State aid for hydrogen projects in Poland – what to pay attention to?

by Jakub Plebański, Julia Pieczonka

14 February 2025

Amid efforts to reduce the greenhouse gas emissions and given the EU’s carbon neutrality targets by 2050, hydrogen is becoming increasingly important in the energy transition.

TABLE OF CONTENTS

Hydrogen technology investment under the National Recovery and Resilience Plan
The origin of hydrogen matters
Is it necessary to specify the hydrogen offtaker at the stage of submitting the bid?
The funding limit

As the hydrogen market is growing, the European Union is launching state aid to support clean hydrogen production. The EU is currently inviting applications for the following EU hydrogen funding programmes:

IF24 auction under the Innovation Fund; the total budget is 1.2 billion euros, and the deadline to submit applications is 20 February 2025,
The Clean Hydrogen Partnership – the total budget is 184.5 million euros; the deadline for submitting proposals is 23 April 2025.

Hydrogen technology investment under the National Recovery and Resilience Plan

In Poland, the most popular hydrogen investment funding scheme is the programme launched by Bank Gospodarstwa Krajowego (BGK), called: B2.1.1. Investment in hydrogen technology, production, storage and transport of hydrogen, which offers non-refundable support. The programme budget, financed from the National Recovery and Resilience Plan, is 640 million euros. Bids may be submitted until 28 February 2025.

Are you interested in participating in this programme? Find out what to pay attention to when submitting your bid.

The origin of hydrogen matters

The first aspect worth mentioning in the context of the bidding process is the fact that chances for receiving state aid increase (or decrease) depending on the origin of the hydrogen and the type of installation for its production. Although the name of the programme suggests support for all hydrogen, there are in fact significant differences when it comes to scoring, depending on factors such as hydrogen production method, the installation’s production capacity, or capex.

Origin of hydrogen

At the stage of reviewing bids, the committee evaluates whether the hydrogen to be produced by the bidder will be RFNBO or low-carbon hydrogen. This distinction is important because a project involving 100% RFNBO hydrogen will earn the bidder fifteen points, increasing the bidder's chance of success, while producing only low-carbon hydrogen will reduce the number of achievable points to 5. Importantly, if an installation is to produce partly RFNBO and partly low-emission hydrogen, demonstrating that it will produce more than 50% RFBO hydrogen will allow the bidder to score 10 points.

RFNBO hydrogen (i.e. renewable fuel of non-biological origin) is hydrogen produced using renewable energy other than biomass, biogas, agricultural biogas, biomethane, bioliquids and renewable hydrogen. Low-carbon hydrogen, on the other hand, is hydrogen produced in a way that does not seriously harm the environment and allows reducing greenhouse gas emissions by at least 73.4% over the entire cycle, compared to the fossil equivalent pertaining to renewable fuels of non-biological origin.

Other types of hydrogen are not eligible for support under the programme.

Minimum capacity of installations

Another criterion for awarding funds is the minimum capacity of the installation. The minimum production capacity of an installation to be built under the investment project applying for funding is 20 MW. This criterion is, however, more complex. The scoring system favours the construction of larger installations, which is in line with the objective of the programme, being the construction of installations with the total capacity of 315 MW in Poland. Thus, projects offering a production capacity of between 20 MW and 70 MW will be awarded 10 points in the bidding procedure, while installations with a capacity in excess of 70 MW will receive 20 points.

Costs

Capex is another limiting aspect. In an installation applying for funding, the cost per every 1 MW built must not exceed 2 million euros. If this threshold is exceeded, the bid will be rejected. The committee will also separately evaluate the cost of achieving the target capacity of the installation applying for funding. This will be calculated by dividing the amount of funding applied for by the capacity of the hydrogen plant. This condition aims to help short-list projects that achieve the best cost-effectiveness ratio as measured by the extent of pure hydrogen production.

Is it necessary to specify the hydrogen offtaker at the stage of submitting the bid?

The obligation to indicate the offtaker of the hydrogen produced in the installation to be part-funded causes a lot of controversies among businesses. Given the growth of Poland’s hydrogen market and the still fledgling legislation in this area, meeting this obligation is a major challenge that can scare off potential bidders. According to the organisers, the criterion aims to demonstrate that projects seeking funding are economically reasonable and have a realistic chance of success.

First of all, bidders who do not want their bids to be rejected straight away should present offtake agreements or letters of intent for at least 20% of the planned hydrogen production. Of course, the agreements will get bidders more points. For example, if the bidder demonstrates that offtake of 90% of hydrogen is already contracted, this will earn him or her 25 points, while letters of intent covering the same volume would only earn 10 points.

It is worth noting that for the remaining part of the hydrogen not covered by either of the offtake agreements or the letters of intent, the bidder can present a strategy for winning offtakers for the hydrogen produced. Such a strategy will be reviewed by the organisers, of course. As announced, the reviewers will particularly focus on the projected work progress and the timetable for winning hydrogen offtakers. In addition, the strategy should include information on the volume of the non-contracted hydrogen to be produced, the economic sectors with potential demand for hydrogen (such as transport, heating, power generation, heavy industry or the fertiliser sector), and should be coherent with official documents estimating hydrogen demand, such as the Polish Hydrogen Strategy until 2030 or regional strategies.

The funding limit

Another aspect of the programme worth noting is the cap on the funds to be granted. According to Annex 1 to the terms and conditions of the programme: the funds sought by the bidder may not exceed half of the planned budget. This means that generally bidders will not get more than 320 million euros. However, the bidding criteria are more complicated.

It is also worth noting that the specific conditions concerning the amounts of funding are specified in the Regulation on state aid for the development of hydrogen technologies and associated infrastructure under the National Recovery and Resilience Plan of 26 September 2023.

The Regulation specifies limits, the exceeding of which makes it necessary to report the funding as notifiable state aid and seek approval by the European Commission. The limits vary depending on the category of aid to be granted to the hydrogen installation. The Regulation mentions the following categories of aid:

aid for research, development and innovation;
aid for environmental protection;
aid for ports; and
regional aid.

For example, aid of up to 30 million euros for environmental protection and of up to 35 million euros for research, development and innovation will be non-notifiable if more than half of the project’s eligible costs are incurred for activities falling under the industrial research category.

It is also important to note that, in the case of a project where the European Commission's approval is required and no such decision is issued as of the date of submitting the bid, the maximum amount of funding may not exceed the permissible amount of state aid specified in generally applicable laws on the basis of which such a bid has been submitted. This means that the limits of aid specified in the Regulation may not be exceeded in such a case.

Are you interested in participating in this programme? You are welcome to contact us »