IF25 Hydrogen Auction: a new step towards a competitive and sustainable European hydrogen market

Three topics, broader scope

Building on the lessons from the 2023 pilot and 2024 second round, the IF25 Hydrogen Auction introduces three topics, updated resilience and sustainability requirements, and a broader scope that now includes electrolytic low-carbon hydrogen alongside renewable (RFNBO) hydrogen. The three topics (or ‘budget baskets’) are:

• Topic 1 – RFNBO and/or low-carbon hydrogen (400 million euros): open to all off-take sectors.
• Topic 2 – only RFNBO hydrogen (400 million euros): open to all off-take sectors.
• Topic 3 – Maritime basket (200 million euros, possibly extended by 100 million euros): dedicated to hydrogen and derivatives for maritime off-takers within the EEA.

Maximum bid price

Each project may apply to only one topic, and bids will continue to be ranked on price only. This is a characteristic of the fixed-premium auction mechanism. The maximum bid price remains at 4.00 euros/kg of hydrogen produced, with a maximum grant per project of 200 million euros and a minimum electrolyzer capacity of 5 MWe.

Support mechanism: fixed premium for verified hydrogen production

As in previous editions, successful bidders will receive a fixed premium per kilogram of hydrogen produced over a 10-year period, with payments triggered only after verified production. The pay-as-bid model remains unchanged, ensuring competitive price discovery while avoiding over-subsidization.
The Innovation Fund’s Auction-as-a-Service (AaaS) feature will once again allow Member States to allocate national top-up funding through the EU mechanism — a tool already adopted by Germany, Spain, Austria, and Lithuania in past rounds.

Key novelties in the 2025 auction

The draft terms and conditions outline several significant updates designed to balance cost efficiency, sustainability, and industrial resilience.

Inclusion of electrolytic low-carbon hydrogen

For the first time, the auction will support both RFNBO and low-carbon electrolytic hydrogen, in line with the new Hydrogen and Gas Market Directive (EU) 2024/1788. Projects producing low-carbon hydrogen must demonstrate compliance with a 70% GHG reduction threshold, verified at the end of the support period.

Updated resilience criteria aligned with the Net Zero Industry Act

At least 75% of electrolyzer units must originate outside China, and stacks must not come from Chinese suppliers. Only two minor components may originate from China. These conditions aim to strengthen the EU’s industrial base and reduce strategic dependencies on non-EU manufacturing. In addition, projects must submit a cybersecurity plan, ensuring that operational control and data storage remain within the EEA.

Introduction of the “Do No Significant Harm” (DNSH) criteria

For the first time, hydrogen manufacturing projects must comply with the six Technical Screening Criteria of the EU Climate Delegated Act — addressing climate mitigation, adaptation, pollution prevention, water and marine resource use, and biodiversity protection. Applicants must submit a DNSH compliance strategy at proposal stage, followed by verification at financial close and end-of-project reporting.

Enhanced qualification requirements

Projects must provide extensive documentation at application stage, including:

• Electricity sourcing strategy proving 60% of supply secured via pre-contractual agreements;
• Off-take agreements covering at least 60% of hydrogen output;
• Electrolyser procurement plans (MoUs or LoIs with suppliers);
• Environmental and grid connection permits;
• Evidence of equity support for at least 60% of total financing;
• Completion guarantee equal to 8% of the maximum grant amount.

These requirements ensure only mature, bankable projects enter the competition.

Market context and lessons learned

The first two rounds of the European Hydrogen Bank auctions have demonstrated both the strong appetite of the market and the challenges of project delivery under tight implementation timelines.

The first pilot auction (2023) received 132 bids from 17 countries, with seven projects selected at bid prices between 0.37–0.48 euros/kg of renewable hydrogen. While all awarded projects were initially announced in early 2024, some — including Benbros’ El Alamillo H₂ — later withdrew. The Catalina project, a large Spanish hydrogen–ammonia initiative, also stepped back after grant agreement signing, freeing a significant portion of the budget.

The second auction (2024), launched under the Innovation Fund with a total budget of 1.2 billion euros, attracted 61 proposals for a total capacity exceeding 6 GW — once again massively oversubscribed. The Commission initially announced 15 projects selected (12 under the general topic and 3 under the maritime basket) with clearing prices of 0.60 euros/kg for renewable hydrogen and 1.88 euros/kg for maritime applications.

However, as the negotiations for grant agreements advanced, several large-scale winners withdrew — most notably Zeevonk (560 MW, Netherlands) and Lubmin (Germany) — both facing infrastructure and permitting delays. In the case of Zeevonk, the project’s dependency on the Delta Rhine Corridor pipeline and associated delays to its upstream IJmuiden Ver Beta offshore wind connection pushed its commissioning beyond 2030, breaching EHB eligibility rules.

In total, 384 million euros of awarded budget was withdrawn before grant signing, and a further 230 million euros (Catalina) after signing, leaving 902 million euros unutilized out of the 2 billion euros offered across both rounds. According to the European Commission, some of these funds could be reallocated to the upcoming IF25 auction, increasing its potential impact and coverage.

The final award list for the 2024 auction is therefore still pending, with new reserve projects invited for grant preparation expected to be confirmed before the end of 2025.

This dynamic adjustment of awarded projects underscores the evolving maturity of Europe’s hydrogen pipeline: while competition remains intense, achieving financial close within the required 2.5 years and securing credible infrastructure and off-take agreements continues to be a key challenge.

Benefit from our expertise, built on a strong IF track record

PNO Innovation can support you in performing the required calculations, structuring, and writing convincing documents, as well as managing the application process. More importantly, we can provide you the necessary insights for a successful bidding, which will give you clear and easy-to-understand strategic insights on the specific auction round. This will help you make an assumption-based bidding decision that is not only low enough to be successful, but also as high as your project’s boundaries allow, so you can take the most out of your participation in the auction. Good preparation and a strong bid map are crucial to success. In recent years, the experts at PNO Innovation have supported many energy-intensive companies and partnerships in successfully applying for the Innovation Fund. So contact our energy, chemical, and high-temperature industry experts today by submitting the contact form at the bottom of this page or by calling +31(0)88 838 13 81.