Statement by Executive Vice-President Vestager on the second Important Project of Common European Interest in the hydrogen value chain

©European Union, 2021, Source: EC - Audiovisual Service©European Union, 2021, Source: EC - Audiovisual Service

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.