The European Commission has approved, under EU State aid rules, a €900 million ($1 billion) German scheme to support investments in the production of renewable hydrogen in non-EU countries, which will be then imported and sold in the EU.
The scheme, called ‘H2Global’, aims at meeting the EU demand for renewable hydrogen that is expected to significantly increase in the coming years, by supporting the development of the unexploited renewable resource potential outside the EU. It will contribute to the EU environmental objectives, in line with the European Green Deal, without unduly distorting competition in the Single Market.
The Commission assessed the scheme under EU State aid rules, in particular the 2014 Guidelines on State aid for environmental protection and energy. The Commission found that the aid is necessary and has an incentive effect, as the projects would not take place in the absence of the public support.
Furthermore, the Commission found that aid is proportionate and limited to the minimum necessary, as the level of aid will be set through competitive auctions.
Finally, it found that the positive effects of the measure, in particular on the environment, outweigh any possible negative effects in terms of distortions to competition. On this basis, the Commission concluded that H2Global is in line with EU State aid rules.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €900 million German scheme will support projects leading to substantial reductions in greenhouse emissions, in line the EU’s environmental and climate objectives set out in the Green Deal.
It will contribute to addressing the increasing demand for renewable hydrogen in the Union, by supporting the development of this important energy source in areas of the world where it is currently not exploited with a view to importing it and selling it in the EU. The design of the scheme will enable only the most cost-effective projects to be supported, reducing costs for taxpayers and minimising possible distortions of competition.”
Under the H2Global scheme, a new Hydrogen Intermediary Network Company (to be known as Hint.Co) would buy and sell the imported green hydrogen. It would issue requests for proposals for the production of renewable H2, or derivatives such as green ammonia, green methanol and e-kerosene, with individual projects outside the EU then bidding into tenders, with Hint.Co awarding ten-year hydrogen purchase agreements (HPAs) to the winners. All the bidders would need to contribute to the construction of new renewables projects, as H2 made from existing energy supplies are not allowed under the scheme.
The state-owned company would then tender one-year hydrogen service agreements (HSAs) to potential off-takers in Germany such as steel, chemicals or transport companies.
Hint.Co would offset the added cost of using green hydrogen — compared to cheaper grey H2 made from unabated natural gas — in a similar way to Contracts for Difference. In other words, the intermediary would pay the difference between the lowest bid price for H2 production and the highest selling price for hydrogen consumption.
The company would also act as a guarantor for both the supply and demand of green hydrogen, to help enable cheap finance for the projects.