Type of instrument
Auction-based mechanism for the procurement of green hydrogen or its derivatives for a fixed procurement volume. The product quantity is determined in the competitive process.
Contracts for Difference (CfD) approach: difference between supply prices abroad and demand prices in Germany and the EU will be compensated by grants from the German government
Eligible applicants
Supply side: project bidding consortia of green hydrogen and its derivatives Demand side: industry, transport and energy sector in Germany
Scope of application
Renewable green hydrogen and its derivatives (PtX products), such as ammonia, methanol and power-based sustainable aviation fuels
Requirements, e.g.
- Project state/maturity
- Project size
- Financing plan/Bankability
Priority given to PtX products as logistics for transport (ship, rail and road haulage) are more mature, long-distance hydrogen pipelines still to be built
Compliance with environmental and social standards and proof of sustainability of the product including renewable electricity sources
Risk management for projects still to be determined
Scope of cover
- Overall instrument
- Per project and Investment
German government to provide 900 million euros in funding to enable at least three larger hydrogen production facilities during a ten-year period = 90 million euros annual volume on average; for future bidding rounds the funding will be raised according to the 2023 German draft budget.
Hydrogen Intermediary Company GmbH (HINT.CO) concludes long-term purchase contracts (HPA of 10 years) on the supply side and short-term sales contracts (e.g. 1 year), Hydrogen Service Agreements (HSA), on the demand side
Evaluation, e.g.
- Flexibility/Formalisation
- Influence on the economic viability
- Influence on the refinancing conditions
Competition-based double auction mechanism instead of fixed feed-in tariffs allows for sufficient degree of flexibility. Could benefit from expected increases in market prices for substitute goods thanks to short-term sales contracts
Public funds required to compensate the price difference may decrease over the funding period due to expected increases in market prices for substitute goods
Functioning of H2Global limited by expansion of transport infrastructure Transparent criteria needed for procurement procedure, to ensure non-discriminatory selection of bidding countries and compliance with sustainability standards
As with hydrogen production in general, important to ensure additional RES use to prevent lack of RES needed for green electricity market
Implementing organisation
H2 Global Foundation & HINT.CO
Link
www.h2-global.de