Four energy companies announced on Tuesday two separate green hydrogen projects in Italy as they move to offer clean fuels to their customers and take advantage of money coming from the European Union's post-pandemic recovery fund.

Italian gas grid operator Snam (SRG.MI) and utility Hera (HRA.MI) said they had signed an agreement to develop a green hydrogen production site near the northern city of Modena.

Separately the Italian unit of France's Engie (ENGIE.PA) and gas distributor Società Gasdotti Italia (SGI) together with local industry lobby Consorzio Industriale Lazio said they would produce the green fuel near Rome.

The 20 million euro ($21.6 million) project led by Snam and Hera involves setting up a photovoltaic plant that will supply green energy to an electrolyser to produce hydrogen from water. At full capacity it will make 400 tonnes a year of green fuel.

"Hydrogen is still expensive, but its price could halve to around 5 euros a kilo if the government offers incentives to reduce costs, in addition to existing ones on capex," said Hera Chief Executive Orazio Iacono, adding the price could be considered competitive by customers.

The green fuel will go to local public transport groups and could also be available to energy-intensive companies based near Modena, including tile-makers and automotive groups.

In its business plan to 2026, Snam has earmarked 1 billion euros for investment in decarbonisation, which also includes the development of a pipeline to bring hydrogen from North Africa to northern Europe, dubbed SoutH2 Corridor.

Snam Decarbonisation Unit Executive Director Piero Ercoli said the group would launch a market test for cross-border hydrogen infrastructure next year.

The project involving Engie and SGI also plans to start producing in 2026 and reach a capacity of 400 million tonnes of hydrogen per year, the groups said. It will cost 20 million euros, of which 9.5 million euros will be coming from public funds.