Auctions for Clean Hydrogen

Creating a transparent market for clean hydrogen, like what exists for other gases and non-gas commodities, will be an important step in further developing the sector. In addition to providing grants, loans and tax credits, some governments are launching clean hydrogen auctions as means of jump starting such a market. These auctions will facilitate the development of hydrogen projects by offering producers certainty of price and volume from a credit worthy buyer, typically for a period of ten years. In turn, greater certainty of supply should encourage end users to invest in transitioning to clean hydrogen.  In addition to benefiting specific producers and end users, these auctions will establish pricing benchmarks, financing templates, delivery protocols and other contractual standards that can be leveraged by the private markets. European governments have been at the forefront of these auction programs including:

GERMANY & EU

The German government initially formed the Hydrogen Intermediary Network Company (HintCo) to administer the H2Global Project, a double auction which would solicit bids from foreign producers to encourage exports of green ammonia primarily but not exclusively to Germany and German companies.  HintCo would run a second auction to sell that ammonia with EUR900mn in funding to make up the difference between the purchase and sale prices for a period of 10 years.  Deliveries are targeted to begin in 2024.    

Subsequently, the EU formed the European Hydrogen Bank (EHB) with a mandate that included a EUR800mn auction targeting EU-based producers of clean hydrogen to be launched this autumn.

Most recently, GlobalH2 and the EHB have agreed to cooperate and coordinate their efforts to ensure broader participation by EU members.

DENMARK

Managed by the Danish Energy Authority, Denmark’s $180mn auction is intended to subsidize approximately 100-200MW of electrolysis capacity over a 10-year period. To achieve minimum volume purchase targets, Denmark will hold back 40% of the allocation if initial bids are above a certain benchmark and conduct a further auction in the future as new technology and economies of scale bring prices down.  The auction is expected to run until August of this year.    

PORTUGAL

Portugal will launch a clean hydrogen auction in the second half of 2023.  Leading Portuguese energy company, GALP, will offtake the hydrogen purchased through the auction and sell it to customers by blending it into existing natural gas pipelines.

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