basic principle, all emissions throughout a specific fuel’s life cycle need to be recorded (well-to-wheel analysis). This includes the emissions from feedstock (raw materials, auxiliary materials and consumables) as well as, for instance, electricity, treated water, nitrogen or electrolyte, such as potassium hydroxide, the emissions resulting from production (e.g., leaks or waste treatment) and emissions caused by transportation via diesel tractor units and distribution at the refueling station. In comparison with fuels for combustion vehicles, no additional GHG emissions occur during use. In the case of hydrogen, however, emissions quickly build to a critical level during transportation and distribution since the diesel trucks used for carrying hydrogen cannot currently be replaced with sustainable forms of propulsion for legal reasons and the refueling stations generally are not permitted to use a green PPA, meaning the power consumed for compression and cooling has to be set off against a correspondingly poor emissions factor. As it stands, there are not yet standardized emission values, e.g., for compression and cooling at refueling stations or for production via electrolyzers with low capacities (roughly < 5 MWel).
Requirements for feedstock emissions In the case of hydrogen or RFNBOs classified as fully renewable, the electricity used for production is given an emission factor of 0 kg CO2/GJ. However, there are also requirements for hydrogen that is only partially renewable. Here, use is made of the average GHG intensity of mains power for the particular EU member state in which the hydrogen production plant is situated. Yet since all RFNBOs have to demonstrate a GHG saving of at least 70 percent compared with the fossil-fuel reference, it is currently possible to qualify with relatively poor mains electricity values only under certain conditions, for instance the assignment of emissions to any commercially used byproducts such as heat and oxygen or proportional production in compliance with power purchasing criteria (via a green PPA). In addition to electricity, all other feedstocks need to be incorporated into the emissions calculation. The expertise of specialist consultants can be called upon for drawing up certifiable calculation methods and carrying out an assessment of the sustainability criteria.
The GHG intensity for the RFNBO (feedstock, production, transportation and distribution) is permitted to be a maximum of 28.2 kg CO2/GJ, after taking into account the minimum saving, in order to qualify for the GHG quota. Quota trading requires that the “last interface” issues proof of sustainability for the relevant RFNBO quantities produced and transferred to suppliers. Only the last interface is entitled to issue this proof. Normally this is the producer which manufactures the fuel to the quality required for use in transport.
This proof of sustainability contains, among other things, the confirmation that all power purchasing criteria and GHG requirements have been met. It also details the GHG intensity of the RFNBO which has been calculated for the particular designated use. For this, the last interface again uses the GHG intensities of possible upstream interfaces and adds to these its own emissions, including downstream transportation and distribution.
Proof of sustainability can only be issued if there is a valid certificate for the production site which has been supplied by one of the certification systems recognized by the European Commission. Proof of sustainability and certificates must also be set up for verification purposes in the Union Database for RFNBOs and in the register of the relevant authority of the German Environment Agency. Both registers are currently under construction.
Fig. 3: From GHG intensity to GHG reduction quantity
This production-specific GHG intensity of the RFNBO can then be used as a basis for calculating the GHG reduction quantity for the GHG quota. Fig. 3 above assumes a GHG value of 20 kg CO2/GJ H2, which would work out at a reduction quantity of almost 28 kg CO2 per kg H2 (incl. triple accounting).
This reduction quantity falls over time, however. If the GHG reduction quota increases over time – as foreseen by legislators – the reduction figure would decrease as a result of green hydrogen since even this type of hydrogen has to meet the reduction quota. Additional revenue from green hydrogen can be deduced depending on the achievable market prices per metric ton of CO2: For example, if the market price is EUR 130 per ton of CO2 (no cap quota), this can generate additional revenue of around EUR 3.60 per kg H2 in 2024.
For quota revenue to be paid, in general the quota transfer needs to have taken place previously through the relevant biofuel quota center at the main customs office. Here, specialist quota service providers can take care of quota trading, supply quota trading agreements and provide support to ensure formal requirements and application deadlines are met. In addition, trading models with an index price or fixed price for RFNBOs can be set if requested (including over several years), thus ensuring secure and predictable quota revenue.
Author: David Benjamin Pflegler, GT Emission Solutions GmbH, Kleve, Germany
Trade shows are short-lived affairs involving a lot of effort and energy for just a few hours in the spotlight, not to mention a heap of materials that need subsequent disposal. This extravagance often sits awkwardly alongside the focal areas of the events themselves, particularly when sustainable themes like renewable energy and hydrogen are on the agenda and the emphasis is on resource conservation not consumption. Keen to highlight – and where possible redress – this incongruity, Benjamin Low has taken action by founding the Sustainable Trade Events Partnership (STEP).
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H2-international: Mr. Low, you’ve had many years of experience running trade fairs so you know full well how material intensive and energy intensive such exhibitions are. Why did you decide to “switch sides,” as it were?
Low: (laughs) I’ve still not switched sides, but it’s precisely because I know the challenges here and am still actively involved in the exhibition sector that I had the feeling I could do something positive. All industries are facing the challenge of how to move toward “net-zero,” and the road ahead is still a long one. I’m convinced that, when you’re part of an industry, you can be much more effective as you’re not looking at the challenges from the outside, and you can talk to people very differently.
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H2-international: So would it be true to say you intend to transform the exhibition sector?
Low: The exhibition sector is a huge industry with many stakeholders. For that reason I tend to shy away from saying that we can transform the entire sector, but we certainly want to draw attention to the issue and put things right. For the first time, we’ve set our sights on the energy trade fairs in Germany and Europe as we have really good contacts here and enjoy a level of trust, but also, of course, because sustainability always plays an important role here as a trade fair theme. Therefore it’s only right and proper that trade fairs reflect this in the way are built and run.
H2-international: In just a few words – what is it all about exactly?
Low: STEP was launched by me together with the international market research and certification institute EUPD Research to create an integrated platform for exhibition organizers, exhibitors, associations and media representatives who want to actively champion carbon-neutral and waste-free trade fairs and conferences. We like to say that STEP is the overarching canopy supported by the three pillars of our work: the exhibition organizers, exhibitors and service providers. The foundations for the three STEP pillars are the certificates and awards. This is where evaluation standards are developed with the participating stakeholder groups and these form the basis for providing certificates and awards to the trailblazers of the sustainable exhibition sector.
H2-international: But how does that become a business model?
Low: Business is, and has never been, the primary focus, but we still need to refinance ourselves, as otherwise it doesn’t make any sense to invest so much time and energy in the project. That’s why we offer memberships and consultancy to exhibitors and exhibition organizers as well as certifications to sustainable pioneers and service providers. This is where the experience garnered by EUPD Research over more than 20 years is extremely valuable.
H2-international: You’re currently testing the waters at The smarter E in Munich. How’s it going?
Low: It’s really interesting – we’re learning a lot! It’s the first time we’ve run the Sustainable Exhibitor Award, and it’s exciting to see where companies and exhibitors are currently at. All exhibitors from The smarter E can take part in our Sustainable Exhibitor Quick Check survey. Once they have achieved the minimum score, they need to submit supporting documents to complete the process. Successful applicants will then receive the Sustainable Exhibitor logo at The smarter E. We have two different levels: silver and gold standard.
H2-international: What’s next on the agenda?
Low: We’re talking to a couple of very well-known organizers and exhibition brands and would very much like to carry forward our consultancy and award services to other trade fairs and exhibition sites. We see the awards as a good opportunity to shine a light on this issue as the process gives you an overview of where you are and what there is still to do. We haven’t got a hydrogen trade fair lined up yet but we hope to change that in the near future.
A moment ago he was among us – now he is no longer. Sven Jösting suddenly passed away on the evening of May 10, 2024. The publisher Hydrogeit Verlag, the HZwei and H2-international team and, with us, the H2 community were completely surprised by the sad news that the compassionate stock market expert is no longer with us.
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At first, it was surprising that the lively Hamburg native was not heard from for a few days and didn’t show up for fixed appointments. A short time later, in addition to the growing worries, came the news that Jösting was in a hospital. Then, things happened very quickly, and it became clear that things weren’t looking good – until they said he had died.
Shortly before, he had been seen at events in his usual relaxed manner – the way he will always be remembered by us.
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With Sven Jösting, H2-international has lost a valuable colleague, who for almost exactly ten years had contributed detailed and comprehensive reports on listed companies to every issue as a freelancer. He has represented our magazine at numerous events and infected many people with his enthusiasm for hydrogen and fuel cell technology.
Over the many years, Sven has dedicated himself to the German magazine HZwei and the English e-journal H2-international as well as a big audience of online fans, who will miss him as much as we will. Over time, his in-depth expertise on stocks was supplemented by increasingly comprehensive specialist knowledge of the technical details and economic context, such that his magazine contributions were recently around ten pages long.
Proven stock expert
Despite a preference for North American stock exchange companies, he always incorporated other perspectives – be it from his trips to China and India or from interviews with various industry leaders. In particular, via his “game account,” his stock portfolio BZvision, he clearly illustrated which trading options were possible. Due to his engaging, personal writing style, which was sometimes quite a challenge for a proofreader, his texts always had something lively about them – completely different from the otherwise often quite sober stock market reports from other analysts.
Even if Sven’s enthusiastic nature may have seemed a bit too optimistic to some investors, he may have made a significant contribution to the ramp-up of the currently growing H2 economy.
Sven Jösting (63) for many years was a member of the hydrogen association Wasserstoff-Gesellschaft Hamburg e.V. He devoted himself to the topic of hydrogen and fuel cells at the beginning of this millennium by bringing together various players in the industry and initiating strategic partnerships. He acquired his stock market knowledge through his 15 years of working as a broker for well-known US investment banks, where his focus was always on companies that dealt with renewable energies and H2 and FC technology as well as environmental technologies. He was also for around 37 years a member of and associated with the network for sustainable economies B.A.U.M. e.V.
In recent years, he had his own office on the premises of the ship transport company F. Laeisz GmbH with Nikolaus W. Schües, the grand seigneur of not only the Hamburg H2 scene.
Fig. 2: Sven was in close contact with numerous H2 greats – here with Ballard CEO Randy MacEwen in Hamburg
With Sven Jösting, we lost a visionary who always cheerfully believed in the potential of H2 and FC technology and never tired of sharing his enthusiasm with others. He leaves a big gap that we won’t be able to fill easily. All the greater is our motivation to leverage the potentials repeatedly described by him. It’s a shame he can no longer see how the hydrogen economy is further developing.
Market accessibility problems for German applicants
When the European Hydrogen Bank’s first pilot auction (Innovation Fund Auction IF23) was announced on Sept. 5, 2023, it drew much attention. April 30, 2024, then saw the publication of the results for the pilot auction, for which the European Union was making EUR 800 million of support available. Seven projects from northern and southern Europe were successful in obtaining funding. The aim of the hydrogen auction is to accelerate the rollout of green hydrogen and send price signals by narrowing the cost gap between green and fossil-based hydrogen.
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The EU’s funding offer was met with particular interest by German hydrogen producers at a time when hydrogen funding in Germany has been greatly reduced due to the ruling by Germany’s constitutional court on the country’s climate and transformation fund. The average bid for German projects was around 108 percent above the average price bid for the seven successful European projects. As part of the pilot auction, Germany also provided an extra EUR 350 million to be channeled exclusively into German projects. German bidders are therefore eagerly awaiting the outcome of the auction for German funding. Another funding call is planned for the end of 2024.
Funding environment for electrolysis in Germany Over the past few years, Germany has offered extensive funding programs for hydrogen projects, especially in the mobility area. The second phase of Germany’s national hydrogen and fuel cell innovation program (NIP 2) played a key role in supporting the research, development and rollout of hydrogen and fuel cell technologies. It focused particularly on raising technology readiness and competitiveness in the transportation sector. Major projects, such as those promoting fuel cell vehicles and hydrogen refueling stations, received financial support which was then significantly scaled back following the decision by the constitutional court on the climate and transformation fund.
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Parallel to this, the HyLand scheme has provided funding for the development and implementation of hydrogen technologies in various regions of Germany. In its initial phase it helped 25 regions establish a hydrogen economy. These were then joined by 15 HyStarter and 15 HyExpert regions in the second phase.
Positive developments in the funding environment were also seen at a European level. The Clean Hydrogen Partnership, successor of the Fuel Cell and Hydrogen Joint Undertaking (FCH JU) under Horizon 2020, awarded nine Hydrogen Valleys with a total of EUR 105.4 million, thereby subsidizing the production of at least 13,500 metric tons of green hydrogen a year.
Another important mechanism has been the Important Projects of Common European Interest or IPCEIs in the area of hydrogen. This program backs innovative and strategically significant key technologies along the entire value chain, from production through application in industry and mobility. In Germany, 62 large-scale projects have been selected to receive over EUR 8 billion in funds from German central or regional government.
These developments illustrate a trend whereby Germany has drastically decreased its funding due to the budgetary crisis while the European Union has increased its financing of hydrogen technologies. This is why the Innovation Fund Auction 23 was greatly anticipated by many potential hydrogen producers in Germany.
The Innovation Fund Auction (IFA) The Innovation Fund Auction (IF Auction) is a funding mechanism which is part of the European Innovation Fund. The Innovation Fund is the biggest funding pot for decarbonizing the EU and will supply a total of around EUR 40 billion in assistance between 2020 and 2030. The money is sourced from the revenue generated by the European Union Emissions Trading System or EU ETS. To stimulate hydrogen rollout in the European Union, the EU Commission launched the European Hydrogen Bank, known as the EHB, in 2022 as part of the Innovation Fund. This financing instrument is designed to target and support the establishment of hydrogen supply and demand. Dedicated funding for the production of renewable hydrogen within the EU is provided through the Innovation Fund Auction,
which works by subsidizing each kilogram of hydrogen produced (EUR/kgH2). This sets the funding mechanism apart from most other European and German funding arrangements which largely provide grants toward the capital outlay on electrolyzers, with operating costs ineligible for support (e.g., under NIP 2).
The cost subsidy equates to the bid price which potential funding recipients have to submit as part of the allocation procedure for their projects. So as to rank individual funding amounts, participants were made aware that the maximum possible bid price in the first funding call for the IF23 Auction (November 2023 to February 2024) would be capped at 4.50 EUR/kgH2 – any bids above this ceiling were to be excluded.
The funding amount sought by each bidder is calculated from the bid price per kilogram of hydrogen multiplied by the quantity of hydrogen that is planned to be produced over the project’s lifetime (usually 10 years). Funding is allocated via an auction in which the lowest bid prices – similar to the merit order principle – are awarded funding until the available budget for the particular funding calls has been exceeded (see fig. 1).
The available budget in the first round of the funding call was EUR 800 million. In addition, EU member states were free to introduce extra funds to support further projects in their own countries. For instance, Germany supplemented the initial funding call with an additional sum of EUR 350 million which could be awarded to the best-placed German projects that had been overlooked.
The terms of participation for bidders are complex and can vary from one funding call to another. One key condition is that only hydrogen manufactured according to European requirements for the production of renewable fuels of non-biological origin (RFNBOs) is eligible. An added condition for participation in the first tendering round was a minimum electrolyzer capacity for the bidder of 5 megawatts.
Pilot auction results The first auction for the EUR 800 million in EU funding concluded at the end of April 2024. In all, EUR 720 million was awarded to seven projects for the production of renewable hydrogen (see fig. 2). The winning bids ranged from EUR 0.37 to EUR 0.48 per kilogram of hydrogen. The weighted average bid was EUR 0.45 per kilogram of hydrogen.
Fig. 2: Overview of funded projects
What is notable is that all successful projects are situated on the Iberian Peninsula and in Scandinavian countries. One of the primary reasons for this is the availability of cheap renewable electricity in those locations (solar power in Spain and Portugal and hydropower in Scandinavia).
The bids put forward by German projects were priced much higher than the successful bids. A rough analysis of the bid summary produced a weighted average bid of around EUR 1.53 per kilogram of hydrogen for the German proposals. This is 108 percent higher than the weighted average of the successful bids. There were also German projects that submitted bids of around EUR 0.60 per kilogram of hydrogen. Perhaps an indication that in Germany, too, certain off-takers are prepared to pay a premium for green hydrogen. The majority of German applications, however, needed a subsidy of between EUR 1.20 and EUR 3.87 per kilogram of hydrogen.
The high bid prices from Germany can be largely explained by looking at example production costs (see fig. 3). With production costs of EUR 8.50 per kilogram of hydrogen, the average successful bid price would result in a cost reduction of only around 5 percent. An important factor in the cost of production is the proportional cost of electricity, accounting for approximately half the cost of producing 1 kilogram of hydrogen, which is due to the high energy prices in Germany.
Fig. 3: Example hydrogen production costs for electrolysis in Germany
Still outstanding are the results for the auction for the EUR 350 million that Germany is awarding to the best-placed, overlooked German projects. The results of this auction and details of which German proposals have been successful will likely yield further fascinating insights into the ramp-up of the hydrogen economy in Germany.
Outlook The next tendering round (IF24 Auction) is expected to follow at the close of 2024. It is advisable for interested parties to prepare their application documents in good time since initial stakeholder talks between the EU and potential applicants began back in June 2024 and the complexity of the application process is not to be underestimated.
The EU has already published initial information on the configuration of the funding scheme, or rather the adjustments to it. A significant change is the lowering of the maximum acceptable bid price from 4.50 to 3.50 EUR/kgH2. For this second funding call, German projects will need to develop strategies that will enable them to enter the auction with lower bids. Should Germany again provide additional resources for homegrown projects for the next funding call, this would create further opportunities. Consequently, there is a great deal of intrigue surrounding the forthcoming announcement of which German projects will receive backing from the German funding pot.
Authors: Nikolas Beneke, Shaun Pick, both from BBH Consulting AG
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