Financing options
for Austria’s hydrogen
network

Austria wants an initial hydrogen network by 2030. The question remains how the development of the necessary infrastructure can be financed. Austria’s Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology commissioned Prognos and FINGREEN with the task of analysing different potential financing models.

The total investment cost for the hydrogen network up to 2040 will amount to around 1.2 billion euros. This is based on Austria’s integrated network infrastructure plan and further studies with the majority of the investment being required in the period from 2027 until 2030. In a parallel phase, during the same period, the network infrastructure plan will see the conversion of two existing gas supply lines to hydrogen.

Initial hydrogen network by 2030

In the study, we examined numerous financing models, two of which emerged as particularly suitable: the high investment support with repayment mechanism model as well as the minimum quantity, or the minimum corridor model.

The selection took into account organisational elements with regard to the operationalisation of the model as well as financial elements, such as cost and risk distribution between the main actors, network operators, users and the state.

Model 1: High investment support with repayment

This variation of investment for the initial hydrogen network enables a repayment of the funding. The high level of funding reduces the initial risk for network operators. Equally, it is still possible for network operators to achieve absolute gains, should they repay the initial investment (pay-back regulation).

Strengths of the “High investment support with repayment” model:

• This model can be implemented simply and fast.
• Network operators have an incentive to pay back the investment – this increases their regulatory assets and thus their earning opportunities.
• Risk distribution is balanced between network operators and the state.

Weaknesses of the “High investment support with repayment” model:

• Until the funding is repaid the financing model is less attractive for network operators.
• Should the hydrogen ramp-up fail, the large initial investment is not expected to be paid back at all or only to a small extent.
• There is the danger that further investment will not be raised should the repayment promise a better return.

Model 2: Minimum quantity/quantity corridor

In this model, the state guarantees a minimum level of utilisation for a specific length of time. The difference between the actual ramp-up and the guaranteed amount will be balanced financially.

The strengths of the “Minimum quantity/quantity corridor” model are:

• A balancing of the models is possible by varying how the investment is repaid.
• If the ramp-up is successful, depending on the mode of repayment, the investment paid out can be reimbursed partially or in total.
• The minimum quantity protects network operators from the consequences of a slow ramp-up.

The weaknesses of the “Minimum quantity/quantity corridor” model are:

• Should there be no ramp-up the resulting costs for the state are high over the long term.
• For this reason, a unilateral withdrawal mechanism is recommended for the state. Experts suggest a one-off payment with a 25 percent deductible for network operators.

The study considers both finance models to be feasible in Austria. The exact modalities should be further developed as part of a negotiation process.

Our approach

In the context of the investigation, we analysed models from across Europe (Germany, Netherlands, Belgium and France) as well as common financing models from other infrastructures.

Using research, interviews and workshops these financing options were narrowed down. The models that were considered advantageous were then then quantitatively analysed and qualitatively formulated using mathematical simulation. After further interviews and a final workshop, the investment funding and the minimum quantity were identified as the most promising models.

Links and downloads

Go to study (BMK website)

Project team: Jens Hobohm, Sven Kreidelmeyer, Saskia Lengning, Ravi Srikandam

Latest update: 30.10.2024