The European Commission will launch a new round of the European Hydrogen Bank after awarding nine projects in the third auction , with more than 1 GW of electrolysis capacity and premiums awarded at less than €1 per kilogram.
“Nine projects were selected across three categories, with prices ranging from less than €0.60 per kilogram to almost €3.50 and with more than 1 GW of electrolysis capacity. I would say these are good results,” analyzed Marco Molica Colella , Director of Funding & Innovation at Hydrogen Europe.
The tender also revealed a greater geographical dispersion. Greece and Austria appeared for the first time among the winning countries, while Finland hosted one of the largest projects. Initiatives were also selected in Denmark, Germany, Spain, Norway, and Portugal.
For Hydrogen Europe, this expansion of the European map may be related to the progress of the implementation of the Renewable Energy Directive, known as RED III, and to greater clarity on the obligations for the consumption of renewable fuels of non-biological origin.
However, the Hydrogen Europe executive points out that awarding a premium of less than €1 per kilogram does not guarantee that the project will be profitable or that it will reach the final investment decision. The incentive only covers part of the difference between the price required by the producer and the buyer's willingness to pay.
“In Europe, we often talk about costs when we talk about the financing gap, without explicitly mentioning the price a project needs to be viable. This can be misleading, since cost is only one part of the equation, as projects must also cover financing costs, risks, and the return required to attract investment,” Molica Colella pointed out.
The executive thus differentiated between the technical cost of production and the commercial price a plant needs to receive. This price must cover operating costs, initial investment, cost of capital, and the margin required to offset risks. The awarded premium enters this equation as supplementary income. The greater the gap between the final price of hydrogen and what the buyer is willing to pay, the greater the support required.
“ €3.50 is better for closing the gap than €0.50 or €0.60. When you have a project around €3 per kilogram or more, you're talking about a significant amount ,” he said.
Reduced premiums can be due to particularly favorable conditions, such as competitive renewable electricity, advanced commercial contracts, or other sources of public support. They can also result from aggressive strategies to position themselves within the bidding process. The real test comes after the award, when the project must sign the agreement, provide guarantees, and demonstrate that it has sufficient resources to move forward.
“When a grant is signed, there is a real commitment. It can happen that the project concludes that it is not in a position to sign and provide a guarantee of compliance before all the elements are secured,” Molica Colella acknowledged.
“ Projects that survive withdrawals and manage to reach completion demonstrate that they are robust in terms of demand, market conditions, and prices ,” he added.
What to expect from the fourth auction?
The European Commission plans to launch the fourth auction of the European Hydrogen Bank in December 2026, with a budget of up to €500 million. The draft terms and conditions, published on July 9 and open for comments until August 24, will serve as the basis for the final design of the call for tenders.
The proposal divides the funds into two categories: €350 million for renewable hydrogen of non-biological origin and €150 million for renewable or low-carbon electrolytic hydrogen projects . The support would maintain the format of a fixed premium per kilogram produced, certified and verified, for a maximum of ten years.
“The confirmation of the fourth auction is very positive. We have worked hard for it and it wasn't guaranteed, especially after the second call for bids,” Molica Colella emphasized.
The document published by the European Commission acknowledges that projects are still not progressing without public funding due to the gap between their production costs and the available market price. It also admits that buyer-related restrictions proved unattractive to developers in previous funding rounds, a diagnosis that reinforces Hydrogen Europe's concern about the lack of firm demand.
Despite this finding, the draft maintains the classification of bids solely by price . Projects will request a premium in euros per kilogram and will be ranked from the lowest bid until the budget is exhausted, meaning that competitive pressure will remain a central element of the bidding process.
The association is demanding that the next funding round include conditions that acknowledge delays beyond the developers' control. One of the main points is the timeframe for reaching a final investment decision.
“There are many reasons why a project might take longer than the project itself. If the conditions are too strict, there is a risk of losing out on good developments,” the executive warned.
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He added: “The time to reach the final investment decision is very short. Our constant request is to make the conditions more flexible when the cause of the delay is external to the project.”
The fourth auction must also avoid making price the sole practical criterion for competitiveness. A minimum premium may be attractive to the public budget, but it loses value if the winning bidder fails to secure its financing.
The challenge will be to balance discipline, maturity, and flexibility. The Commission will have to filter out opportunistic bids without excluding solid projects affected by network delays, permits, infrastructure, or decisions made by their buyers.
Without firm demand, there is no bankable project.
Demand is one of the main obstacles to turning a project into an operational plant. A developer may receive European support, but will not obtain financing if they lack predictable revenue, according to the association.
“If you don’t have a buyer capable of committing to a long-term contract, you can’t have certainty about your income. And if you don’t have that certainty, it generates a chain reaction affecting investors and banks,” Molica Colella explained.
The market faces a mismatch between producers and consumers. Plants need long-term contracts to recoup their investments over periods of 15 or 20 years, while many buyers are reluctant to commit to paying for a fuel that is more expensive than its fossil fuel alternatives.
This gap necessitates complementing production incentives with instruments aimed at consumption. Without demand-side incentives, a premium per kilogram may improve the producer's bottom line, but it does not guarantee a contract.
Hydrogen Europe argues that funding must be properly distributed across the value chain. Sectors such as steel, refining, shipping, and aviation need regulatory and economic signals to translate their decarbonization targets into effective procurement.
The third auction itself highlighted this difficulty . The maritime category managed to award projects with higher premiums, while the aviation segment produced no winners. The existence of a specific category does not, in itself, create a market. Investment only progresses when regulation, financing, and demand align around enforceable contracts.
From corporate finance to project finance
“Most projects that reach the final investment decision are based on corporate financing. The dialogue with banks takes place at the company level, not at the project level,” the executive noted.
This model favors groups with the capacity to contribute their own capital, absorb delays, and cover potential cost overruns. At the same time, it limits the entry of smaller developers and makes market growth more expensive.
The next step should be the move towards project finance . Under this model, financial institutions grant debt based on contracts, cash flows, and the specific assets of the development. In mature sectors, bank debt can represent around 80% of the investment, while sponsors contribute the remaining 20%. “ Today we're probably lucky if the opposite happens ,” observes the representative from Hydrogen Europe.
The high proportion of equity capital increases financing costs and necessitates higher returns. As a result, hydrogen requires a higher price, a higher premium, or a combination of both. To reduce this exposure, Hydrogen Europe is calling for public guarantees and risk-sharing mechanisms. These instruments could cover specific aspects of the operation, such as breach of an electricity supply contract, infrastructure delays, or technological performance issues.
“ We need a combination where subsidies continue, but there are also specific financial instruments capable of reducing a certain part of the risk ,” the executive stated.
The model would not be unprecedented. Similar guarantees accompanied the growth of wind and solar technologies, and continue to be used in markets where financial institutions cannot absorb all the risks.
Hydrogen Europe identifies five key factors that influence the final investment decision for projects: regulation, demand, infrastructure, electricity supply, and technological performance . The lack of long-term contracts reduces revenue predictability, while delays in pipelines, terminals, or cross-border connections can disrupt the plant's operational start-up.
The third auction demonstrated that there is competition to submit bids at or below €1 per kilogram. The fourth will have to verify that these prices can be translated into contracts, bank loans, and final investment decisions.