The European Commission published the terms and conditions for its second Europe-wide auction for projects decarbonizing industrial process heat. It earmarked EUR 1 billion for support. Such processes are largely powered by fossil fuels and they account for three quarters of industrial emissions.
The Innovation Fund 2026 (IF26) Heat Auction will be launched in December with a planned budget of EUR 1 billion, raised from the auctioning of allowances within the European Union Emissions Trading System (EU ETS), according to the final terms and conditions.
Being part of the Clean Industrial Deal, the competitive bidding process will boost investment in homegrown clean energy solutions, increase resilience, and reduce energy prices, said the European Commission’s Directorate-General for Climate Action – DG Clima. It builds on the success of the pilot IF25 heat auction, in which 65 funding proposals were selected.
“This auction is a crucial stepping stone toward the implementation of the Industrial Decarbonisation Bank. It opens the door to scaling investments in industrial electrification technologies driving industrial decarbonisation,” Director-General Kurt Vandenberghe said.
Decabonizing process heat in three main categories
The auction will support innovative technologies to decarbonize process heat in three main categories – electrified technologies such as heat pumps, thermal storage, plasma torches and electric boilers; direct renewable heat from solar thermal or geothermal systems; and, for the first time, nuclear technologies such as small modular reactors. Such processes are largely powered by fossil fuels and they account for three quarters of industrial emissions.
In the pilot auction, 65 funding proposals were selected
Process heat refers to the energy used to generate medium and high temperatures for manufacturing activities in sectors such as chemicals, pulp and paper, steel, food and beverages, or cement.
Temperature threshold lowered to 80 degrees Celsius
The second edition expands eligibility to include some projects using heat from as low as 80 degrees Celsius, versus the previous 100-degree threshold, and provides further incentive to implement flexibility solutions that reduce the pressure on the electricity system. The final terms and conditions were prepared following collaborative public consultations with industry and stakeholders.
The auction may be topped up by national contributions via the auction-as-a-service feature, an approach that has already proven successful in previous hydrogen auctions, the update reads.
Successful bidders receive a fixed premium subsidy that is linked and proportional to each ton of direct CO2 emissions abated for a maximum period of five years. The IF26 Heat Auction is open to projects of all sizes from every industrial sector across the European Economic Area. It serves projects that use continuous industrial processes but also incentivises flexibility solutions to avoid electricity consumption in peak hours or technologies that don’t require electricity.
