The European Commission has approved, under EU State aid rules, a French scheme to support the production of renewable and low-carbon hydrogen in line with the objectives of the EU Hydrogen Strategy and the Clean Industrial Deal . The scheme will also contribute to the objectives of the REPowerEU Plan to reduce dependence on Russian fossil fuels and accelerate the clean transition.
The French scheme
France notified to the Commission plans to introduce a scheme to support the production of renewable and low-carbon hydrogen by new electrolysers for the purpose of reducing (industrial) greenhouse gas emissions.
The scheme will support the construction of 1 GW of hydrogen electrolysis capacity. The aid will be awarded through a competitive bidding process planned over three tender rounds. The first tender concerns 200 MW of electrolysis capacity with an estimated budget of €797 million. Hydrogen produced under this scheme will be exclusively sold for direct industrial use, to limit the use of hydrogen to cases where no economically viable electrification alternative exists.
The aid will take the form of a fixed premium. Contracts will be concluded for a 15-year period. Beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin ('RFNBO') as well as low-carbon fuels, as set out in the delegated act on renewable hydrogen and the recently adopted delegated act on low-carbon hydrogen . The aid will contribute to off-setting the additional costs related to the cost of electricity needed to produce the renewable and low-carbon hydrogen in comparison with cheaper fossil hydrogen.
The scheme will contribute to France's effort to achieve 4.5 GW of electrolyser capacity by 2030 and 8 GW of capacity by 2035. France expects that the scheme will lead to up to 1,100 kilotons of CO2 being avoided annually, which will contribute to France fulfilling its EU climate targets.
The Commission's assessment
The Commission assessed the scheme under EU State rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU, which enables Member States to support the development of certain economic activities under certain conditions, and the 2022 Guidelines on State aid for climate, environment protection and energy ('CEEAG').
In particular, the Commission found that:
- The scheme is necessary and appropriate to facilitate the production of renewable and low-carbon hydrogen, and thus the decarbonisation of the industrial sector. At the same time, it supports the objectives of key EU policy initiatives such as the Clean Industrial Deal , the EU Hydrogen Strategy and the REPower EU Plan ;
- The aid has an 'incentive effect', as the production of renewable and low-carbon hydrogen is still more expensive than the production of fossil hydrogen, and the beneficiaries would not carry out the projects without the public support;
- France has put in place sufficient safeguards to ensure that the scheme has a limited impact on competition and trade within the EU. In particular, the beneficiaries will be selected following an open, transparent and non-discriminatory bidding process and the aid will be kept to the minimum necessary to undertake the projects;
- The aid will bring about positive effects, in particular on the environment, that outweigh any possible negative effects in terms of distortions to competition.
On this basis, the Commission approved the French scheme under EU State aid rules.
Background
The Commission's 2022 CEEAG provide guidance on how the Commission assesses the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.
The revised Renewable Energy Directive of 2023 established an EU-wide binding renewable energy target of at least 42,5% share in the energy mix, with a larger aim of achieving 45%. by 2030. In addition, it set out stringent criteria for renewable fuels of non-biological origin, such as renewable hydrogen and other renewable PtX products, to ensure that their environmental impact is minimal and that they contribute to the deployment of renewable energy. Amongst others, emission savings of the end product must be at least 70% across the entire value chain.
On 18 May 2022, the Commission published the REPowerEU plan , which sets out a series of measures to rapidly reduce EU's dependence on Russian fossil fuels by accelerating the clean energy transition, including a Hydrogen Accelerator . The REPowerEU plan is based on three pillars: saving energy, producing clean energy and diversifying the EU's energy supplies. As part of its scaling up of renewable energy in power generation, industry, buildings and transport, the Commission proposed to increase the target in the Renewable Energy Directive to 45% by 2030.
