Project

Achieving the EU’s climate targets for 2030 and climate neutrality by 2050 requires a substantial scale-up of investment in innovative climate-neutral technologies, particularly in capital-intensive, risk-exposed and internationally competitive sectors. While carbon pricing under the EU Emissions Trading System (EU ETS) provides a central economic incentive for decarbonisation, price signals alone are often insufficient to trigger investments in new technologies characterised by high upfront costs, long payback periods and uncertain market demand.

Against this backdrop, the European Commission seeks to complement the EU ETS with targeted support mechanisms. The Innovation Fund was established as a central funding instrument to support projects in the phase between demonstration and market uptake. As the Fund expanded and funding needs increased, growing attention has been paid to how limited public resources can be deployed as efficiently as possible.

The introduction of competitive, auction-based allocation procedures aims to focus public support on projects that can be realised with the lowest support requirement while enabling market-based price discovery. Hydrogen auctions were identified as a key application case, as the ramp-up of renewable hydrogen is associated with high cost risks, the absence of established reference markets and uncertain demand, while the product’s relative homogeneity makes it well suited to competitive allocation through auctions.

The project supports the European Commission (DG CLIMA) in designing and implementing competitive bidding mechanisms under the EU Innovation Fund. These mechanisms aim to accelerate the deployment of innovative low-carbon technologies by allocating support through fixed premium contracts, Contracts for Difference (CfDs) and Carbon Contracts for Difference (CCfDs). In the first phase, the focus was on assessing economic design options and developing the legal and operational framework for a pilot auction. The second phase provides continuous assistance in refining auction designs, expanding the scope to additional sectors, and supporting business intelligence, communication, and dissemination activities. 

The consortium combines techno-economic analysis, legal expertise, and practical policy advice. FH ISI and Guidehouse lead the design of auction schemes, BBH provides legal and governance input, and ICF supports with policy analysis and dissemination. Specific tools have been developed to simulate bidder behaviour in hydrogen auctions and to compare the cost-efficiency of industrial decarbonisation technologies under potential CCfD schemes. The team also assessed State aid and financial regulation aspects and contributed to the set-up of the Auction-as-a-Service mechanism for Member States. 

The work formed the central basis for the EU-wide hydrogen auctions IF23 and IF24 within the framework of the Innovation Fund.

The pilot auction, the IF23 Hydrogen Auction, was conducted with tailor-made IF23 Terms and conditions and contract structures for successful bidders and launched at the end of 2023.

As part of the pilot auction, seven projects were selected during the auction clearing process to receive a total of around €720 million in EU funding. These projects submitted bids ranging from around €0.37 to €0.48 per kilogram of renewable hydrogen and are spread across four European countries.

The results can be viewed on the Commission's official website: Official results of the IF23 Hydrogen Auction.

In the second round, the IF24 Hydrogen Auction, a dedicated budget for the maritime sector was introduced for the first time, alongside the general auction without specific off-taker requirements. The auction was launched with a total budget of €1.2 billion, including €200 million earmarked for projects with maritime off-takers. In total, 15 projects were initially selected, comprising 12 projects under the general topic (with bids between €0.20 and €0.60/kg) and three projects under the maritime topic (with bids between €0.45 and €1.88/kg). Further details are available on the Commission's website: Official results of the IF24 Hydrogen Auction.

Another key outcome is the development of the Auctions-as-a-Service (AaaS) mechanism, which allows Member States to channel national funding into EU-wide auctions, thereby combining European and national resources. The IF24 auction marked the first successful practical application of this mechanism under an Innovation Fund auction, with Austria, Spain and Lithuania contributing national funding through AaaS.

Beyond these results, the work contributes to the continuous refinement of auction designs and ensures systematic knowledge transfer for future Innovation Fund auctions, including with a view to additional sectors and application areas.

1st + 2nd phase : June 2022 – June 2025

• European Commission (DG Climate Action)

• Becker Büttner Held (BBH), Rechtsanwälte Wirtschaftsprüfer Steuerberater
• Guidehouse
• ICF International (ICFI)