European Hydrogen Bank: the Commission announces EUR 3 billion and a pilot auction in autumn 2023

On 16 March 2023 the European Commission presented the concept of the European Hydrogen Bank, an instrument intended to accelerate the development of the renewable hydrogen market in the EU. Under the initial programme, financed from the Innovation Fund, around EUR 3 billion is to be available over three years, and the first pilot auction, as announced, is to take place in autumn 2023. The Bank is to support the goals of the REPowerEU plan, including the production of 10 million tonnes of renewable hydrogen in the EU and the import of a further 10 million tonnes by 2030.

What is changing

The European Hydrogen Bank is not a financial institution in the classic sense but a set of support mechanisms. It rests on several pillars: auctions for a fixed premium on the price of renewable hydrogen produced in the EU, market creation (matching producers and buyers) and an "international window" intended to support imports. The support is meant to reduce the cost gap between renewable hydrogen and fossil hydrogen, which today is many times cheaper.

In the communication the Commission stresses that renewable hydrogen is needed above all where electrification is difficult: in industry (for example the production of steel, fertilisers and chemicals) and in heavy-duty, maritime and aviation transport.

Significance for the industry in Poland

Poland is one of the largest hydrogen producers in the EU, but mostly from natural gas, chiefly for the chemical industry. The transition to renewable hydrogen requires electrolysers, electricity from renewable energy sources (RES) and infrastructure. The biogas industry enters this discussion as a potential partner: biogas and biomethane can be a feedstock for producing hydrogen from biomass (reforming), and by-products, such as CO₂ from upgrading, can be used in fuel synthesis. Such hydrogen, however, is subject to separate criteria (bioenergy sustainability criteria) and not to the RFNBO rules.

For Polish investors, the detailed conditions of the auction will matter: whether hybrid projects can take part, what emission levels will be required and how grid charges will be settled.

What an auction might look like

In a fixed-premium auction model, the hydrogen producer submits a bid stating the subsidy it expects per kilogram of fuel produced, and the lowest bids win. Payment is made after actual production, which limits the risk of excessive support. Projects submitted to such auctions must demonstrate compliance with the RFNBO definition and technical readiness. For market participants from Poland, access to RES electricity, the location of the electrolysers and on-site hydrogen offtakers will be key.

What next

The Commission will begin preparations for the pilot auction and discussions with Member States on national funding. For biogas companies it will be important to distinguish between renewable hydrogen from electrolysis and hydrogen from bioenergy, because the available support instruments depend on it.