EU considers extending joint gas purchasing scheme to bulk-buy green hydrogen: reports

The European Commission has put forth a proposal to transform the existing joint gas purchasing initiative, originally established as an emergency response in April 2022 to replace Russian gas supplies, into a permanent arrangement. This revised scheme would not only continue to address gas procurement needs but also encompass the collective procurement of green hydrogen by member states. The plan, as reported by Reuters, suggests that participation in this initiative would be voluntary under normal circumstances. However, in the event of another energy supply crisis, all member states would be required to participate, aimed at avoiding competition for limited energy resources.

Previously, this scheme had been considered as a potential model for future hydrogen purchases, but now officials are looking to formalize this proposal into law by year-end, partly to provide support to the European Hydrogen Bank. The bank is gearing up for an €800 million pilot auction in November, primarily geared towards boosting renewable hydrogen project development within the EU. It offers fixed premiums of up to €4.50 per kilogram to bridge the cost gap between green hydrogen and fossil-based hydrogen, provided that pre-contractual agreements are in place with potential buyers.

Additionally, the bank plans to host auctions to meet the EU's goal of importing 10 million tonnes of green hydrogen from non-EU sources by 2030. However, achieving this goal would likely necessitate a mechanism to aggregate demand from member states.

The extension of the joint gas purchasing scheme to include hydrogen procurement raises questions about previous announcements regarding the expansion of Germany's H2Global scheme to the entire EU, with a connection to the European Hydrogen Bank. H2Global operates as a double-sided auction system, where international suppliers bid to provide hydrogen at the lowest possible price, and domestic buyers bid to purchase it at the highest price. The German government funds the price difference between these two bids.

In May, Germany's vice-chancellor Robert Habeck and the European Union's energy commissioner Kadri Simson revealed plans to extend this initiative to the rest of Europe, urging member states to establish their own H2Global initiatives if they hadn't already done so in a joint letter sent later in the summer.

While one approach could involve the European Commission pooling a budget from member states to directly support Hintco (the company behind H2Global auctions) in conducting auctions on behalf of the European Hydrogen Bank, this would require a time-consuming assessment. Alternatively, the extension of the joint gas purchasing mechanism, which has already executed two tenders to acquire fossil gas from international suppliers, might render a separate instrument for aggregating demand unnecessary.