European Commission approves €158 million fund to LOTOS Green H2 project

The European Commission has approved, under EU State aid rules, a €158 million Polish measure to support LOTOS Green H2 sp. z o.o, a special purpose vehicle ultimately owned by PKN Orlen SA, in the production of renewable hydrogen to be used in the refinery production processes.

The measure will contribute to the achievement of the EU Hydrogen Strategy and the European Green Deal targets while helping end dependence on Russian fossil fuels and fast forward the green transition in line with the REPowerEU Plan.

Poland notified the Commission of its plan to support LOTOS’s Green H2 project to produce renewable hydrogen through water electrolysis (i.e. a process of using electricity to decompose water into oxygen and hydrogen gas) instead of through steam methane reforming using natural gas. This renewable hydrogen will be used in the fuel production processes in PKN Orlen’s refinery in Gdańsk.

The aid, which will take the form of a direct grant of €158 million, will support the installation of an electrolyser with a capacity of 100 MW, as well as the construction of 50 MW photovoltaic power plant and 20 MWh battery storage. The electrolyser is expected to start operating as of 2027 and to gradually increase its production up to 13,600 tonnes of renewable hydrogen per year.

Once completed, the project is expected to avoid the release of a total of 2.5 million tonnes of carbon dioxide over the project’s lifetime. In addition, to maximise the reduction of greenhouse gas emissions, hydrogen will be produced solely with electricity generated from renewable sources.

Poland selected the Green H2 project, in the context of an open call, to form part of an IPCEI on hydrogen technologies and systems. The Green H2 project intends to reduce greenhouse gas emissions in the energy-intensive and hard-to-abate refinery sector. As an aid for the reduction of greenhouse gas emissions, including through support of decarbonisation projects, is one of the main categories of aid allowed by the CEEAG, the measure was best suited for assessment under these guidelines, rather than as part of said IPCEI.

The measure facilitates the development of economic activity, in particular the production of renewable hydrogen. At the same time, it supports the objectives of key EU policy initiatives such as the European Green Deal, the EU Hydrogen Strategy and the REPowerEU Plan.

The aid has an ‘incentive effect’, as the beneficiary would not carry out the investments in renewable hydrogen production without public support.

The measure has a limited impact on competition and trade within the EU. In particular, it is necessary and appropriate to promote the production of renewable hydrogen. In addition, it is proportionate, as the level of aid corresponds to the effective financing needs.

“This €158 million measure enables Poland to help LOTOS Green H2 in the deployment of renewable hydrogen production and allows for partial decarbonisation of refinery activities. This will contribute to the greening of a very energy-intensive sector, in line with our commitment to transition to a net zero economy. At the same time, it ensures that any potential competition distortions are kept to the minimum”, said Margrethe Vestager.

Engr. Haseeb Ullah

Haseeb covers the global energy market for both conventional and modern energy resources. His expertise is on the global energy supply chain from generation to distribution and end-users. He has a Master degree in Engineering Management and a Bachelor of Science degree in Electrical Engineering.
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