Commission approves €170 million Danish scheme to support renewable hydrogen production

The European Commission has approved, under EU State aid rules, a €170 million Danish scheme to support the production of renewable hydrogen through Power-to-X (‘PtX’) technologies.

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.

Denmark notified the Commission of its intention to introduce an around €170 million scheme (DKK 1.25 billion) to support the upscaling of the production of renewable hydrogen and derivatives, such as renewables-based ammonia, methanol, and e-Kerosene, using PtX technologies. PtX refers to a group of technologies that turn electricity into carbon-neutral synthetic fuels. The key PtX technology is electrolysis, which uses electricity to decompose water into oxygen and hydrogen gas that can be used as a fuel or in chemical processes.

The scheme will support the construction of up to 100-200 MW of electrolysis capacity. The aid will be awarded through a competitive bidding process to be concluded in 2023. The tender will be open to all companies planning to construct new electrolysers in Denmark. The aid will take the form of a direct grant for a ten year period. Beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin. This includes contributing to the deployment or financing of the additional renewable electricity needed to produce the PtX products supported under the measure.

The new electrolysers are expected to reduce greenhouse gas emissions by approximately 70,000 tonnes of CO2 annually across the industrial, mobility and energy sectors. The scheme will contribute to Denmark’s efforts to reduce its greenhouse gas emissions by 70% by 2030 compared to the 1990 level and to reach carbon neutrality by 2050. It will also help the EU reach its 2030 target for renewable energy production, which the Commission has proposed increasing to 45%.

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.
  • Denmark 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.
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