The European Commission has authorized a €900 million German proposal to promote investments in renewable hydrogen production in non-EU countries, which will subsequently be imported and sold in the EU, under EU State aid laws.
The ‘H2Global’ initiative intends to fulfill the EU demand for renewable hydrogen, which is predicted to rise dramatically in the future years, by promoting the development of untapped renewable resource potential outside the EU. It will help the EU achieve its environmental goals in accordance with the European Green Deal, while without distorting competitiveness in the Single Market.
“This €900 million German program will promote projects leading to large reductions in greenhouse emissions, in keeping with the EU’s environmental and climatic objectives set forth in the Green Deal,” said Executive Vice-President Margrethe Vestager, who is also in charge of competition policy. It will help meet the Union’s growing need for renewable hydrogen by promoting the development of this essential energy source in places where it is currently underutilized, with the goal of importing and selling it in the EU. The scheme’s framework will ensure that only the most cost-effective projects are funded, lowering public expenses and eliminating potential market distortions.”
Germany informed the Commission of its plans to launch the ‘H2Global’ programme, which would assist the production of renewable hydrogen in non-EU countries for import and sale in the EU. Starting with the award of the first contract under the program, the scheme will operate for ten years with an anticipated expenditure of €900 million.
Hydrogen may be made from renewable resources by electrolyzing water with power generated from renewable sources. Because renewable hydrogen emits nearly no greenhouse gases during production, it can result in significant savings in greenhouse gas emissions when it replaces a fossil fuel or a fossil-based chemical.
A special-purpose entity called HINT.CO will manage and implement the scheme. On the supply side (green hydrogen generation), this middleman will execute long-term purchase contracts, and on the demand side, short-term resale contracts (green hydrogen usage).
Competitive tenders will be used to grant the help. A double auction mechanism will be used to decide prices on the purchasing and selling sides, with the lowest bid price for hydrogen production and the highest selling price for hydrogen consumption both receiving a contract.
To participate in the tenders, producers of renewable hydrogen and hydrogen derivatives such as green ammonia, green methanol, and e-Kerosene must adhere to the updated Renewable Energy Directive’s sustainability standards for renewable hydrogen and hydrogen derivatives production (RED II). They will also be required to contribute to the deployment or financing of the additional renewable electricity required to power the scheme’s hydrogen-producing electrolysers.
On the basis of talks with the Commission, the German authorities will specify interim criteria to be used in the auctions if part of the EU regulatory framework for renewable hydrogen under the Renewable Energy Directive is not in operation at the time of the auctions.
The plan was evaluated by the Commission in accordance with EU State assistance laws, including the 2014 Guidelines on State Aid for Environmental Protection and Energy.
The Commission determined that the aid is required and has an incentive impact since the projects would not be implemented without it. This is due to the fact that carbon pricing and other regulatory restrictions do not completely internalize environmental costs. This is due to the fact that renewable hydrogen is substantially more expensive to create and consume than hydrogen derived from fossil fuels. Furthermore, because the quantity of help would be determined through competitive auctions, the Commission determined that aid is equitable and confined to the bare minimum required. Finally, given the availability of competitive bidding processes in which a large number of prospective enterprises can engage, the measure’s good impacts, particularly on the environment, outweigh any potential negative implications in terms of competition distortions.
On this basis, the Commission determined that H2Global complies with EU State assistance standards by supporting initiatives that cut greenhouse gas emissions in accordance with the European Green Deal while avoiding undue competitive distortion.
