Financial Tools and Incentives
The European Commission estimates that to reach the EU's target of consuming 20 million tonnes of hydrogen by 2030 (10 Mt of domestic production and 10 Mt of import), an investment of between €86 and €126 billion will be required for core hydrogen infrastructure. These estimates underline the need to combine public and private sources of funding to foster the sector's growth.
Numerous EU programs and initiatives have been set up to promote hydrogen technologies and facilitate the transition to a low-carbon economy. These programs vary in terms of their objectives, beneficiaries, funding mechanisms and the level of technological readiness they support. It should be noted that the landscape of funding programs and initiatives may evolve over time. It is therefore essential to consult the latest information on official EU websites or other reliable sources for the most recent updates.
The large number of EU funding instruments that can support hydrogen projects means that EU financing is available for a wide variety of hydrogen activities, ranging from the production of renewable and low-carbon hydrogen to its transmission and distribution, and application in industry and for mobility purposes, among others. Individual projects can obtain funding from several EU funding instruments in combination, provided that there is no double funding of the same costs.
List of EU hydrogen funding programs and initiatives
Connecting Europe Facility – Energy: The Connecting Europe Facility for Energy (CEF-E) is a funding instrument for targeted infrastructure investment at European level. It supports the implementation of the Regulation on Trans-European Networks for Energy (TEN-E), which is focused on linking the energy infrastructure of EU countries. It may fund cross-border hydrogen transmission & distribution projects, storage and large-scale electrolysers (>100 MW of capacity).
Connecting Europe Facility – Transport: The Connecting Europe Facility for Transport (CEF-T) finances projects that upgrade infrastructure and remove bottlenecks while promoting sustainable and innovative mobility solutions. It supports hydrogen refueling infrastructure for all modes of transport (road, rail, maritime, inland waterways).
Important Projects of Common European Interest: Where private initiatives supporting breakthrough innovation and infrastructure fail to materialise because of the significant risks such projects entail, EU State aid rules enable EU countries to jointly fill the gap to overcome these market failures with an IPCEI. IPCEIs are ambitious, cross-border, integrated projects, important due to their contribution to EU objectives while limiting potential competition distortions and ensuring positive spill-over effects for the internal market and the Union. Following an assessment by the European Commission, the first set of clean hydrogen projects “IPCEI Hy2Tech” received approval in July 2022. These 41 projects located in 15 EU countries will receive up to €5.4 billion in public funding. This is expected to unlock an additional €8.8 billion in private investments. The second group of clean hydrogen projects “IPCEI Hy2Use” received approval from the European Commission in September 2022. These 35 projects in 13 EU countries will receive up to €5.2 billion in public funding, which is expected to attract an additional €7 billion in private investments. Non-EU countries members of the European Economic Area (EEA) can also benefit from the IPCEIs initiative (for instance, click here).
Innovation Fund: One of the world’s largest funding programmes for the demonstration of innovative low-carbon technologies covered by Annex I to the EU ETS Directive. The fund finances demonstration projects on innovative production and use of low-carbon and renewable hydrogen (production, storage, and utilization) at pre and commercial scale, with the aim of bringing it to market. Under the umbrella of the European Hydrogen Bank funded by the Innovation Fund, the Commission will launch in November 2023 a first auction (i.e., competitive bid) for supporting the production of renewable hydrogen (budget of EUR 800 million). Funding will be awarded as a fixed premium in €/kg of verified and certified RFNBO hydrogen produced, on top of market revenues that developers can achieve, and guaranteed for up to ten years of operation. Further, to avoid fragmentation at the early stage of hydrogen market formation in Europe and to save administrative costs of developing different hydrogen support schemes by indivudal countries, the Commission will also extend the Innovation Fund pilot auctions as a platform to interested countries of the EEA. This mechanism, called Auctions-as-a-Service (AaaS), will enable countries of the EEA to use their national budget resources to award support to projects located on their territory while relying on an EU-wide auction mechanism to identify the most competitive projects.
Horizon Europe: Horizon Europe 2021-2027 is the EU’s key funding programme for research and innovation. Pillar II and III of Horizon Europe are focused on the deployment of low-carbon industry applications and breakthrough technologies, including hydrogen. It must involve the research and innovation element. The Clean Hydrogen Partnership is a public-private initiative under Horizon Europe that aims to accelerate the development of a clean hydrogen economy in Europe. It may involve funding opportunities and collaboration with industry stakeholders.
The Clean Energy Transition Partnership: The CETPartnership is an initiative co-funded by the European Union that brings together public and private stakeholders in the research and innovation ecosystems in European Member States and Associated Countries. Its aim is to boost and accelerate the energy transition and to support the implementation of the European Strategic Energy Technology Plan (SET Plan). The CETPartnership has 7 Transition Iniatives (TRIs) focusing on the R&D challenges described in the Strategic Research and Innovation Agenda (SRIA). Clean hydrogen technologies are included in TRI 3 "Enabling Climate Neutrality with Storage Technologies, Renewable Fuels and CCU/CCS".
European Clean Hydrogen Alliance: This alliance brings together industry, public authorities, and civil society to promote the deployment of hydrogen technologies. It may facilitate access to funding and partnerships for hydrogen projects.
European Regional Development, Cohesion Fund, REACT-EU. The European Regional Development Fund (ERDF) and the Cohesion Fund (CF) are part of the EU’s Cohesion Policy (it is almost one third of MFF 2021-2027). ERDF and CF support innovation and entrepreneurship in the transition to a climate-neutral economy. REACT-EU is providing additional funds to ERDF. Some regions may allocate ERDF funds to hydrogen projects as part of their clean energy strategies.
European Investment Bank (EIB): The European Investment Bank provides loans and financial support for various sustainable projects, including those related to hydrogen infrastructure and technologies.
InvestEU: InvestEU provides a budgetary guarantee to the EIB Group and selected implementing partners with the aim to facilitate access to finance for riskier projects, including renewable hydrogen production, on-site storage, transport refueling infrastructure and critical infrastructure supporting hydrogen deployment. It finances sustainable infrastructure; research, innovation and digitalization, SMEs, and social investment skills.
Just Transition Fund: Funded by NextGenerationEU, the Just Transition Fund (JTF) is one of the EU’s Cohesion Policy funds. Its aims to reduce the social and economic impact resulting from the transition to climate neutrality in the most affected regions, given their dependence on fossil fuels or on carbon-intensive industries.
LIFE programme: LIFE 2021-2027 is the only EU funding programme entirely dedicated to environment, climate and energy. It includes the Clean Energy Transition sub-programme. It is oriented to projects in early phase demonstration, in governance, and in catalyst projects for large-scale deployment solutions.
Modernisation Fund: The Modernisation Fund is a fund supporting 10 lower-income EU countries’ transition to climate neutrality through the modernisation of their energy systems and improved energy efficiency. It supports investments in the production and use of renewable hydrogen; hydrogen fueled trains, trucks and cars, high-efficiency hydrogen CHP.
Recovery and Resilience Facility: The Recovery and Resilience Facility (RRF) is the centerpiece of the EU’s recovery plan, called NextGenerationEU. Its goal is to make EU economies and societies more sustainable by supporting green and digital transition. Project financing depends on what each EU country has included in its plan.
Hydrogen Public Funding Compass
For more information, the Hydrogen Public Funding Compass is available as an online guide for stakeholders to identify public funding sources for hydrogen projects. It is designed as a single entry point for stakeholders to access information on the most important public funding programmes and funds for renewable and low carbon hydrogen.
The funding compass is structured in two parts
- EU funding programmes and funds financed by the 2021 -2027 long-term EU budget and NextGenerationEU;
- National funding programmes and funds available at EU country level.
Other relevant links
- 'National Policies and Legislation' section on the European Hydrogen Observatory.
- European Commission, 2023. Hydrogen.
- Hydrogen Europe. Clean Hydrogen Monitor 2022 – Chapter 8 “Funding and financing ecosystem”.
- J. Kneebone, Florence School of Regulation. Hydrogen funding flows in the European Union 2023.