Design Options for a European Hydrogen Bank

Summary:

In September 2022 President of the European Commission Ursula von der Leyen announced the establishment of the European Hydrogen Bank in her State of the Union speech and declared that the instrument would be a flagship initiative for the upcoming year, endowed with €3 billion from the Innovation Fund. Considering the broader EU policy framework, including the European Hydrogen Strategy, the RePowerEU plan and the Green Deal Industrial Plan, the European Hydrogen Bank’s primary objective is to ensure sufficient availability of hydrogen and its derivatives across the European Union (EU) and kick-start the market uptake of hydrogen production and applications in the EU.

The European Commission currently intends to establish a two-pillar approach to the European Hydrogen Bank. The domestic pillar aims at supporting the scale-up of domestic hydrogen production within the EU and will be implemented under the Innovation Fund. The imports pillar will focus on international imports of primarily hydrogen-based derivatives from outside of the EU. Assuming the two-pillar set-up outlined above, this report contributes to the current debate around potential design choices for the European Hydrogen Bank. It outlines potential high-level functions and objectives and assesses the relevance of these policy objectives for the domestic and imports pillar. The study assesses three potential designs: double-sided auctions for supply and demand contracts, supply- or demand-side auctions determining market premiums, and default guarantees for hydrogen producers. For each model, benefits and potential challenges are discussed in terms of how well they perform in achieving the defined policy objectives.

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