Government to hold first hydrogen auction in early 2021

The government will hold the first auction for the production of green hydrogen at the beginning of next year, revealed João Galamba, Secretary of State for Energy, to ECO/Capital Verde, explaining that “we will hardly be able to do it this year”. After this auction, the production of green hydrogen could start on the ground at the end of 2021 or the beginning of 2022.

“We will have a financial envelope to allocate, a total volume of hydrogen that we want to support and we will do an auction,” said the Energy Commissioner. The allocation from a financial envelope of 500 million until 2030 will be through a “competitive mechanism.”

According to the National Strategy for Hydrogen, the state support will be around 900 million over 10 years, of which 500 million through the Environmental Fund, via auction, to cover the extra cost and support the production and price of hydrogen associated with the 2 GW of installed power. And a further 400 million EU funds to support the investment: 40 million from POSEUR and 360 million from Portugal 20-30. “Whether to support investment or production, all funds will be allocated competitively,” he stressed.

As for the kg of green hydrogen to be auctioned, Galamba refers to the final version of the National Strategy for Hydrogen that will be made public next week, after being approved by the Council of Ministers. There, the “weight of hydrogen production needed to meet the targets in the national energy mix will be discriminated: between 1 and 5% by 2025 and 10 to 15% by 2030. These are the kg implicit in these same targets,” he said.

“We want to use the solar auction experience. They will be auction-based mechanisms for allocating certain volumes of hydrogen. Imagine that by 2023 we want to support a certain number of thousands of tons. We’ll do an auction to elect projects up to that exact amount we want to produce. The reference price will be based on the best estimate we can make of what the production costs are. And then we’ll do an auction, just like in solar. It will be fully competitive and I guarantee that there will be no excessive rents,” Galamba said.

In a clarification session with the industry, and faced with the concerns raised by the Portuguese Business Confederation about the need for large investments in hydrogen, the office of the Secretary of State for Energy had mentioned “future hydrogen auctions, which will take into account the concerns of companies” and may even benefit them. On the price of hydrogen, it was guaranteed that it should not be a burden on consumers.