EU Awards €400 Million to 65 Projects in First-Ever Innovation Fund Heat Auction to Decarbonise Industrial Heat

The European Commission has selected 65 projects under the Innovation Fund Heat Auction, the first EU-wide auction to accelerate the deployment of innovative clean heat technologies across European industry, awarding approximately €400 million in grants funded through the EU Emissions Trading System. Spanning ten European Economic Area countries including Austria, Belgium, Czechia, Denmark, France, Germany, Hungary, Portugal, Slovenia and Spain, the selected projects are expected to avoid more than 6.6 million tonnes of carbon dioxide emissions over ten years by replacing natural gas-fuelled heat production systems. Together the projects will produce around 16.3 terawatt hours of decarbonised heat over their first five years of operation, equivalent to replacing over 1.5 billion cubic metres of natural gas and comparable to the annual consumption of 4 million EU households.

 

Technology Portfolio and Industrial Sectors

 

The 65 selected projects employ a wide range of decarbonisation technologies, with most relying on direct resistance heating or indirect resistance heating. Other technologies represented include heat pumps, solar thermal, electromagnetic and dielectric heating, hybrid solutions and electrified heat systems powered directly from renewable sources. This technology diversity reflects the Commission's intent to support multiple decarbonisation pathways for industrial heat rather than concentrating support on a single approach, recognising that different industrial processes and temperature requirements demand different solutions.

In terms of industrial sectors, the auction covers pulp and paper, glass, ceramics and construction materials, iron and steel, food and beverage, textiles and pharmaceuticals. The inclusion of pulp and paper, glass, ceramics and iron and steel is particularly notable as these sectors have been less represented in the Innovation Fund portfolio to date despite their significant heat-related emissions. The auction was structured around three topics based on temperature level and installation capacity, with five projects receiving €62.1 million under the high-temperature heat topic, 44 projects receiving €286.5 million under the medium-temperature heat topic above 5 megawatts and 16 projects receiving €47.9 million under the medium-temperature topic at 3 to 5 megawatts capacity.

 

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Strategic Significance of Industrial Heat Decarbonisation

 

Industrial heat represents one of the most challenging segments of European emissions reduction, as process heat requirements in manufacturing often demand high temperatures that are difficult to supply from renewable electricity or other low-carbon sources using current commercial technology. The slow uptake of decarbonised solutions for process heat production has left this category underrepresented in European climate investment relative to its emissions significance. The Innovation Fund Heat Auction was specifically designed to address this gap by providing financial support that bridges the cost difference between conventional and innovative clean heat technologies during the early commercialisation phase.

The auction serves as a pilot for the future Industrial Decarbonisation Bank, signalling the Commission's intent to institutionalise large-scale support for industrial transformation beyond the current Innovation Fund framework. By testing the auction mechanism across multiple technology categories and industrial sectors, the Commission is building the policy and operational infrastructure needed to support a permanent industrial decarbonisation financing facility. The strong response of 85 applications submitted for this inaugural auction demonstrates significant industry appetite for such support when structured around transparent, competitive grant allocation processes.

 

Implementation Timeline and Compliance Requirements

 

The European Climate, Infrastructure and Environment Executive Agency will now begin formal preparation of grant agreements with the selected projects, with agreements expected to be signed in the second half of 2026. Selected projects must reach financial close within two years of grant signature and enter into operation within four years, with commitments backed by completion guarantees provided by the projects to the Commission. CINEA will monitor progress throughout implementation to ensure projects are delivered as planned and that support is used in accordance with agreed terms.

The combination of milestone requirements and completion guarantees reflects the Commission's intent to ensure that Innovation Fund awards translate into real-world emissions reductions rather than remaining as announced but unimplemented projects. Project size and grant requests from the 65 successful projects ranged from 3 to 45 megawatts thermal capacity and from €444,000 to €37.1 million, indicating a wide range of project scales and technology maturities within the selected cohort. The final list of signed projects is expected to be published in the fourth quarter of 2026.

 

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The €1 Billion Second Round and Broader Innovation Fund Context

 

Preparations for a second Innovation Fund Heat Auction in 2026 have already begun, with a significantly enlarged budget of €1 billion announced at the 2026 Cleantech Conference. The Commission plans to publish draft Terms and Conditions for the second auction by the end of May 2026, with a general Innovation Fund stakeholder consultation event scheduled for 19 June 2026. The scale-up from €400 million to €1 billion between the first and second auction rounds signals a strong commitment to accelerating industrial heat decarbonisation as a priority investment category within the broader Innovation Fund programme.

The Innovation Fund has an estimated total budget of €40 billion from the EU Emissions Trading System for the period from 2020 to 2030, making it one of the largest dedicated public funding sources for net-zero technology innovation in the world. Having already awarded grants to around 260 innovative projects across the European Economic Area, the fund is building a significant portfolio of first-of-kind and early commercial-scale deployments across clean energy, industrial decarbonisation and carbon removal. The Heat Auction represents a focused application of this broader resource to one of the most persistent gaps in the EU's industrial climate transition.

 

Outlook for European Industrial Heat Decarbonisation

 

The Innovation Fund Heat Auction establishes an important precedent for using competitive grant mechanisms to accelerate the commercialisation of clean heat technologies at industrial scale. If the 65 selected projects successfully reach financial close, enter operation and deliver their projected emissions reductions, the auction model will have demonstrated its effectiveness as a policy instrument for industrial decarbonisation. The lessons from this first cohort will directly inform the design of the larger second auction and the eventual Industrial Decarbonisation Bank.

Whether European industry can accelerate the adoption of clean heat technologies at the pace required to meet the EU's 2030 and 2050 climate targets will depend on the combination of Innovation Fund grants, carbon pricing signals from the ETS and the development of enabling infrastructure including renewable electricity supply, grid connections and hydrogen networks. Continued expansion of the Heat Auction programme alongside complementary policy measures is expected to be essential for closing the industrial heat decarbonisation gap that remains one of the most significant challenges in Europe's transition to climate neutrality.

 

Source: European Commission