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State aid
In this spirit of the twin green and digital transition and the context of economic recovery, the Commission has been revising the rules on state aid in a number of priority areas, including climate, energy and environment.
Currently, three documents compose the EU framework for state aid, which is pivotal for hydrogen, plus a fourth one that refers to the compatibility of state aid with the Important Projects of Common European Interest (IPCEIs):
- Guidelines on State aid for climate, environmental protection and energy (CEEAG);
- General Block Exemption Regulation (GBER);
- the EU Temporary Crisis and Transition Framework for State Aid (TCTF);
- the Communication on Criteria for the analysis of the compatibility with the internal market of State aid to promote the execution of important projects of common European interest (2021);
Although there is tight control on state aid under Treaty provisions for the integrity of the Single Market, there are some exceptions allowed, provided they do not distort competition and are compatible with the internal market. State aid could not be allocated by each single Member States without prior scrutiny of the European Commission via a notification procedure, especially when referring to the CEEAG or the TCTF. Still, a few exceptions apply, as the de minimis regime and the GBER allows Member States to avoid notification in order to subsidise national projects through own resources if compliant with the legislation.
The Guidelines on state aid for climate, environmental protection and energy 2022
The new guidelinesentered into force on 28th January 2022. They work together with other aid state aid measures relating to hydrogen projects, while adding a new complementary level applying to integrated and large European cross-border hydrogen projects across the value-chain. The aim of the guidelines is to enable the Green Deal objectives by broadening the categories of green investments and technologies that Member States can support to reach climate objectives. The focus of the guidelines is to accelerate the roll-out of renewable energies and those technologies that reduce GHG emissions and foster energy efficiency.
Within the new CEEAG, which entered into force in 2022, hydrogen related activities are widely covered. This includes its production and use throughout the value chain, such as buildings, clean mobility (and related infrastructure), circular economy, energy infrastructure and district heating and cooling. According to the new provisions, aid can go up to 100% of the funding gap where competitive bidding is foreseen, covering the entire net extra costs (CAPEX and OPEX) of the projects. Aid to produce low-carbon hydrogen is also foreseen, as well as for the construction of CCUS equipment, even though the threshold and intensities for such activities are lower compared to the support granted to renewable hydrogen.
The Temporary Crisis and Transition Framework (TCTF)
In November 2023, the Commission adjusted certain elements of the TCTF in order to accommodate the crisis response to Russia’s invasion of Ukraine. The TCTF, originally adopted in March 2023, allows Member States to temporarily provide support schemes or individual aid , until the end of 2025, for production and storage of renewable hydrogen and renewable hydrogen-derived fuels, and the use of renewable and electricity-based hydrogen for decarbonisation of industry. Compared to the previous temporary framework, certain categories can benefit from more flexible criteria, increased aid scale and scope, and extended completion periods. The TCTF also applies to projects through a retroactive clause: projects that have started before the entry into force of the TCTF can also be addressed.
The TCTF also opens the possibility to directly support investments for the scale up of manufacturing of technologies and the related advanced materials, components and critical raw materials. By expressly addressing electrolysers, it helps trigger the manufacturing capacities needed by 2030. Beyond the schemes that Member States can adopt, enhanced support is also possible for companies that risk diverting investments to third countries through the so called “matching aid”.
Finally, the TCTF maintains the possibility for Member States to link the granting of aid to compensate for high energy electricity and gas prices (in force for an extended period, until end of June, 2024), to environmental protection or security of supply requirements such as the consumption of a certain share of renewable energy, investments in energy efficiency in production processes, heating or transportation, and reduction or certification of natural gas consumption.
The Green Deal General Block Exemption Regulation (GBER)
The GBER is a tool that aims to facilitate state aid support to companies, without recurring to burdensome notification procedures. This instrument is also expected to have a positive impact on the deployment of hydrogen as it covers the whole hydrogen value chain, such as renewable hydrogen production, infrastructure (for renewable hydrogen or more than 50% of renewable hydrogen/gases), industry decarbonisation (including the use of renewable hydrogen, renewable hydrogen derivatives and low-carbon hydrogen) and the deployment of vehicle fleets and hydrogen refuelling stations (HRS, using renewable and low-carbon hydrogen).
In June 2023 the Commission updated the GBER to simplify and speed up support in green and digital transition areas. The aid for these categories provides higher notification thresholds than before (e.g., on renewable hydrogen production, industry decarbonisation and hydrogen mobility, and also on training and skilling of employees), and may grant up to 100% of the funding gap in case of bidding processes. The new GBER also opens the possibility to exempt operating aid for the production of renewable hydrogen, albeit this is limited to small scale installations. The regulation has been designed to complement major European hydrogen support schemes to projects, such as the Important Projects of Common European Interest (IPCEIs).
Lastly, the Communication on Projects of Common Interest was revised under the general review of competition policy initiated by the European Commission. The revised communication was published in December 2021 and it serves to give guidance on the assessment of public financing of IPCEIs (such as the one on hydrogen) under state aid rules. Member States can use IPCEIs to pool financial resources, act quickly and connect the right players along key value chains. They are a catalyst for investment and allow Member States to fund large-scale innovation projects across borders in case of market failures. Moreover, the communication applies to large European integrated cross-border hydrogen projects of different TRL levels (RDI, First Industrial Deployment (FID) and Infrastructure deployment) across the value chain.
What’s in it for hydrogen?
The revision of State aid rules facilitates public support to the development of key industrial sectors and innovative value chains and is proven to give leverage to the deployment of hydrogen and fuel cell technologies and their role in steering the energy transition, via potential increased funding channels and amounts. This is especially the case under the new GEEAG, where different categories of State aid measures can directly or indirectly support the hydrogen sector in a wide range of activities, operative costs needs may be considered and aid intensities may reach 100% in case of competitive bidding processes.
So far, the three IPCEI waves in the hydrogen sector (Hy2Tech, Hy2Use, Hy2Infra) gave a substantial impetus to the development of various segments of the hydrogen industry. The inclusion and collaboration of a high number of Member States in these IPCEI waves also provides essential geographical diversity, which helps the ramp up of the sector on an EU-wide scale.
However, rules stemming from the TCTF, especially those linked to manufacturing of clean technologies (hydrogen is in the scope) and recovery and recycling of critical raw materials, are supposed to be in place until the end of 2025; while further rules of the CEEAG, GBER and the de minimis rule will continue to give the general guidelines regarding the national support eligible for hydrogen projects until future communication of DG COMP.
Links to the original document and additional information:
General Block Exemption Regulation
Guidelines on State aid for climate, environmental protection and energy
