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European Hydrogen Bank
The European Hydrogen Bank is one of key initiatives announced by the European Commission for 2023. Its establishment was announced in the State of the European Union address on 14th September 2022 by the Commission President. The aim of the Bank is to bridge the investment gap between supply and demand of renewable hydrogen to achieve the REPowerEU targets. The main framework of the Bank was detailed in a communication issued in March 2023.
The Hydrogen Bank is an instrument implemented by DG CLIMA, consisting of two new financing mechanisms to support RFNBO hydrogen production: one for production within the EU and one for international production (essentially referring to imports). The Bank aims to unlock private investments in the hydrogen value chain by connecting supply with demand from European off takers, acting as a steppingstone for a global renewable hydrogen market. The Bank governance is structured into four pillars: the domestic financing mechanisms, the international financing mechanism, transparency and coordination for demand visibility, and lastly coordination and facilitation of financial blending.
Domestic market
Under the first pillar, the goal is to support the creation of a domestic market through an auction-based mechanism under the EU Innovation Fund. The first auction (IF23 Auction) was launched in November 2023 and ran until February 2024, with the following objectives:
- Connect EU domestic renewable hydrogen supply and demand;
- Reduce the cost-cap between renewable and fossil hydrogen;
- Enable price discovery and market formation for hydrogen;
- De-risk European hydrogen projects;
- Reduce administrative burdens and costs due to short, lean and transparent procedures.
The auction had as its aim to support RFNBO production (as defined in the Renewable Energy Directive), with the bid price as the requested unit contribution (fixed premium) per kg of RFNBO hydrogen production, which will be paid for a maximum of 10 years. Only projects with a minimum installed capacity of 5 MW electrolysis were eligible. The budget of the first auction was €800 million.
On 30 April 2024, the results of the European Hydrogen Bank’s first competitive bidding were released. Seven renewable hydrogen projects across the EU will receive a total of 720 € million, with a plan to produce 1.58 million tonnes of renewable hydrogen over ten years, avoiding more than 10 million tonnes of CO2 emissions.
After consulting the hydrogen sector, the European Commission officially launched the second European Hydrogen Bank auction in December 2024, significantly increasing the total budget to approximately €1.2 billion. RFNBO hydrogen producers could bid for a fixed-price premium of up to €4 per kilogram of hydrogen produced over 10 years.
The auction was structured into two baskets: a general basket (€1 billion) and a newly introduced Maritime basket (€200 million). Results of this auction are anticipated to be presented in Q2 2025.
In parallel, with the launch of the Clean Industrial Deal, a third call of the Hydrogen Bank is expected towards the end of 2025, with an additional €1 billion budget. This will complete the €3 billion total funding that President von der Leyen promised to kickstart the Hydrogen Bank initiative.
Under the domestic pillar, the Bank can also be used as an Auction-as-a-Service for Member States, enabling them to use their own resources for projects on their territory by through the established EU-wide auction mechanism. Germany became the first EU country to participate in such a scheme and will make €350 million available for the Hydrogen Bank auction. Although Germany was unable to fund any projects due to design flaws, these issues appear to have been addressed by DG CLIMA in recent months. The Auction-as-a-Service (AaaS) model will channel further funding contributions from EU Member States, including Austria (€400 million), Spain (€400 million), and Lithuania (€36 million), bringing the total financial capacity of the Hydrogen Bank second call to around €2 billion.
Supporting International Hydrogen Production
The aim of the international pillar of the hydrogen bank is to support partner countries to accelerate their transition towards climate neutrality and contribute to their broader social and economic development. The Commission is still developing the design of the international leg of the Bank.
According to recent announcements, the EU plans to launch a platform for the joint purchase of hydrogen and other critical materials in September 2025. The new platform will succeed the AggregateEU joint purchasing scheme for natural gas, which will conclude in March 2025 after a final round of matching suppliers and customers.
The upcoming hydrogen joint purchasing scheme will require purchase agreements to be reported, while keeping the prices confidential. Unlike AggregateEU, where participation was mandatory for Member States, the new scheme will be voluntary.
However, several Member States are already advancing their own initiatives to match supply and demand for green hydrogen. For instance, the Commission is working to bring the concept of the Hydrogen Bank international scheme together with the EU countries’ financial resources and use the H2Global scheme of Germany as a vehicle for such international auctions.
What’s in it for hydrogen?
The Hydrogen Bank is an important support tool for the development of the nascent hydrogen market. Apart from providing direct funding support to hydrogen production projects, the Bank increases the attractiveness of those projects for investors. The Bank also represents an important commitment towards European Union partner countries, as they will be able to benefit from support for the establishment of their own hydrogen value-chains.
Lastly, the Bank is an important steppingstone in the development of the hydrogen market, where the lack of clarity on existing hydrogen flows, transactions and prices has a negative effect on investment.
Links to Legislation and additional information:
European Hydrogen Bank Communication
Factsheet: European Hydrogen Bank
Commission outlines European Hydrogen Bank to boost renewable hydrogen
