Multiple project cancellations and calls for a review of the European Union’s (EU’s) official green definitions are likely to have put off some potential investors in Europe’s hydrogen (H2) sector over the last 12 mos. However, the results of the EU’s latest €1-B subsidy auction show that the sector retains significant momentum, with dozens of developers lining up projects across the continent. 

The European Hydrogen Bank’s third auction was heavily oversubscribed. The main category—for projects producing green H2 compliant with the EU’s Renewable Fuels of Non-Biological Origin (RFNBO) definition—drew 50 bids seeking total funding of €7.3 B, which is significantly more than the €600 MM of subsidies on offer. The auction produced five winning bidders in the form of projects spanning Greece, Spain, Denmark and Austria.  

Daniel Fraile, Chief Policy and Market Officer at industry association Hydrogen Europe, commented: “We welcome the Hydrogen Bank results. We see a strong continued interest in the auctions, with as many applications as in the previous round.” 

Germany’s adoption of EU mandates on the use of clean fuels in transport has created clear opportunities for the development of electrolytic H2 projects targeting the German market, he added. 

Low bidding. The value of the subsidies that projects bid for was marginally higher than in the previous auction, but was still surprisingly low, continuing a trend seen in the first two auctions.  

The subsidies, paid as fixed premiums over 10 yrs, are designed to bridge the gap between production costs and the price that offtakers are willing to pay. The subsidies awarded in the most recent auction were mostly < €1/kg, nowhere near the level need to cover that gap.  

That implies two things: 

1. Competition was strong, with projects submitting low bids to try to undercut their rivals, even if it meant securing a relatively small subsidy payment. 
2. Green H2 will need to be sold at a large premium to fossil-fuel H2 producers if they are going to break even or achieve a slight profit margin. 

Strong competition for subsidies was not evident in all categories of the auction. A special category for H2 aimed specifically at offtakers in the maritime and aviation sectors was undersubscribed, with some of the offered subsidies left unallocated. Winning bids in the category were higher, at €3.48/kg and €3.49/kg, respectively, possibly reflecting the real market price of green H2.  

In total, the auction awarded subsidies to projects across seven countries in the European Economic Area, with an expected electrolyser capacity of about 1.1 GW, producing > 1.3 MMt of H2 over their first 10 yrs of operation.  

The successful projects will be invited to prepare their grant agreement with the European Climate, Infrastructure and Environment Executive Agency (CINEA), and agreements are expected to be signed in 4Q 2026. Projects must reach financial close 2.5 yrs after signing the grant agreement and enter into operation 5 yrs after signature of the grant agreement.