State aid: Commission approves €246 million Dutch scheme to support renewable hydrogen production

The European Commission has approved, under EU State aid rules, a €246 million Dutch scheme to support the production of renewable hydrogen.The measure aims to contribute to the development of renewable hydrogen in line with the objectives of the EU Hydrogen Strategy and the European Green Deal.The scheme will also contribute to the objectives of the REPowerEU Plan to end dependence on Russian fossil fuels and fast forward the green transition.

The Dutch scheme

The Netherlands notified the Commission of its intention to introduce a €246 million scheme to support the production of renewable hydrogen in order to increase the country’s electrolysis capacity.

The scheme will support the construction of at least 60 MW of electrolysis capacity. The aid will be awarded through a competitive bidding process planned to be concluded in 2023. The tender will be open to all companies established in the European Economic Area and operating, or wishing to build and operate, a hydrogen production unit in the Netherlands. The aid will take the form of a direct grant for a 7-to-15-year period. Beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin, set out in recently adopted delegated acts on renewable hydrogen. This includes contributing to the deployment or financing of the additional renewable electricity needed to produce the renewable hydrogen supported under the measure.

The scheme will contribute to the Netherlands‘s efforts to achieve 500 MW of electrolyser capacity in 2025 and 3-4 GW by 2030.It will also support the EU‘s ambitions to install at least 6 GW of renewable hydrogen-based electrolysers and the production of up to 1 million tonnes of renewable hydrogen by 2024, and at least 40 GW with a production of up to 10 million tonnes of domestic renewable hydrogen in the EU by 2030.The Netherlands expects that the scheme will lead to the equivalent of around 55 kilotons of CO₂ being avoided every year until 2030, which will contribute to the Netherlands‘ efforts to reduce its greenhouse gas (GHG) emissions by 55 % by 2030 and to achieve climate neutrality by 2050, compared to 1990 levels.

The Commission’s assessment

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) the Treaty on the Functioning of the European Union, which enables Member States to support the development of certain economic activities under certain conditions, and the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG‘).

In particular, the Commission found that:

• The scheme is necessary and appropriate to facilitate the production of renewable hydrogen, and thus the decarbonisation of the industrial, transport and/or energy sectors.
• The measure has an “incentive effect”, as the as the beneficiaries would not carry out the relevant investments without the public support.
• The Netherlands put in place sufficient safeguards to ensure that the scheme has a limited impact on competition and trade within the EU. In particular, the beneficiaries will be selected following an open, transparent and non-discriminatory bidding process and the aid will be kept to the minimum necessary to undertake the projects. In addition, the aid will bring about positive effects, in particular on the environment, in line with the European Green Deal, that outweigh any possible negative effects in terms of distortions to competition.

On this basis, the Commission approved the Dutch scheme under EU State aid rules.

Background

The Commission’s 2022 CEEAG provide guidance on how the Commission assesses the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.

The Guidelines, applicable as of January 2022, create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU‘s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and cater for the increased importance of climate protection. They include sections on energy efficiency measures, aid for clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity, as well as measures to ensure security of energy supply, subject to certain conditions.

EU rules on renewable hydrogen are set out in two delegated acts based on the Renewable Energy Directive of 2018, which established an EU-wide binding renewable energy target of at least 32% by 2030. The stringent criteria for renewable fuels of non-biological origin (RFNBOs), such as renewable hydrogen and other renewable Power-to-X products, ensure that their environmental impact is minimal and that they contribute to the deployment of renewable energy. Amongst others, emission savings of the end product must be at least 70% across the entire value chain.

With the European Green Deal Communication in 2019, the Commission reinforced its climate ambitions, setting an objective of net zero GHG emissions by 2050.The European Climate Law in force since July 2021, which enshrines the legally binding 2050 climate neutrality objective and introduces the intermediate target of reducing net GHG by at least 55% by 2030, set the ground for the ‘Fit for 55′ package of legislative proposals presented by the Commission on 14 July 2021 and now well advanced toward adoption.The revisions of the Renewable Energy Directive and the Energy Efficiency Directive have been provisionally agreed by EU co-legislators with more ambitious binding annual targets to increase the production of energy from renewable sources and reduce energy use at EU level. The renewables agreement raises the EU‘s binding renewable target for 2030 to a minimum of 42.5%, with the aim to reach 45% of renewables by 2030.

Scaling-up and speeding-up renewable energy across power generation, industry, buildings and transport will bring the EU one step closer to deliver the European Green Deal and the REPowerEU objectives.On 18 May 2022, the Commission published the REPowerEU plan, which sets out a series of measures to rapidly reduce EU’s dependence on Russian fossil fuels by accelerating the clean energy transition, including a Hydrogen Accelerator.

The non-confidential version of the decision will be made available under the case number SA.101998 in the State aid register on the Commission’s Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.