European Commission authorises EUR 550 million Italian hydrogen aid scheme

On 30 January 2024, the European Commission authorised an Italian hydrogen aid scheme with a budget of EUR 550 million under the Temporary Crisis and Transition Framework.

The Green Deal industrial plan

The European Commission has adopted the Green Deal industrial plan, which aims to strengthen the competitiveness of Europe's net-zero emissions industry and support a rapid green transition.

The plan is based on four pillars:

• A predictable regulatory framework, simplified through three proposals:
  • A Net-Zero Industry Act
  • A Critical Raw Materials Act
  • A reform of the organisation of the electricity market, enabling consumers to benefit from the reduced cost of renewable energies.
• Faster access to finance by facilitating the compatibility of State aid, particularly under the Temporary Crisis and Transition Framework.
• Improved skills to facilitate the transition of workers from declining to expanding sectors.
• Opening up trade for resilient supply chains by developing global cooperation while protecting the single market from unfair trade.

In particular, the Commission recognises the importance of hydrogen. In this respect, it has set itself the following objectives:

• Develop and strengthen hydrogen infrastructures.
• Extend the provisions of the Temporary Crisis and Transition Framework to the storage of hydrogen originating from renewable sources.
• Introduce the possibility under the Temporary Crisis and Transition Framework of granting aid corresponding to standard percentages of investment costs.
• Significantly raise the notification thresholds for State aid supporting measures in sectors such as hydrogen through the General Block Exemption Regulation.
• Create academies of net-zero emissions industries in industries such as hydrogen.

Temporary Crisis and Transition Framework

In March 2023, the European Commission extended the scope of its Temporary Crisis Framework for State aid measures, initially designed to support the economy following Russia's invasion of Ukraine and adopted in March 2022, and reclassified it as the Temporary Crisis and Transition Framework.

It aims to clarify the conditions for the compatibility of aid to be notified by Member States to the Commission on the basis of Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU) to make the European Union more independent of fossil fuels, reduce emissions and protect against price rises. Within this framework, Member States are encouraged to take support measures in sectors that are essential to the transition to a net-zero emissions economy.

The Italian hydrogen aid scheme

On 11 May 2023, the Italian authorities notified a draft scheme aimed at supporting investment in the use of hydrogen in industrial processes to promote the transition to a net-zero emissions economy. With a budget of EUR 550 million, the scheme will run until the end of 2025.

To qualify for support, beneficiaries will have to demonstrate that their projects lead to a reduction of at least 40% in greenhouse gas emissions generated by production processes, or a reduction of at least 20% in energy consumption compared with today. In addition, companies will have to switch from fossil fuels to renewable hydrogen, and will be able to combine these investments with investments aimed at electrifying their production processes or significantly improving their energy efficiency.

Following its examination of the notified Italian scheme, the Commission concluded that it complied with the conditions laid down in the Temporary Crisis and Transition Framework. Firstly, the aid will not exceed EUR 200 million per beneficiary. Secondly, it will not exceed the aid intensities set out in the Framework, i.e. 40% of eligible costs in this case, adjustable according to the size of the company and the investment in question. In addition, the scheme will end on 31 December 2025. Lastly, the aid will be subject to conditions designed to guarantee real reductions in emissions and a switch to the use of hydrogen.

Conclusion

To date, the European Commission has adopted approximately 100 decisions based on the Temporary Crisis and Transition Framework.

As it did during the pandemic crisis, the Commission initially used the Temporary Framework to enable Member States to support their ailing economies, before extending its scope to investment projects focusing in particular on energy, in parallel with the implementation of Member States' recovery plans under the EU's Recovery and Resilience Facility.

It should also be remembered that projects in the hydrogen sector have been the subject of a number of recent Commission decisions relating to major projects of common European interest.