EUIF Auctions: Novel funding mechanism for hydrogen
Hydrogen is vital for reaching Europe’s climate goals, hence substantial EU investment in hydrogen infrastructure is crucial for maximising its potential in industry and transport. Clear production capacity targets are outlined in key strategies like RePowerEU, the European Green Deal, and communications from the European Hydrogen Bank. Thus, the EU Innovation Fund (EUIF), is exploring Auctions as a novel funding mechanism with the launch of the EUIF23 Auction call for RFNBO Hydrogen. Keep reading as Susana Santos, Innovation Consultant at Innovayt, takes you through the latest in EUIF Auctions.
What are EUIF Auctions?
While the usual EUIF calls focus on financing projects before they start operations, the EUIF Auctions will support projects after they enter into operation, bridging the cost gap between renewable and fossil hydrogen. The objective of the EUIF Auctions is to put Europe’s net-zero industry in the lead by fostering price discovery, creating markets, and de-risking projects within the European Economic Area (EU and Iceland, Liechtenstein, as well as Norway).
What is RFNBO Hydrogen?
RFNBO is short for Renewable Fuels of Non-Biological Origin, so-called renewable or green hydrogen, i.e., hydrogen that is only produced from additional electricity from renewable sources (other than biomass). RFNBOs will only be counted towards the EU’s renewable energy target if they have over 70% greenhouse gas (GHG) emissions savings compared to fossil fuels.
The EUIF Auctions offer greater flexibility in hydrogen utilisation. The produced RFNBO hydrogen can be self-consumed (in integrated projects) or sold to any customers.
Need-to-know about the first EUIF23 Auction for RFNBO Hydrogen
8 February 2024 at 17:00 (CET).
€800 million for new RFNBO hydrogen capacity.
Fixed premium in €/kg of RFNBO hydrogen produced over 10 years (with semi-annual payments and with a maximum grant request of €266.7 million). The maximum funding per project is calculated as follows:
[Bid price in EUR/kg] * [expected average yearly volume of production in kg/year] * 10
Evaluation and award procedure
- Ranging according to bid price (lowest to highest).
- Maximum grant amounts that fit into the overall budget.
- Assessment of Relevance and Quality.
The bid price is therefore of central importance in selecting the funded projects. Projects will be ranked based on price with a maximum bid price of 4.5 €/kg of RFNBO Hydrogen produced. The bid price per unit is expected to cover the premium required by the producer:
[Bid price per Unit] = [expected revenues from the sale of one unit] – [unit’s levelised costs]
Cost elements like production, sale, transport, and storage can be priced into the bid.
Priority order for proposals with the same score
- Smaller support requirement.
- Proposals located in countries with fewer funds awarded in previous calls.
- Shorter time until entry into operation.
Some important requirements
- Projects need to be mature enough to enter operation in less than 5 years after the grant signature (before November 2029).
- Projects need to target a new electrolyser capacity with a minimum size of 5 MWe. This installation must take place at one location per project (pooling is not allowed).
- Both individual applicants and small consortia are eligible to participate.
The application documents consist of:
- Administrative information and summarised budget (Part A).
- Project contribution to EU programme KPIs (Part C).
- 50-page technical description of the project (Part B).
- Mandatory annexes and supporting documents include a detailed budget table/calculator (Financial Information File (FIF) with the bid); participant information; timetable; renewable electricity sourcing strategy; off-take and price hedging strategy; equipment procurement strategy; permits, licences, and authorisations; as well as completion guarantee letter of intent (at proposal stage) and completion guarantee (during GAP).
Consistency among the different documents is key! Innovayt can support you from the very beginning, from the conception of your innovation to the preparation of the application, and beyond.
One last note
The first EUIF23 Auction for RFNBO call will be used to gather lessons learnt and discuss with stakeholders, i.e., as a learning experience and to gain feedback. Stay tuned for changes in the second round of auctions that is already planned for spring 2024.