Innovation Fund Heat Auction 2026: €1 billion for process heat

The Innovation Fund Heat Auction 2026 could help industrial companies bridge the economic gap between fossil-based and clean process heat. 

Looking back at the first Innovation Fund Heat Auction

The first Innovation Fund Heat Auction, launched in December 2025 with a budget of €1 billion, introduced an EU-wide competitive bidding mechanism specifically designed to support the decarbonisation of industrial process heat. The auction received 85 bids, representing a strong and encouraging response from industry. 

In May 2026, the European Commission announced that 65 projects across ten European countries had been selected for funding. Together, these projects will receive approximately €400 million to accelerate the deployment of low-carbon industrial heat technologies.

Over their first five years of operation, they are expected to generate more than 16 TWh of clean process heat, delivering substantial CO₂ emission reductions.

Innovation Fund Heat Auction 2026: what we know so far 

The current design proposes €700 million for medium-temperature projects and €300 million for high-temperature projects. The European Commission expects to publish the final terms in autumn 2026.

Which projects are eligible for the Heat Auction? 

The Innovation Fund Heat Auction targets companies seeking to replace fossil fuel-based process heat with clean alternatives.

Potentially eligible technologies include: 

• Industrial heat pumps
• Electric boilers
• Electric resistance heating
• Induction heating
• Electric smelters, melters and ovens
• Electric shockwave heating
• Plasma torches
• Solar thermal heat
• Geothermal heat
• Nuclear heat from small modular nuclear fission reactors (SMRs)
• Hybrid industrial heating concepts
  
  

Projects from a wide range of industrial sectors may be suitable candidates, including:

• Food and beverage
• Chemicals
• Paper
• Metals
• Ceramics and glass
• Textiles
• Manufacturing

The auction evaluates projects based on the requested support relative to the expected greenhouse gas emission reductions. It therefore rewards cost-efficient decarbonisation solutions.

Why companies should consider applying

The Innovation Fund Heat Auction offers much more than financial support.

Improve Project Economics:

The auction provides an output-based fixed premium linked to verified decarbonised heat production for up to five years. While it does not reduce the equipment’s actual investment cost, the support helps bridge the economic gap between fossil-based process heat and eligible electrified, renewable or nuclear heat solutions. This can strengthen project bankability and accelerate final investment decisions.

Increase Competitiveness:

Replacing fossil fuels with electricity or renewable heat reduces exposure to volatile fuel markets while improving operational efficiency and sustainability performance.

Prepare for Future Regulation:

The EU continues to tighten climate legislation through instruments such as the EU Emissions Trading System (EU ETS), the Energy Efficiency Directive, and the Net-Zero Industry Act. Investing today helps companies stay ahead of future regulatory requirements.

Accelerate Your Decarbonisation Strategy:

Funding allows companies to implement projects earlier, helping achieve corporate climate targets while strengthening their ESG credentials and market positioning.

Why should companies start preparing now?

A strong application requires more than a description of the planned technology. The project must demonstrate technical, financial and operational maturity.

Companies should begin by:

• Identifying suitable process heat applications
• Determining the required capacity and temperature level
• Comparing eligible decarbonisation technologies
• Estimating annual process heat production
• Calculating the expected CO₂ abatement
• Developing a credible financial model
• Obtaining technical specifications and supplier quotations
• Assessing electricity-grid and storage requirements
• Preparing a permit and implementation strategy
• Determining a competitive premium and bid price

The draft conditions also require a feasibility study, project timetable and evidence supporting equipment procurement and financing. Selected applicants are expected to provide a completion guarantee covering 6% of the maximum grant amount.

How EurA supports your Heat Auction applicants

Preparing a successful Innovation Fund Heat Auction application requires more than technical expertise. It demands a clear funding strategy, a strong business case, and a competitive bid.

Our team supports industrial companies throughout the entire process, including:

• Initial eligibility assessments
• Technology and project screening
• CO₂ reduction calculations
• Financial and economic modelling
• Bid strategy development
• Proposal preparation
• Submission support
• Communication with funding authorities

Whether your project focuses on industrial heat pumps, electrification, renewable heat, or integrated decarbonisation concepts, we help position your investment for the highest possible chance of success.

Prepare your process heat project

The next EU Innovation Fund Heat Auction represents a major opportunity for industrial companies looking to decarbonise their process heat while securing significant EU funding.

The companies that begin preparing now will be best positioned when the call officially opens.

Don't wait until the application window starts.

Early planning allows you to optimise your project, strengthen your business case, and develop a competitive bidding strategy that maximises your funding potential.

Author: Parisa Javadi-Marand

Image source: bobo1980 - stock.adobe.com