Hydrogen made in Europe under 4,5 euro's per kg is here to come! The First EU Hydrogen Auction, launched under the European Hydrogen Bank, was announced by the EU Commission on November 23, 2023 in which producers of renewable hydrogen can bid for support in the form of a fixed premium per kilogram of hydrogen produced. A week before Germany announced the build up of its Wasserstoff Kernnetz and a week later EU institutions agreed to not unbundle hydrogen networks, now risking conflics of interest as gas operators seek to prolong their rent on existing infrastructure,. They also decided not to install a European Network of Network Operators for Hydrogen (ENNOH) as an independent regulator, as the Commission proposed to govern the network and avoid conflicts of interest. This  option is  favoured by renewable energy associations, green NGOs, as well as the climate think-tank E3G. Under the EU pilot auction, producers of renewable hydrogen, as defined in the Renewable Energy Directive and its Delegated Acts, can submit bids for EU support for a certain volume of hydrogen production. The bids should be based on a proposed price premium per kilogram of renewable hydrogen produced, up to a ceiling of 4.5€/kg. Bids up to this price, and which also comply with other qualification requirements, will be ranked from the lowest to the highest bid price and will be awarded support in that order, until the auction budget is exhausted. The selected projects will receive the awarded subsidy on top of the market revenues that they generate from hydrogen sales, for up to 10 years. Once projects have signed their grant agreements, they will have to start producing renewable hydrogen within five years. Bidders have until 8 February 2024 (17:00 CET) to apply via the EU Funding and Tenders Portal. Project promoters are strongly encouraged to consult these frequently asked questions when preparing their proposals and to engage with a financial institution as soon as possible concerning their completion bonds. An Info Day will take place online on 30 November 2023. In Spring 2024,  the second round of auctions, reaching a total value of three billion euros will be launched. The premium is intended to bridge the gap between the price of production and the price consumers are currently willing to pay. According to a recent Bloomberg's New Energy Finance study, "2H 2023 Hydrogen Market Outlook The Demand Question", that was published last October 2023, only 5% of the USD 190 bln global public hydrogen funding as of October 2023, is committed to hydrogen supply. Just in time for the EU Auction, on November 15, 2023 the association of the supra-regional gas transmission companies FNB Gas e.V.,  submitted the draft application for the hydrogen core network, the so-called Wasserstoff-Kernnetz, to the Federal Network Agency and the Federal Ministry for Economic Affairs and Climate Protection. The total length of the optimized core network is around 9,700 km . Of this, 710 km is accounted for by pipelines from 17 other potential hydrogen network operators, which were submitted to the TSOs for comments on the initial planning status by 28.7.23. have been received. The core network consists mainly of converted natural gas pipelines (approx. 60%). The investment costs amount to € 19.8 billion and will have to be privately funded. The feed-in and feed-out capacities amount to around 100 GW and 87 GW respectively. The draft of the core network thus fulfills the goals of a Germany-wide, expandable, efficient and quickly realizable hydrogen network by the target year 2032, which are anchored in the EnWG amendment to the hydrogen core network. This puts Germany at the forefront of infrastructure development in Europe. The submission of the draft application also marks the start of the first consultation of the draft core network by the Federal Network Agency on its website. Once the amendment to the EnWG on the hydrogen core grid (Sections 28o – 28s) comes into force, the grid operators are expected to officially submit the final joint application in the first quarter of 2024, which will then be consulted on, reviewed and approved by the Federal Network Agency. The basis for modeling the core network is a scenario that was set together with the federal government based on criteria developed for this purpose. The defined scenario has a controlling function for the scope of the core network. According to German Law. Section 28r Paragraph 1 EnWG, the core network should be a Germany-wide and expandable hydrogen network for supra-regional transport and reach the currently known large consumption and production regions for hydrogen in Germany. Against this background, IPCEI projects (Important Projects of Common European Interest) and PCI/PMI projects (Projects of Common/Mutual Interest) will initially be taken into account in the core network, as well as projects that serve to integrate into a European hydrogen network. In addition, further criteria are applied: Projects that can be assigned to industrial sectors for which, from today's perspective, there is no sensible option for decarbonizing the industrial process as an alternative to using hydrogen (including iron and steel, chemicals, refineries, glass industry, ceramics). Real-world laboratories for the energy transition, hydrogen storage projects and large CHP power plant sites (> 100 MW of electrical CHP output) are also taken into account as representatives of future H2-ready power plants. In addition, sufficient connection options for production regions and electrolyzers should be guaranteed in accordance with the expansion paths of the National Hydrogen Strategy (NWS) and a regional balance should be created. Overall, the exit volume in the core network scenario in 2032 is around 280 TWhth. Of this, around 160 TWhth – i.e. over 50% – is attributable to forecast requirements at larger CHP locations, which are taken into account as representatives of future H2-ready power plants. The total exit volume is already well above the demand forecast of 95-130 TWhth for 2030, which is assumed in the National Hydrogen Strategy. The core network is therefore already designed for the transport of larger quantities and the further hydrogen ramp-up. Clearing the way for these investments, will be EU’s new hydrogen and gas market rules for which negotiations between EU Commission Parliament and Council were concluded on November 27, 2023 with a special carve-out for Germany’s municipal utilities. Initially proposed in December 2021, the rules  are prioritising “hard to abate” industries like steel and chemicals as preferred locations for the German Wasserstoff-Kernnetz as well. Formal approval is expected in March, before the European elections in June. “This agreement is a great achievement as it will boost the deployment of the emerging hydrogen sector, the transition of the gas sector towards renewable energy, and it also sets rules for consumer protection and strengthens the security of supply,” said Spain’s ecological transition minister Teresa Ribera, who represented the 27 EU member states in the talks on behalf of the Spanish EU presidency. The package consists of two laws: one directive describing investment rules and a regulation on market structure; the last topic is still not decided due to a disagreement on biogas targets and joint EU procurement for hydrogen. For his part, Geier managed to successfully conclude negotiations on investment rules – despite a last-minute scuffle between Germany and France on whether hydrogen infrastructure ownership should be more strictly regulated than gas and electricity grids, as the European Commission initially proposed. “Investment hurdles in the Commission proposal that would have slowed down the ramp-up of hydrogen have been removed,” said Jens Geier the social democrat EU Parlaiment rapporteur, referring to proposed “ownership unbundling” rules preventing network operators from simultaneously owning gas and hydrogen infrastructure. Instead, legislators decided to adopt “unbundling rules for hydrogen network operators that are in line with best practice in the gas and electricity market,” he said. This means countries like Germany can exempt gas grid operators from an obligation to invest in hydrogen grids through a separate company – provided they have less than 100,000 customers.This would “secure the future of municipal utilities in Germany as a crucial part of municipal public services and give them a perspective in the hydrogen economy,” Geier pointed out. “Unbundling” is the legal split  of infrastructure ownership from energy production, so thatthe same company cannot produce electricity or gas and own the networks delivering it to European consumers. The European Commission initially proposed strict “unbundling” rules for hydrogen networks, which would have barred gas companies from switching their existing pipeline infrastructure to hydrogen. The European Parliament, decided to scrap this rule to encourage gas companies to convert their infrastructure. The Parliament’s approach “enables the transformation of gas networks to hydrogen,” explained Jens Geier.Several EU countries have come out to support this, namely Germany, Austria, Hungary, Bulgaria and Slovakia. France and the Netherlands, however, have argued in favour of sticking to the joint EU Council position agreed in March, which would uphold unbundling requirements. When EU ambassadors met on November 24, 2023 several EU countries did not clarify their stance for Monday’s negotiations with Parliament. Michaela Holl, a senior advisor at the German think-tank Agora Energiewende indicated that ,“the gas package deal is out of sync with Europe’s energy security and climate ambitions, ... it will impose unnecessarily high costs on taxpayers, make it hard for new renewable hydrogen and ammonia producers to enter the market and fail to clarify what counts as ‘low-carbon’ hydrogen and biomethane,” she added. According to Agora “the biggest shortcoming is that it ignores the fundamental changes on Europe’s economy, energy market and infrastructure that will result from the rapidly shrinking fossil gas market,” Holl said. The recognition of “node points” in the package, to efficiently integrate renewable energy and hydrogen production will offer more insight in how lack of unbundling will work out in practice.