Fueling the Hydrogen Rush: Demystifying EU Subsidies

Author: Erik Rakhou, in collaboration with Joeri Achterberg, Tim Bloemhof (EU subsidies) and Flore de Durfort (certification) for EU-part of the article.

Having worked in my far past as evaluator of the EU subsidies grants, I know how tough it is to compete for public funding. It starts with even knowing what, where and how to apply. Not surprisingly, there are ones who build their livelihood like my industry colleagues Joeri and Tim, who focus on art of EU subsidies applications as a separate business.

Now in hydrogen this is exacerbated with a particular role of knowing that your Hydrogen is decarbonising the world - certification; on that knowledge of certification one can build a business like my industry colleague Flore de Durfort.

So with this brief write up, I wanted to open a dialogue - what examples of subsidies and programmes, and pre-requisites for winning those subsidies, do we see that open up a Hydrogen market successfully.

This article explores the nuances of subsidy access using the European context in particular.

Introduction: The Vital Role of Subsidies

At current stage of the hydrogen value chain build-out, policy incentives including subsidies are often crucial to make the business case, as we have seen in the past with build-up of solar and wind sectors. These financial aids are essential for initiating substantial projects and de-risking the pioneering efforts.

Subsidies, especially from the ongoing, recurring EU Hydrogen Bank auction and ongoing Innovation Fund multi-bn EUR calls, as well as upcoming schemes in Japan (20 bn USD), Australia (2 bn AUSD large scale H2 projects' Headstart programme), and the US (uncapped tax breaks of Inflation Reduction Act), are crucial for companies globally engaged in large-scale green and blue hydrogen production.

Further to bigger recurring pots mentioned above, we see a further variety of initiatives supporting Hydrogen value chain build out in form of incentives or subsidy rounds - for example in UK, Denmark, Germany, Netherlands, France and Italy. And this is a very much non-exhaustive list.

Understanding the Complexity of Subsidy Access - lessons of EU

Navigating the world of subsidies involves complexities. Drawing from my experience as EU subsidies evaluator, and interviews of my network of EU subsidies experts, lets consider what are the winning features of getting subsidies in Europe - here are 6 key lessons to consider.

Six Key Pre-requisites for Winning EU H2 Subsidies

1. Project Layout: Success in EU tenders hinges on meeting specific geographic and technical requirements, such as for example belonging to the European Economic Area, or partnering with local firms, and ensuring the hydrogen produced meets stringent EU import, local production standards - be it for green (RFNBO) or blue quality (to be defined via Gas Package).
2. Economics: Developing a clear offtake - supply value chain strategy and a robust business plan is essential, as the allocation of funds often depends on these factors. In EU Hydrogen bank auction, understanding your relative position to other bidders may be even more crucial.
3. Ecosystem Support: Gathering support from government bodies, local authorities, and other stakeholders is critical for a successful application - and helps to share risks.
4. Strategic Application Preparation: Crafting a comprehensive application, including technical descriptions and business plans, requires significant effort and expertise. One can easily spend at least 400 hours when preparing with a small team.
5. Market Alignment and Storytelling: Aligning with market needs and differentiating the project through compelling business style storytelling is an art that improves the winning rates, particular in qualitative criteria tenders like Innovation Fund.
6. Carbon valorisation: specifically it's crucial to master the carbon nuances of your project outputs. Sustainability impact assessments and certification are an essential part of de-risking hydrogen projects and supply chains, before these are operational. For example, all financiers, grant givers and offtakers, all demand "future-proof projects in terms of sustainability regulation".

Sound simple, right? These 6 lessons? So where could one immediately apply those, and get some funding in Europe.

The most immediate opportunity is the Innovation Fund, open until 9 April 2024. Soon after, it is the EU Hydrogen Bank auction round 2 with 2,2 billion Euro prize funds to go after in spring 2024 or later, depending if terms need to be updated.

There are more initiatives and stakeholders to consider such as forthcoming H2 Global initiatives, and European Investment Bank and its Global Gateway support programmes. More opportunities on EU subsidies are regularly available on the relevant EU portal linked here for those who are interested, just use keyword "Hydrogen".

Final words - beyond Subsidies

Subsidies are just one piece of the puzzle in developing a viable hydrogen business case. But they do help. Some of them, like the ongoing EU Hydrogen bank auction, may even bring prizes beyond few lucky winners - price transparency for European hydrogen in 2024.