The Commission has approved, under EU State aid rules, a second Important Project of Common European Interest (‘IPCEI’) to support research and innovation, first industrial deployment and construction of relevant infrastructure in the hydrogen value chain.
The project, called “IPCEI Hy2Use” was jointly prepared and notified by thirteen Member States: Austria, Belgium, Denmark, Finland, France, Greece, Italy, Netherlands, Poland, Portugal, Slovakia, Spain and Sweden.
The Member States will provide up to €5.2 billion in public funding, which is expected to unlock additional €7 billion in private investments. As part of this IPCEI, 29 companies with activities in one or more Member States, including small and medium-sized enterprises (‘SMEs’) and start-ups, will participate in 35 projects.
IPCEI Hy2Use will cover a wide part of the hydrogen value chain by supporting (i) the construction of hydrogen-related infrastructure, notably large-scale electrolysers and transport infrastructure, for the production, storage and transport of renewable and low-carbon hydrogen; and (ii) the development of innovative and more sustainable technologies for the integration of hydrogen into the industrial processes of multiple sectors, especially those that are more challenging to decarbonise, such as steel, cement and glass. The IPCEI is expected to boost the supply of renewable and low-carbon hydrogen, thereby reducing dependency on the supply of natural gas.
Several projects are expected to be implemented in the near future, with various large-scale electrolysers expected to be operational by 2024-2026 and many of the innovative technologies deployed by 2026-2027. The completion of the overall project is planned for 2036, with timelines varying in function of the project and the companies involved.
Norway, as part of the European Economic Area, also participates to the IPCEI ‘Hy2Use’ with two individual projects. The EFTA Surveillance Authority is in charge of assessing State aid notified by Norway.
IPCEI Hy2Use follows and complements the first IPCEI on the hydrogen value chain, the IPCEI “Hy2Tech”, which the Commission approved on 15 July 2022. While both IPCEIs address the hydrogen value chain, Hy2Use focuses on projects that are not covered by Hy2Tech, namely hydrogen-related infrastructure and hydrogen applications in the industrial sector (while Hy2Tech focuses on end-users in the mobility sector).
Commission assessment
The Commission assessed the proposed project under EU State aid rules, more specifically its Communication on Important Projects of Common European Interest.
Where private initiatives supporting breakthrough innovation and the construction of large-scale infrastructure of great EU importance fail to materialise because of the significant risks such projects entail, IPCEI enable Member States to jointly fill the gap to overcome these market failures. At the same time, they ensure that the EU economy at large benefits from the investments and limit potential distortions to competition.
The Commission has found that the IPCEI Hy2Use fulfils the required conditions set out in its Communication. In particular, the Commission concluded that:
- The project contributes to a common objective by supporting a key strategic value chain for the future of Europe, as well as the objectives of key EU policy initiatives such as the European Green Deal, the EU Hydrogen Strategy and the REPowerEU Plan.
- All 35 projects part on the IPCEI are highly ambitious, as they aim at developing technologies and infrastructure that go beyond what the market currently offers and will allow major improvements in performance, safety, environmental impact, as well as on cost efficiencies.
- The IPCEI also involves significant technological and financial risks. Therefore, public support is necessary to provide incentives to companies to carry out the investment.
- Aid to individual companies is limited to what is necessary, proportionate and does not unduly distort competition. In particular, the Commission has verified that the total planned maximum aid amounts are in line with the eligible costs of the projects and their funding gaps. Furthermore, if large projects covered by the IPCEI turn out to be very successful, generating extra net revenues, the companies will return part of the aid received to the respective Member State (claw-back mechanism).
- The results of the project will be widely shared by participating companies benefitting from the public support with the European scientific community and industry, beyond the companies and countries that are part of the IPCEI. As a result, positive spill-over effects will be generated throughout Europe.
On this basis, the Commission concluded that the project is in line with EU State aid rules.
Funding, beneficiaries and amounts
The IPCEI will involve 35 projects from 29 companies, including SMEs and start-ups, with activities in one or more Member States. The direct participants will closely cooperate with each other through numerous planned collaborations, as well as with over 160 external partners, such as universities, research organisations and SMEs across Europe.
More information on the amount of aid to individual participants will be available in the public version of the Commission’s decision, once the Commission has agreed with Member States and third parties on any confidential business secrets that need to be removed.
Quotes by Members of the College of Commissioners
President Ursula von der Leyen said:
“Hydrogen can be a game changer for Europe. It is key in diversifying our energy sources and helping us reduce our dependency on Russian gas. We need to bring this niche market to scale. That is why we are creating a Hydrogen Bank. And we will also increase our financial participation in Important Projects of Common European Interest. This will help enabling breakthrough innovation and positive spill-overs for all of the EU economy and help power the economy of the future.”
Executive Vice-President Margrethe Vestager, in charge of competition policy, said:
“Developing technologies for low carbon and, in particular, green hydrogen, and building the necessary infrastructure for its deployment, will take us one step closer to making Europe the first climate-neutral continent by 2050. The hydrogen value chain in Europe is in its infancy. This makes it risky for companies and Member States to invest alone in such innovative market. That is where State aid has a role to play to unlock, crowd-in and leverage substantial private investments that would otherwise not materialise.” The full statement is available here.
Commissioner Thierry Breton, in charge of the internal market, said:
“Hydrogen is key for the green transition of Europe’s energy-intensive industries: it allows us to produce carbon-free steel, cement and chemicals and can replace large quantities of fossil fuels. Europe’s industry is a global technology leader in hydrogen. Now is the time to roll out our technologies to Europe’s factory floors. Our hydrogen IPCEIs support just that: a first generation of large-scale hydrogen industrial projects in Europe.”
Background
The Commission’s approval of this IPCEI is part of the wider Commission efforts to support the development of an innovative and sustainable European hydrogen industry.
In 2018, the Commission established the Strategic Forum for IPCEI, a joint body of representatives from Member States and industry. In November 2019, the Strategic Forum published its report and identified, among others, Hydrogen Technologies and Systems as one of several key strategic value chains for Europe. In July 2020, the Commission published its EU Hydrogen Strategy, setting ambitious goals for clean hydrogen production and use, and launched the European Clean Hydrogen Alliance, bringing together the European hydrogen community (industry, civil society, public authorities).
Jointly with the policy priorities set out in the European Green Deal, notably in terms of environmental sustainability as well as the green transition of industry and transport sectors to climate neutrality, these initiatives played an important role for the objectives of the IPCEI Hy2Use and facilitated the creation of industrial partnerships.
Today’s decision is the second IPCEI project approved on the basis of the 2021 State aid IPCEI Communication, setting out criteria under which several Member States can support transnational projects of strategic significance for the EU under Article 107(3)(b) of the Treaty on the Functioning of the European Union. The Communication aims at encouraging Member States to support highly innovative projects that make a clear contribution to economic growth, jobs and competitiveness.
The IPCEI Communication complements other State aid rules such as the Climate, Energy and Environment Aid Guidelines, the General Block Exemption Regulation and the Research, Development and Innovation (R&D&I) Framework, which allow supporting innovative projects whilst ensuring that potential competition distortions are limited.
In particular, the Climate, Environmental protection and Energy Aid Guidelines enable public support for investments delivering reductions of greenhouse gas emissions, including projects related the production or use of renewable and low-carbon hydrogen. Some of these projects will complement the IPCEIs on hydrogen and are currently being assessed by the Commission as a matter of priority.
The IPCEI Communication supports investments for R&D&I, first industrial deployment and construction of infrastructure on condition that the projects receiving this funding are highly innovative, of European relevance and do not cover mass production or commercial activities. They also require extensive dissemination and spillover commitments of new knowledge throughout the EU, as well as a detailed competition assessment to minimise any undue distortions in the internal market.
The non-confidential version of the decision will be made available under the case numbers SA.64631 (Austria), SA.64641 (Belgium), SA.64636 (Denmark), SA.64628 (Finland), SA.64670 (France), SA.64654 (Greece), SA.64645 (Italy), SA.64650 (Netherlands), SA.64627 (Poland), SA.64754 (Portugal), SA.64634 (Slovakia), SA.64623 (Spain), and SA.64652 (Sweden) in the State Aid Register on the competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.
Statement by EU Commission’s Executive Vice-President Vestager on hydrogen value chain
Brussels, 21 September 2022
The Commission has approved today “IPCEI Hy2Use”, the second Important Project of Common European Interest in the hydrogen value chain.
The project involves 29 companies and 35 projects from 13 Member States: Austria, Belgium, Denmark, Finland, France, Greece, Italy, the Netherlands, Poland, Portugal, Slovakia, Spain and Sweden.
The Member States will provide up to €5.2 billion in public funding, which is expected to unlock additional €7 billion in private investments.
IPCEI “Hy2Use” follows and complements another project in the hydrogen value chain, IPCEI “Hy2Tech”, that the Commission approved only a couple of months ago.
IPCEI “Hy2Tech” focused on the development of novel technologies for the production, storage, transportation and distribution of hydrogen as well as applications in the mobility sector.
The “Hy2Use” project we approved today aims at boosting the supply of renewable and low-carbon hydrogen and at enabling the development and first industrial deployment of clean and innovative hydrogen technologies in other industrial sectors, such as cement, steel and glass.
More specifically, “Hy2Use” includes two different and complementary categories of participating projects: some involve the construction of large-scale infrastructure for the production, storage and transport of renewable and low-carbon hydrogen, while others develop highly-innovative technologies leading to reduced greenhouse gas emissions in industries such as cement, steel and glass sectors that typically face higher barriers to decarbonise.
Developing technologies for low carbon and, in particular, green hydrogen, and building the necessary infrastructure for its deployment, will take us one step closer to making Europe the first climate-neutral continent by 2050. It will also take us one step closer to a diversified combination of energy sources in Europe, and hopefully many steps away from dependence to Russian fossil fuels, in line with the REPowerEU Plan.
The investments approved under the Hy2Use IPCEI will allow to build new electrolysis capacity of approximately 3.5 GigaWatt resulting in an output of approximately 340,000 tons of renewable and low-carbon hydrogen per year that will help decarbonising some of the most polluting sectors in Europe.
To give a concrete example of infrastructure, the Hy2Use project “Masshylia” carried out by ENGIE and TotalEnergies, concerns the construction and operation of a 120 MegaWatts electrolyser mostly powered by renewable energy (solar and wind), which will supply industry and transport sectors. The project’s strategic location in the important European industrial centre and port of Marseille allows for the generation of positive spill-over effects and the strengthening of collaborations across the emerging European hydrogen backbone.
Also to give an example of application to end-use sector, the Hy2Use project “Fossil-free steel” by the Swedish company Hybrit intends to develop and deploy at scale a breakthrough technology which fully replaces coal and coke used in steel production with renewable hydrogen entirely eliminating greenhouse gas emissions from steel production. This project, which will also receive support from the EU Innovation Fund, shows the way for the future of the steel sector, one of the most polluting in the world.
The aim of IPCEIs is to pool resources to enable breakthrough innovation and support the construction of relevant infrastructure in key sectors and technologies, where the market would not otherwise deliver. At the same time, they ensure positive spill-overs for the EU economy while preserving fair competition.
In our assessment, in addition to a concrete and significant contribution to EU objectives, we found that IPCEI “Hy2Use” generates positive spill-over effects across the EU, bringing together a number of actors across the European hydrogen value chain.
The approved State aid per beneficiary is not higher than the eligible costs and the so-called funding gap (i.e. difference between the positive and negative cash flows over the lifetime of the investment).
This is essential to ensure not only that taxpayers’ money is wisely spent, but also that only the truly innovative projects, that without public support would not take place, are supported. And even for these projects, we need to make sure that the public support does not crowd out, but rather crowds in, private investments.
Indeed, the hydrogen value chain in Europe is in its infancy. This makes it risky for companies and Member States to invest alone in such innovative market. That is where State aid has a role to play to unlock, crowd-in and leverage substantial private investments that would otherwise not materialise. In this case, public support of up to 5.2 billion euros of aid is expected to unlock approximatively another 7 billion euros of private investments.
IPCEIs are an example of truly ambitious European cooperation, where companies, Member States and the Commission play their role, working together to reach a common objective.
We know that Member States are currently in the process of designing other Important Projects of Common European Interests both relating to the hydrogen value chain, as well as for other key technologies. As always, the Commission stands ready to support their plans, provide guidance and coordinate efforts, while protecting the level playing field.
Finally, it is important to stress that IPCEI rules are not the only relevant ones to contribute to achievement of our environmental and energy objectives. Actually, the main applicable rules are those of the Climate, Environmental protection and Energy Aid Guidelines (CEEAG), which were updated at the beginning of the year.
Some projects that were initially pre-selected by Member States to take part in the IPCEIs hydrogen are better suited for an assessment under the dedicated CEEAG rules – such as individual decarbonisation projects with limited cross-border collaborations or spillover effects. The Commission assesses those projects as a matter of priority and aims at finalizing its assessment as quickly as possible.
Source – EU Commission