This study supported the European Commission (DG ENER) in the design and preparation of a European import auction for renewable hydrogen and its derivatives under the European Hydrogen Bank.
The European Union aims to achieve climate neutrality by 2050 under the European Green Deal, with the intermediary legally binding target of reducing its emissions by at least 55% by 2030. Renewable hydrogen will play a key role for decarbonisation of hard-to-abate sectors and to replace current uses of fossil-based hydrogen. While domestic auctions have already been launched under the European Hydrogen Bank, its international leg focusing on renewable fuels of non-biological origin (RFNBO) imports from third countries remains to be designed. RFNBO imports can help secure the necessary volumes cost-efficiently by tapping into low-cost production potentials around the world. In the current ramp-up stage of the international hydrogen market, support instruments are required to de-risk projects and close the gap between production cost and willingness to pay. Therefore, the European Commission plans to implement a European import auction for hydrogen under the international pillars of the European Hydrogen Bank.
There are four objectives that an EU auction for renewable hydrogen imports should fulfil. First, the auction should help cover the cost gap between the LCOH of renewable hydrogen (or derivatives) produced in third countries and transported to the EU and willingness to pay from offtakers in Europe. It can thereby incentivise investments in the hydrogen value chain and foster supply and demand of renewable hydrogen. Second, the auction should support early market formation and enable an efficient coordination of supply and demand across borders. Third, it should provide clarity to international producers on demand volumes in the EU and help improve the efficiency for the MS by providing a single platform able to compare and evaluate different bids. This market transparency objective will also be addressed by the new pilot mechanism that was created under the decarbonized gases and hydrogen package, which will become part of the EHB. Fourth, it should support internal coordination between MS for the creation of hydrogen corridors.
The project team supported DG ENER in designing an auction that can fulfil these objectives with a multitude of activities. These involved compiling a comprehensive overview of current studies on hydrogen supply and demand, analysing the pipeline of planned hydrogen production projects, as well as economic analysis and qualitative criteria-led assessment. Task 1 established a foundation by providing a thorough understanding of the status quo and expected development of global hydrogen markets and creating an analytical framework on auction design; the team conducted desk research and interviews to compile a summary of lessons learned. In Task 2, the team facilitated the organisation and implementation of two workshops with MS and technical meetings as needed. Building on these, Task 3 involved developing concrete recommendations on the auction design for two case studies - pipeline-based hydrogen imports and ship-based imports of the key derivatives ammonia, methanol and eSAF - and culminated in the drafting of preliminary T&Cs for both case studies.
The study offers strategic recommendations based on hydrogen market analyses, the assessment of existing and planned hydrogen auction schemes in Europe and beyond, as well as preliminary considerations on auction design. The analysis highlights the potential for hydrogen imports from regions like North America, Australia, Latin America, and the MENA region. It includes concrete case studies on both pipeline-based imports of pure hydrogen and ship-based imports of key derivatives (ammonia, methanol and synthetic aviation fuels (eSAF) to reflect Member State preferences and provides a concrete starting point for further defining import auctions. Priority considerations for auction design include ensuring fair competition between domestic production and imports, addressing geopolitical risks, and achieving cost efficiency. The case studies serve as a flexible blueprint for implementing EHB import auctions, considering Member State interests and aligning with the EU's broader objectives.
November 2024 – July 2025
Fraunhofer Institute for Systems and Innovation Research ISI