Hydrogen technology value chain: EU Commission approves €5.4bn of support

The Commission has approved, under EU State aid rules, an Important Project of Common European Interest (‘IPCEI’) to support research and innovation and first industrial deployment in the hydrogen technology value chain. The project, called “IPCEI Hy2Tech” was jointly prepared and notified by fifteen Member States: Austria, Belgium, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Italy, Netherlands, Poland, Portugal, Slovakia and Spain.

The Member States will provide up to €5.4 billion in public funding, which is expected to unlock additional €8.8 billion in private investments. As part of this IPCEI, 35 companies with activities in one or more Member States, including small and medium-sized enterprises (‘SMEs’) and start-ups, will participate in 41 projects.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said:

Hydrogen has a huge potential going forward. It is an indispensable component for the diversification of energy sources and the green transition. Investing in such innovative technologies can however be risky for one Member State or one company alone. This is where State aid rules for IPCEI have a role to play. Today’s project is an example of truly ambitious European cooperation for a key common objective. It also shows how competition policy works hand in hand with breakthrough innovation.

Commissioner for the internal market, Thierry Breton said:

Promoting hydrogen development and deployment will boost jobs and growth throughout Europe while contributing to our green and resilience agenda. It enables the clean transition of energy-intensive industries and increases our independence from fossil fuels. With this IPCEI, we see EU hydrogen production moving “from lab to fab”; and our industry turning technological mastery into commercial leadership. And of course, we are not only supporting hydrogen through funding. We have also made decisive progress on building partnerships through the Clean Hydrogen Alliance and are developing EU-wide rules for enabling the hydrogen market and creating dedicated infrastructure. Because we know what is at stake: Europe’s position as a leading region for the hydrogen industrial transformation.

The IPCEI will cover a wide part of the hydrogen technology value chain, including (i) the generation of hydrogen, (ii) fuel cells, (iii) storage, transportation and distribution of hydrogen, and (iv) end-users applications, in particular in the mobility sector. It is expected to contribute to the development of important technological breakthroughs, including new highly efficient electrode materials, more performant fuel cells, innovative transport technologies, among which first time roll out hydrogen mobility ones. The IPCEI is expected to create approximately 20.000 direct jobs.

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 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 Hy2Tech 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 Green Deal, the EU Hydrogen Strategy and REPowerEU.
• All 41 projects part on the IPCEI are highly ambitious, as they aim at developing technologies and processes 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, and public support is therefore 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 ICPEI. 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 41 projects from 35 companies, including 8 small and medium-sized enterprises (‘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, and with over 300 external partners, such as universities, research organisations and SMEs across Europe.

The timelines of this IPCEI vary in function of the individual projects and the companies involved.

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.

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 Hy2Tech and facilitated the creation of industrial partnerships.

Today’s decision is the first 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.

The IPCEI Communication supports investments for R&D&I and first industrial deployment on condition that the projects receiving this funding are highly innovative 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.64625 (Austria), SA.64651 (Greece), SA.64642 (Belgium), SA.64644 (Italy), SA.64640 (Czechia), SA.64649 (Netherlands), SA.64633 (Denmark), SA.64626 (Poland), SA.64646 (Estonia), SA.64753 (Portugal), SA.64632 (Finland), SA.64635 (Slovakia), SA.64671 (France), SA.64624 (Spain) and SA.64647 (Germany) 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.

Today, the Commission has approved “IPCEI Hy2Tech”, the first ever Important Project of Common European Interest in the hydrogen sector.

The project aims at developing innovative technologies for the hydrogen value chain to decarbonise industrial processes and mobility. It involves 35 companies and 41 projects from 15 Member States: Austria, Belgium, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Italy, the Netherlands, Poland, Portugal, Slovakia and Spain.

Hydrogen has a huge potential going forward. Russia’s unprovoked and unjustified military aggression against Ukraine has only underlined the need for Europe to diversify its energy sources and fast-forward the green transition. Among the many technologies required, hydrogen proves to be an indispensable component.

Currently, there is no established hydrogen market in Europe. This makes it risky for companies or even Member States to invest alone in such innovative technologies. That is where State aid has a role to play to unlock, crowd-in and leverage substantial private investments that would otherwise not materialise.

State aid rules for IPCEI allow Member States to pool resources and cooperate. They bring together knowledge, expertise, financial resources and economic actors. They enable breakthrough innovation in key sectors and technologies, where the market would not deliver, and ensure positive spill-overs for the EU economy while preserving fair competition.

Our assessment focused on four key elements:

First, the entire IPCEI must contribute concretely and significantly to one or more EU objectives. The IPCEI Hy2Tech contributes to the EU’s decarbonisation targets, as laid down in the EU Climate Law. It also contributes to the REPowerEU Plan, playing its part to diversify energy supplies and moving away from Russian fossil fuels.

Second, we make sure that the IPCEI Hy2Tech generates positive spill-over effects across the EU. Results of the research and development, which are not protected by intellectual property rights, will be widely disseminated. Results protected by intellectual property rights will be licensed on fair, reasonable, and non-discriminatory terms. That is to the benefit of companies which are not part of the IPCEI.

Third, all individual projects must aim at breakthrough innovation: we conducted a technical assessment for all 41 projects to determine whether each project complies with the innovativeness requirements going beyond the global state-of-the-art.

Fourth, companies can only receive what is necessary for the project to happen. Potential competition distortions must be minimised:

So, we have verified that the approved State aid per beneficiary is not higher than the eligible costs and the so-called funding gap. This is the difference between the positive and negative cash flows over the lifetime of the investement.

As a safeguard to public funds, Member States have also agreed to put in place a claw-back mechanism for those projects receiving large amounts of aid. The claw-back would kick-in if the project generates extra net revenues beyond projections. In such case the companies will return to the respective Member States part of the money received.

The Commission’s assessment is key to make sure that taxpayers’ money is spent wisely. Only the truly innovative projects are supported, and only those that, without public support, would not take place. And even for these projects, we need to make sure that the public support does not lead to overcompensation and does not crowd out, but rather crowds in, private investments.

In this case, the Commission has authorised under the State aid rules up to 5.4 billion euros of aid.  And this public support will crowd in another 8.8 billion euros of private investments. The Commission’s scrutiny has halved the potential aid that could be granted under this IPCEI.

Participation in this project is impressive: 35 companies from 15 Member States will participate in 41 projects. These are both well-known large industrial players, such as Symbio, Arkema, Daimler Truck and Ansaldo, but also small and medium enterprises and start-ups, such as Advent, H2B2 and McPhy. They will engage in additional collaborations with over 300 indirect partners all over Europe, including universities and research organisations.

The project is structured in four technology fields, concerning generation of hydrogen, fuel cells, storage, transportation and distribution of hydrogen, and end-users applications:

• First, the development of hydrogen generation technologies. To give a concrete example, Elcogen, an Estonian SME, will develop an electrolyser with a reduced amount of critical raw materials and an optimised manufacturing process.
• Second, the development of hydrogen fuel cell technologies, which use hydrogen to generate electricity. For instance, Nedstack, a Dutch SME, will develop fuel cells for fixed and maritime use.  This will increase fuel cells’ efficiency and applicability.

• Third, the development of technologies for hydrogen storage, transportation and distribution. As an example, the French company Arkema will develop and produce materials for hydrogen tanks with bio-based inputs. This can drastically reduce the manufacturing time and cost, while being fully recyclable and increasing safety.
• Fourth, the development of technologies for end-users across a number of applications, in particular in the mobility sector, such as heavy-duty trucks, trains and ships. But also in energy systems, in which hydrogen can serve as a stabilising reserve. To give an example, Daimler Truck aims at creating trucks powered by liquid hydrogen.

To conclude, and give you a bit of perspective, this is the fourth project to receive green light under the State aid framework for Important Projects of Common European Interest.

IPCEIs are an example of truly ambitious European cooperation, where companies, Member States and the Commission play their role to reach a common objective. We know that Member States are actively working towards designing other projects 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. Because IPCEIs are not meant for general support schemes for which other State aid rules may be better suited.

The total investments under the IPCEI Hy2Tech are expected to be almost 14.2 billion euros. These funds will allow the development and first industrial deployment of breakthrough technologies in the hydrogen value chain. Boosting innovation and first industrial deployment of such breakthrough technologies is part of the EU’s contribution to a more resilient, greener and digital future.