The Dutch government announced it will organise it’s $1.1bn auction for subsidies to support both investment and operating costs for green hydrogen projects from 15 October to the end of that month. This is important to the success of green hydrogen in the Dutch market but will it be enough? Or, why Green Hydrogen needs support now.
The auction was previously approved by the European Commission, agreeing to provide state aid for the Dutch hydrogen production scheme, which is expected to support the construction of at least 200MW of electrolysis capacity.
Why green hydrogen support now?
After years of growing momentum for green hydrogen, a certain fatigue seems to be kicking in. Many projects are facing delays or have been shelved. Last month, it was revealed by ICIS Hydrogen Foresight that no Dutch hydrogen projects had progressed further than a final investment decision. Despite future low-carbon hydrogen demand increasing by almost 14% over the six months prior to April 2024, ICIS data showed a lack of projects reaching FID.
This comes on top of a range of bad news from other European countries. In Germany, Thyssenkrupp warned of slowing growth in green hydrogen sector. The group also revealed the tax credits it is relying upon to subsidise the clean hydrogen market in the US could potentially be delayed until after November election.
French energy giant Engie has pushed back its 2030 target to build about 4GW of green hydrogen projects to 2035. In Denmark, Danish developer Orsted scrapped its 70MW FlagshipONE green hydrogen-to-methanol plant — billed as the largest in Europe — though the firm had taken final investment decision (FID) on the project two years previously.
Norwegian hydrogen-plant manufacturer HydrogenPro said the pace of new projects being approved missed expectations in the second quarter with final investment decisions delayed due to cost increases, increased cost of capital and lack of clarity on incentive schemes.
On top of all this, a new study revealed that existing fossil gas infrastructure such as pipelines and appliances are “mostly unusable” with hydrogen, without either major investment, or changes in operation that would significantly reduce the amount of energy delivered to customers.
The Dutch green hydrogen auction
So, green hydrogen needs support now and the Dutch government auction therefore comes at an important moment in time. The Dutch auction of subsidies is to support both investment and operating costs for green hydrogen projects. The maximum amount a single project could walk away with is 50% of the €998,330,000 budget. However, bidders will be ranked on a euro-per-megawatt basis.
The state aid will also go towards both investment costs (maximum 80%) to build the plant and operating costs for five to ten years to fill in the price gap with grey H2, rather than one or the other.
Successful bidders must prove compliance with the EU criteria for the production of renewable fuels of non-biological origin (RFNBOs), as laid out in the delegated acts of renewable hydrogen.
Speaking on the auction in July (2024), Margrethe Vestager, European Commission Executive Vice-President, said, “This €998m Dutch scheme will help scale up the production of renewable hydrogen in the Netherlands by providing support to electrolyser projects of all sizes, while ensuring that any potential competition distortion is kept to the minimum.”
The question remains though – will it be enough to kickstart this market en clear the hurdles that currently exist?
