Blog Article

Record-Low Bids, Big Winners: What Europe’s First Hydrogen Auction Reveals About the Future of Green Energy​

Zia-Melchior Hoseini

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Clean hydrogen is central to the EU’s climate strategy. The 2020 European Hydrogen Strategy set targets of 6 GW of electrolysers by 2024 and 40 GW by 2030, later doubled by REPowerEU to 10 Mt domestic renewable hydrogen plus 10 Mt of imports. To close the price gap with fossil hydrogen, Brussels created the European Hydrogen Bank (EHB), financed by Innovation Fund carbon revenues. Its pilot auction, held late-2023 with results in April 2024, offered fixed premiums in a pay-as-bid contest. The presentation of our team member analyses this round and compares it with global moves like the U.S. Inflation Reduction Act’s $3 kg⁻¹ credit.

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On a modest €800 million budget, the call attracted 132 bids totalling more than 15 GW of capacity from 17 states—an oversubscription of 20 to 1. Ultimately seven projects prevailed: three in Spain, two in Portugal, one each in Finland and Norway, aggregating about 1.5 GW of electrolysers and 1.58 Mt of renewable hydrogen over the ten-year support horizon. Winning premiums clustered between €0.37 and €0.48 kg⁻¹—an order of magnitude below the €4.50 ceiling and well beneath U.S. subsidies—showing how Iberian solar and Nordic wind can approach cost parity. Yet the absence of Dutch, Swedish or Danish winners, despite pipelines, flags an emergent north-south equity issue that policymakers must address.

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The study has been presented in the Workshop organised by Danish Association of Energy Economics (DAEE), constructs a balanced 2020-25 project–country panel that fuses auction data with techno-economic variables: hourly renewable capacity factors, industrial gas prices, GDP per capita and proximity to pipeline infrastructure. Its econometric spine is a difference-in-differences model with project and year fixed effects, complemented by a dynamic event-study that traces pre- and post-treatment trajectories. To tackle possible self-selection, the authors instrument treatment status with exogenous renewable-resource quality and exploit 2SLS. They then deploy two independent robustness lenses—a propensity-score-matched sample and a synthetic-control counterfactual for the Netherlands—to test consistency. All three methods yield strikingly similar point estimates, reinforcing internal validity.​​​​​​​​​​​​​​​​

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Across specifications, securing an EHB contract trims the levelised cost of hydrogen by roughly €1.0–1.2 kg⁻¹, translating to a 15–25 % closure of the green–grey cost gap. Nordic winners enjoy an additional €0.5 kg⁻¹ advantage over the baseline, while Dutch projects would still need around €0.9 kg⁻¹ extra support if invited. The implied public abatement cost falls in the €60–75 t⁻¹ CO₂ range, aligning with prevailing EU ETS prices and indicating efficient carbon spending. Placebo tests reveal no pre-policy effects, and sensitivity analyses confirm robustness under alternative power-price, CAPEX or utilisation assumptions, lending credibility to the causal link and its overall impact.

Nevertheless, concentration of awards in the cheapest regions risks widening intra-EU disparities. Policy monitoring offers the following highlights. First, introduce regional ring-fenced baskets or minimum-share quotas to guarantee geographic balance without sacrificing competition. Second, scale up the EHB’s Auctions-as-a-Service mechanism so national treasuries can seamlessly top-up unfunded domestic bids; evidence suggests this is more efficient than parallel standalone schemes. Third, accelerate repurposing of existing gas pipelines—often at just 10–35 % of new-build cost—to form export corridors from Iberia and the Nordics to central industrial clusters. Together these measures could boost equity and cost efficiency as auction volumes ramp toward 2030 targets.