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Auctions have always been a friend to clean technology, with the cost of wind and solar projects in Europe dropping substantially over two decades thanks to bidding schemes that incentivise developers to ask for lower and lower levels of subsidies. It is clear that this same mechanism will help reduce green hydrogen prices.
Jorgo Chatzimarkakis is the Chief Executive Officer of Hydrogen Europe.
Last month, Denmark held Europe’s first national auctions for green hydrogen, and the results were hugely encouraging for the future of the hydrogen economy. Six projects totalling 280MW secured support, all of them well below the auction’s ceiling price – the maximum level of support one can receive – of €2 per kilogram of hydrogen produced. All the winning bids fell below €1.2/kg, with the most competitive project asking for a premium of only €0.15/kg! What’s more, the auction was massively oversubscribed, with 675MW worth of projects participating, according to the Danish energy agency.
What this tells us is that the economic fundamentals behind auctions will help hydrogen just as it helped wind and solar. It also tells us that, when the right conditions are in place, green hydrogen projects are far more viable than some critics give them credit for. Denmark has a renewable-heavy electricity grid that is set to be more than 90% green by 2028 (when the auction winning projects will be operational). It is also expecting part of its hydrogen backbone to be completed by the same time. This part of the backbone will connect these auction-winning projects to Germany, where a host of end-users (read: offtakers!) will be ready and willing to purchase the green hydrogen. These conditions make Danish green hydrogen viable, and their example demonstrates to other countries that it’s possible.