Danish tender gives hints for European H2 bank auction

The outcome of Denmark's first subsidy tender for production of renewable hydrogen and derivatives provide a first indication on how low some project developers may be willing to go with bids in the EU's pan-European hydrogen bank pilot auction later this year.

The Danish Energy Agency (DEA) selected six projects with a combined electrolyser capacity of 280MW for subsidies, allocating the tender's full budget of 1.25bn kroner ($176.9mn), it said today.

The EU's auction — due to be launched on 22 November — will see project developers across all of Europe compete for subsidies under very similar rules. As in Denmark's tender, developers will request subsidies for production of renewable hydrogen or its derivatives over a 10-year period. And as in the Danish process, the proposed projects with the lowest requested subsidy will win.

A key difference is the maximum support developers could get. The EU has set a ceiling of €4.50/kg, well above the around €2/kg maximum that would have been granted under the Danish scheme.

But the Danish results suggest participants in the EU auction may have to stay far below the ceiling to have a chance of success. The highest successful bid in the Danish tender was DKr67.5/GJ, or around €1.05/kg assuming energy density of 120MJ/kg. The lowest bid was just €0.16/kg, submitted by US firm Plug Power for a plant with 100MW electrolyser capacity.

The hydrogen bank auction's €800mn budget will be nearly five times that of the Danish tender, meaning more projects may be able to bag support. But the EU-wide approach arguably creates much fiercer competition.

While many Danish projects hope to capitalise on strong wind speeds to limit power generation costs, facilities elsewhere in the EU may have more favourable conditions. In Spain plants can access solar photovoltaic (PV) generation at comparatively low costs. Lower production costs could allow developers to submit lower bids while still ensuring their sites are profitable.

The EU will also give successful bidders more time to build their facilities than the Danish government, thereby further widening the scope of projects that can compete. The six projects selected by the DEA will have to start operating in four years — around late-2027 — to claim the subsidies. The EU will award contracts next summer and then give developers five years to commission their sites, meaning facilities can compete as long as they manage to come on line by mid-2029.

By Stefan Krumpelmann