EU to include low-carbon hydrogen in next European Hydrogen Bank auction
The European Commission has released draft terms for the European Hydrogen Bank auction, which expands eligibility to include low-carbon electrolytic hydrogen for the first time.
Projects using grid or nuclear energy will be eligible for subsidies under certain conditions. They must still meet the EU’s low-carbon criteria, which is 70% lower lifecycle emissions than fossil fuels.
The €1.1bn budget will be shared across three funding pots, two of which will allow for low-carbon hydrogen. In fact, just €400m of the budget will be allocated purely to RFNBO-compliant hydrogen production, marking a significant shift in the EU’s decarbonisation tactics.
What’s changed?
Before these new draft terms, only RFNBO – meaning renewable fuel from non-biological origins – compliant hydrogen was eligible for the European Hydrogen Bank auction. The auctions have previously seen nearly €720 million awarded to 7 renewable hydrogen projects across Europe in 2023-2024.
New terms for the 2025 Innovation Fund auction specify that certification proving that the supported capacity achieves at least 70% GHG savings will need to be provided. This opens up a new avenue for funding of up to €1.1bn for low-carbon hydrogen.
Why is this happening now?
EU countries have been pushing against the European Commission’s Renewable Energy Directive.
Earlier this year twelve EU countries petitioned the European Commission to loosen the rules surrounding RFNBOs, which specify that green hydrogen plants should only be operated from renewables capacity that is less than three years old. This ruling has limited the usable amount of the already limited supply of RFNBOs in Europe.
Delays in implementing the Renewable Energy Directive have led to the European Commission announcing infringement proceedings against any EU country which hadn’t put the Renewable Energy Directive into law by May 21st 2025.
This resistance to the perceived strictness of EU RFNBO regulations preceded the shift to low-carbon hydrogen being accepted by the European Hydrogen Bank.
What does this mean for the hydrogen industry?
Along with the Clean Industrial Deal’s focus on a “low-carbon economy”, the new draft rules unlock progress for EU countries struggling with RFNBO shortages and regulations in 2025. It offers a viable path towards decarbonisation which prioritises progress over perfection.
There are concerns that this may dilute ambition to completely decarbonise, but low-carbon hydrogen does offer a feasible first step to decarbonisation. “Low-carbon hydrogen must still cut emissions by 70% over fossil fuels,” the Commission noted – a not insignificant percentage.
To reach the EU’s goal of 60% of the total energy supply being RFNBOs in 2035, the EU must address issues of delay to the Renewable Energy Directive being transposed into law. Additionally, the issue of RFNBOs being in short supply must be resolved, instead of simply offering another route into decreasing carbonisation.
