The European Union’s Commitment to Renewable Hydrogen Production
The European Union is forging ahead in its pursuit of renewable hydrogen production, taking a significant step with the recent signing of grant agreements for six projects selected under the 2024 Innovation Fund Hydrogen Auction. This initiative marks a crucial investment in sustainable energy, providing a total of €270.6 million in funding sourced from the EU Emissions Trading System (ETS).
Located across Spain, Finland, and Norway, these selected projects aim to decarbonize particularly challenging sectors such as heavy industry and transport. Notably, two of the projects are dedicated to maritime applications and have collectively secured more than €35 million, emphasizing the EU’s commitment to transforming maritime energy use.
Growing the Hydrogen Market in Europe
Operating under the European Hydrogen Bank, the Innovation Fund Hydrogen Auction aims to scale hydrogen production and cultivate market integration throughout Europe. Its primary goal is to replace traditional fossil fuels, which include natural gas, coal, and oil, especially in sectors that cannot transition to electricity alone.
The fund employs a market-based mechanism to offer a fixed premium per kilogram of renewable hydrogen produced. This support is crucial for bridging the financial gap between production costs and the prices that industrial users currently bear, thereby mitigating investment risks and simplifying the administrative processes for project developers.
All hydrogen produced through this initiative qualifies as renewable fuel of non-biological origin (RFNBO), adhering to stringent EU sustainability criteria.
A Promising Climate Impact
The collective output of the six projects is anticipated to be around 500 kilotons of renewable hydrogen over a decade. This exertion is projected to prevent nearly 3.4 million tonnes of CO₂ emissions, based on careful estimations derived from existing ETS benchmarks.
The hydrogen generated will primarily cater to the chemical industry and mobility sectors, with a particular focus on decarbonizing maritime transport and heavy-duty vehicles. These areas remain some of the most difficult to decarbonize, underscoring their central role in the EU’s goals for climate neutrality.
Diverse Projects Across Europe
With a combined electrolyser capacity of 381.25 megawatts, these projects vary in scale from 5 to 200 megawatts electric (MWe). Grant allocations also display significant variance, with amounts ranging from €1.8 million for smaller initiatives to €135.5 million for the largest project in the portfolio.
Bidding prices during the Innovation Fund Hydrogen Auction exhibited a spectrum from €0.33 to €1.88 per kilogram of renewable hydrogen, reflecting differences in project size, location, and technological method. The most competitive bid came from a large-scale initiative in Finland, while the higher bids were associated with smaller and maritime-focused projects situated in Norway.
Innovative National Funding Structures
In tandem with EU-level investments, countries like Spain, Lithuania, and Austria have allocated up to €836 million in national funding through the Innovation Fund’s Auctions-as-a-Service mechanism. This structure enables Member States to support additional promising projects that align with auction criteria, even if they couldn’t be funded directly due to budgeting constraints.
By leveraging the EU auction platform, these countries simplify the process of awarding national funding while ensuring consistent evaluation standards across the board. Details about projects funded under this mechanism will be revealed by the respective national authorities in due course.
Looking Ahead
The European Climate, Infrastructure and Environment Executive Agency will play a crucial role in overseeing the development of the selected projects, ensuring compliance with Innovation Fund requirements as they progress towards financing and construction milestones.
To maintain momentum, projects are required to secure financial closure within 2.5 years and commence renewable hydrogen production within 5 years. Upon becoming operational, they will continue to benefit from the fixed premium for up to a decade, based on verified hydrogen output.
As these initiatives unfold, the European Hydrogen Bank is already gearing up for the next phase. The third Innovation Fund Hydrogen Auction, launched in December 2025, has a hefty budget of €1.3 billion, with proposals due by 19 February 2026.