Final terms of the Innovation Fund Heat Auction published

The European Commission published the final terms and conditions of the Innovation Fund Heat Auction call for proposals on 24 September 2026. The auction, announced as part of the Clean Industrial Deal with a budget of EUR 1 billion, aims to promote the decarbonization of industrial process heat through a competitive auction mechanism. The call is expected to open in early December 2026.

Key elements of the auction

• European Commission funding mechanism to support industrial process heat decarbonization through competitive auctions across the EEA
• Eligible projects:

1. Electrifying industrial process heat through technologies (e.g., heat pumps, direct and indirect resistance heating including thermal energy storage, electromagnetic and dielectric heating, plasma heating)
2. Using direct renewable heat (e.g., solar or geothermal) for industrial processes
3. Deploying innovative nuclear technologies for industrial heat generation (e.g., nuclear heat).
4. Hybrid solutions of the above technologies

• Funding: The funding will be established in the form of a fixed premium, based on the amount of reduced carbon dioxide (tCO₂), for a maximum period of five years. The maximum grant amount is calculated as: Subsidy requested in (€/MWhth) × (MWhth/year) × 5 years, (but max. €100M for low or medium and €250M for high temperature).
• Projects are ranked based on the bid unit price (€/tCO₂) in ascending order, and funding is awarded until the available budget is exhausted.
• Subsidised heat production will be limited to the equivalent of 70% of the annual full operating hours of the nominal capacity.
• A 25% bid bonus (i.e. reduction of the bid price for ranking purposes only) is available if a project meets at least one of the following conditions: (i) deploys electricity or thermal storage sufficient to replace at least 20% of the project’s electricity consumption or heat demand for 4 hours; or (ii) deploys heat pumps (COP ≥ 1.5); or (iii) deploys direct renewable or nuclear heat. Projects claiming the bid bonus are also exempt from the 70% load hours limit.

Total budget: €1,000M - distributed as follows:

Auction process

• Financial close deadline: maximum 2.5 years after signing the grant agreement
• Entry into Operation deadline: maximum 5 years after signing the grant agreement
• Grant disbursement duration: maximum 5 years after Entry into Operation or until the expected heat volume is achieved
• Payments: Annually after Entry into Operation based on certified heat production, with a 6-month payment schedule available upon request for consortia including at least one SME
• Guarantee: 6% performance guarantee required on the requested grant amount
• Application window: December 2026 – February 2027

Eligibility conditions

• Location: Projects implemented in EEA territory
• Eligible applicants: Individual or in consortium, without restrictions on company form or sector (e.g., energy companies, project developers, industrial companies can also apply)
• New capacity: Projects must entail the installation of new heat production capacity (projects which have already started are not eligible)
• Single site: Capacity must be at a single location, several units can be combined at one location, but virtual pooling is not allowed
•  Industrial use: Only industrial process heat is eligible, space heating or sale via district heating networks is not eligible
• Minimum project size: 3 MWth or 5 MWth (depending on topic) newly installed heat production capacity
• Minimum CAPEX requirement: Minimum €2.5 million
• Temperature: Process heat with a minimum temperature of 80°C, 100°C or 400°C, depending on the auction topic
• Fossil restriction: Projects may not include new fossil fuel capacity, subject to limited exceptions where technical or safety barriers to full electrification exist
• Ineligible activities: The auction explicitly excludes electrolysis processes (e.g., in the aluminium sector) and electric arc furnaces for steel making, heat production for space heating or for sale to district heating networks and heat production for activities primarily aimed at fuel production based on non-recycled fossil feedstocks. Biomass and hydrogen use for heat production are also excluded.

What to submit?

Documents required for submission:

• Grant application
• Detailed cost calculation including financial plan
• Detailed feasibility study
• Strategy to obtain the relevant permits (e.g., environmental permits, construction permits, grid connection)
• Letter of intent from a bank to provide performance guarantee
• Letters of intent from equipment manufacturers, suppliers, and energy users
• Other supporting evidence on: equity, equipment procurement, heat off-takers
• Electricity sourcing and heat off-taker strategies
• Timetable/Gantt chart

Companies aiming to make their heat production more sustainable—for instance, by converting their industrial boilers, steam systems, or heat supply to renewable energy—should explore the funding opportunities available through the Innovation Fund Heat Auction, where Deloitte’s experts are ready to provide support.

If you require further information regarding the grant procedure, please contact our experts.