The Federal Ministry for Economic Affairs and Energy (BMWE) said the second round of CCFDs would be “more flexible, more SME-friendly, and more technology neutral” than the 2024 auction, which awarded €2.8bn ($3.3bn) to 15 projects.
Energy Minister Katherina Reiche recently told the Bundestag that €6bn ($7.02bn) would be available for CCFDs in 2026.
The mechanism aims to protect companies investing in low-carbon processes against price risks associated with energy costs and emissions trading schemes.
“If the CO2 price rises, the subsidy decreases, and vice-versa,” the BMWE said. “Other subsidies, such as electricity price compensation, are deducted from the subsidy to prevent double funding.”
Successful projects will receive funding over a 15-year period based on actual carbon emissions savings. Supported firms will need to reduce emissions by 60% in the third year of the contract term and 90% in the final year.
As well as making it less risky for companies to transition, the BMWE said the scheme will promote the ramp-up of technologies like industrial heat pumps, hydrogen, and carbon capture technologies.
This new auction will also support carbon capture and utilisation, as well as storage.
Companies are free to decide which technology they use – typically incentivising the lowest-cost abatement systems.
The bidding process is expected to begin next year, subject to budgetary and EU Commission approval.
Analysis: Should Europe subsidise green hydrogen use instead of supply?
Despite billions in EU funding, Europe’s green hydrogen sector has stumbled: projects cancelled, companies bankrupt, and demand lagging behind supply.
Those at the coalface blame high production costs and a subsequent lack of demand for green hydrogen. And now some are suggesting EU policymakers should look to support prospective users rather than producers.
Jun Sasmura, Hydrogen Manager at analyst Westwood Global Energy Group, believes this could be a path forward.
“It gives more incentive to the offtaker to find a source for their hydrogen,” Sasamura told H2 View. “I haven’t seen a mechanism that has implemented that [in Europe], but we need to see more creativity around to bridge the cost gap.”
Sasamura explained that unless developers shoulder substantial risk or receive significant injections of public and private capital, many projects will struggle to advance.
Both producers and consumers, he noted, are entering a more pragmatic phase, as the hydrogen sector undergoes a necessary “rebalancing”…
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