European Commission Gives Green Light to German State Aid Scheme for Hydrogen Production

Recently, the European Commission granted approval under EU State aid regulations to a €350 million German initiative aimed at enhancing the production of renewable hydrogen. This scheme operates through the European Hydrogen Bank's innovative "Auctions-as-a-Service" tool. Aligned with the objectives outlined in the 'REPowerEU' initiative and the 'European Green Deal Industrial Plan', the scheme is designed to further diminish reliance on Russian fossil fuel imports and facilitate the transition towards green energy, the commission has affirmed.

The approved scheme is poised to support the establishment of up to 90 MW of electrolysis capacity, with projections indicating that it could incentivize the production of approximately 75,000 tonnes of renewable green hydrogen within Germany. The country asserts that this endeavor will play a pivotal role in realizing its ambition of attaining at least 10 GW of domestic electrolysis capacity by 2030. Additionally, it aims to contribute towards the EU's overarching objective of achieving a minimum of 42.5 percent renewable energy production by 2030, with aspirations to reach the 45 percent mark.

Margrethe Vestager, Executive Vice-President responsible for competition policy at the European Commission, hailed the significance of this €350 million scheme as a significant stride towards advancing renewable hydrogen development. She emphasized that the scheme is structured to bolster the most cost-effective projects within Germany, thereby curbing costs for taxpayers and mitigating potential distortions of competition. Notably, Germany stands as the inaugural Member State to leverage this auction mechanism, which expedites the allocation of public support within this pivotal sector.

As per reports from the European Commission, the aid will be dispensed through a competitive bidding process overseen by the European Climate, Infrastructure, and Environment Executive Agency (CINEA). The bidding process, which concluded on 8 February, is presently undergoing evaluation for projects spanning across all EU Member States.

Under the German scheme, support will be extended to companies intending to erect new electrolyzers within the German territory. This support will be disbursed in the form of a direct grant per kilogram of green H2 produced, with a maximum duration of ten years.

It is noteworthy that beneficiaries must demonstrate adherence to EU criteria governing the production of renewable fuels of non-biological origin (RFNBOs). This entails substantiating contributions towards the deployment or financing of additional renewable electricity requisite for the production of hydrogen, which receives backing under the scheme.

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