The European Commission has approved, under EU State aid rules, a €998 million Dutch scheme to support the production of renewable hydrogen. 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 reduce dependence on Russian fossil fuels and accelerate the green transition.

The Dutch scheme

The Netherlands notified the Commission of its intention to introduce a €998 million scheme to increase the country’s electrolysis capacity and support the production of renewable hydrogen.

The scheme will support the construction of at least 200 MW of electrolysis capacity. The aid will be awarded through a competitive bidding process planned to be concluded in 2024. The tender will be open to projects with a capacity of at least 0.5 MW.

The aid will take the form of a direct grant combining an upfront investment grant up to 80% of the investment costs and a variable premium over a period of 5 to 10 years. Beneficiaries will have to prove compliance with EU criteria for the production of renewable fuels of non-biological origin (RFNBOs), as set out in the delegated acts on renewable hydrogen.

The scheme will contribute to the Netherlands’s efforts to achieve 500 MW of electrolyser capacity in 2025 and 3-4 GW by 2030. It will also support the EU’s ambitions to install at least 6 GW of renewable hydrogen electrolysers by 2024, and at least 40 GW by 2030. The Netherlands expects that the scheme will lead to the equivalent of around 55 kilotons of CO₂ being avoided every year until 2030, which will contribute to the Netherlands’ and EU’s climate targets.

The Commission’s assessment

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) the Treaty on the Functioning of the EU, 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. 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 measure has an ‘incentive effect’, as the beneficiaries would not carry out the relevant investments without the public support.
• The Netherlands 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.
• The aid will bring about positive effects that outweigh any possible negative effects in terms of distortions to competition.

On this basis, the Commission approved the Dutch scheme under EU State aid rules.

Background

This scheme follows a previous Dutch scheme approved by the Commission in July 2023, which aimed to support specifically small-scale electrolysers (with a capacity of up to 50 MW).

The  2022 CEEAG provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU. The Guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection.

The Renewable Energy Directive of 2018 set out stringent criteria for RFNBOs, such as renewable hydrogen, to ensure that their environmental impact is minimal and that they contribute to the deployment of renewable energy. Amongst others, emission savings of the end product must be at least 70% across the entire value chain. Under the revised Renewable Energy Directive of 2023, the target for the share of renewable energy in the EU’s gross energy consumption is increased to 42.5% by 2030, and a new target is introduced to reach 42% of renewable hydrogen in total hydrogen used in industry by 2030 and 60% by 2035.

In July 2020, the Commission published its EU Hydrogen Strategy, setting ambitious goals for clean hydrogen production and use, and launched the European Clean Hydrogen Alliance, bringing together the European hydrogen community (industry, civil society, public authorities).

With the European Green Deal Communication in 2019, the Commission set an objective of net zero emissions of greenhouse gases in 2050 that is enshrined in the European Climate Law. In force since July 2021, the law also introduced the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030. Through the adoption of the ‘Fit for 55′ legislative proposals, the EU has in place legally binding climate targets covering all key sectors in the economy. Specifically, following the reform of the gas market, the EU now has in place a framework for the development of a hydrogen market.

The non-confidential version of the decision will be made available under the case number SA.110068 in the State aid register on the Commission’s Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.