Renewable hydrogen is seen as a key solution to achieving climate neutrality. The EU and its Member States have in the last years published hydrogen strategies to steer the ramp-up of the hydrogen market through frameworks and policy support. On its way to climate neutrality, the EU has set itself an intermediate target of minus 55% GHG emissions by 2030. To ensure the achievement of this target, the Fit for 55 package was published. It includes several proposals, some of which are of high importance for hydrogen. For example, the European Commission proposes that Member States ensure that the share of renewable fuels of non-biological origin (RFNBOs) of all hydrogen used for final energy and non-energy purposes in industry reaches 50 % by 2030. The fulfilment of this target requires support. Hydrogen auctions could be used to allocate the support to eligible parties.

This policy brief aims at informing the debate on hydrogen support policies by providing practical, near-term considerations on auctions for renewable hydrogen support allocation and discussing four basic auction models. We point out that any near-term policy needs to account for two main challenges – the missing market and infrastructure for RFNBOs. While electricity infrastructure is already today widely available, hydrogen infrastructure has yet to grow beyond dedicated industry clusters. The current market situation for hydrogen can best be explained as a chicken and egg problem. Currently, there is almost no demand for renewable hydrogen because it is very costly in comparison to alternatives. Hence, there is no supply of renewable hydrogen beyond pilot projects. The price of renewable hydrogen, however, can only drop if economies of scale and technological learning pick up.

Download the report here.