Energy

39 Topic Description This could be done through a sliding scale mechanism, whereby a greater multiple of the fixed premium is paid for the first quantities of RH2 sold in each year. Such quantities would be determined through the competitive auction. Limited to initial projects / funding cap States should define the initial total value or capacity of projects to be supported. There is no obligation on states to offer support to additional projects after the scheme value / capacity has been awarded. This is the way for states to manage risk associated with excessive spending as happened with Spanish renewables. Narrow eligibility criteria Eligibility under each funding window should be defined narrowly in the first stage, restricted only to RH2. If support to low-carbon hydrogen is pursued as a policy, it should be done in a separate window, to avoid competition between the two types of production methods. Otherwise RH2 production risks being pushed out by more mature solutions with lower abatement costs in the short term (e.g. CCS). Separate aid windows targeting industry and mobility applications may also be considered, ensuring ramp-up of RH2 use in both sectors. However, these could also be supported through demand-side measures. Selection criteria The main selection criteria should be the fixed premium value, expressed in EUR/KG of RH2. Adjustment / Indexation An annual indexation based on inflation may be considered, however, direct links to natural gas prices and/or carbon prices should be avoided, as they do not represent cost and revenue streams for producers. Period in which support scheme is required Projects taking final investment decisions between 2023- 2025. Potential extension post-2025 depending on the evaluation of RH2 market conditions. A short availability period will better incentivise rapid investment decisions by RH2 producers, to ensure they can take advantage of the state support. Duration of support The maximum period allowed under CEEAG requirements (10-year term), longer outside of the EU. Delivery mechanism Private law contract. This protects investors from change in law risk. The choice of law and dispute resolution forum both need to be ex-EU and, ideally, with the beneficiary incorporated in a jurisdiction with adequate BIT coverage with EU MSs (e.g. the US, UK, Singapore and Switzerland).

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