IPCEI Hydrogen – kick-starting Europe’s hydrogen revolution

High costs and low demand have hindered the creation of an emissions-free hydrogen market. With IPCEI Hydrogen, the EU’s new gigantic push to bring together public and private hydrogen investments, the hydrogen market may finally have its much needed kick-start.

In December 2020, 22 EU countries and Norway announced their intention to launch an “important project on common European interest” (IPCEI) for hydrogen. In Norway, Enova maintains the role of organizing participation in IPCEI Hydrogen projects for Norwegian companies. The deadline for submitting expression of interest in participation was 1 February 2021. Enova is currently considering several Norwegian projects for a matchmaking process. In this article, we will explain the legal basis for IPCEI projects, and how IPCEI provides a much needed kick-start for the development of a European hydrogen market.

What is an IPCEI?

At its core, IPCEI is a complex state aid project. An IPCEI aims at overcoming large market failures or other large systemic failures, by combining many singular state aid projects into a common roadmap structure. The IPCEI Hydrogen project aims to answer goals set out in EU’s 2020 hydrogen strategy. IPCEI’s legal basis is the TFEU’s Article 107(3)(b) under EU-law, and the EEA Agreement’s Article 61(3)(b) under EEA-law. Both the Commission and ESA have adopted identical guidelines, regulating in detail how these provisions must be interpreted.

The aim of the IPCEI Hydrogen project

The IPCEI Hydrogen project aims to pave the way for a blue and green hydrogen market in Europe, by strategically supporting hydrogen projects along the full hydrogen value chain. This involves supporting the production of hydrogen, developing hydrogen end-user technology for the industry and transport sectors, and developing the infrastructure needed for a functioning hydrogen market in Europe. The participating countries aim to notify the Commission and ESA of the projects by November 2021. Project implementation is intended to start in the beginning of 2022.

The IPCEI Hydrogen project is a powerful tool for developing a functioning hydrogen market in Europe, primarily due to the flexibility IPCEI’s legal framework offers. In particular, the IPCEI-guidelines, as the sole state aid framework, allows support for projects involving ‘first industrial deployments’. First industrial deployments constitute projects which involve commercialization of a new highly innovative product or production method, in the steps subsequent to the mass production phase. For these projects, both capital expenditures and operational expenditures (CAPEX and OPEX) count as eligible costs. Furthermore, aid intensity could include as much as 100% of the project’s eligible costs, without caps in absolute amounts. In other words, the IPCEI legal framework offers an impactful value chain approach in order to kick-start the European hydrogen market.

What will the scope of the IPCEI Hydrogen project be?

Since adopting the IPCEI-guidelines in 2014, the Commission has approved three large value chain-directed projects. In 2018, the Commission approved an IPCEI-project notified by France, Germany, Italy and the UK, allowing a total of €1.75 billion in state aid for the development of microelectronics. In 2019 and 2021, the Commission approved two battery related projects involving 11 EU member states. The 11 member states plan to invest a total of €6,1 billion of public funds in order to develop a full battery value chain, from the extraction of raw materials to the recycling of used batteries. The size of the IPCEI Hydrogen project has not yet been revealed, but with more participating countries (23 in total), it will likely be even larger than previously approved IPCEI projects.

Although the train may temporarily have left the station for Norwegian companies who wish to participate in the IPCEI Hydrogen project, the two IPCEI battery projects indicate that this may not be the last round of IPCEI Hydrogen projects. Interested companies should therefore follow future developments in the EU/EEA, and potential future calls from Enova, closely.

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