Questions and answers on the results of the 3rd call for large-scale projects under the EU Innovation Fund
What projects are being supported by this large-scale call?
The 3rd large-scale call greatly expands the Innovation Fund's portfolio of supported projects and innovative technologies to reach climate neutrality by 2050. In support of the REPowerEU objectives to end Europe's imports of Russian fossil fuels, this call covers projects in four different categories: general decarbonisation; industry electrification and hydrogen; clean-tech manufacturing; and mid-sized pilots.
The results of this new call show that innovative projects are being developed in most EU countries. 7 new Member States will receive funding for large-scale projects: Austria, Croatia, Czechia, Denmark, Greece, Ireland and Portugal. Counting small-scale projects too, the Innovation Fund is now supporting projects in a total of 22 countries.
239 applications were received with total requests exceeding the initially earmarked €3bn budget. About 196 were eligible and admissible for evaluation and 41 were finally selected to receive grants of €3.6 billion.
All pre-selected projects in this call are set to enter into operation before 2030 and have the combined potential to avoid 221 million tonnes of CO2eq emissions in their first 10 years of operation.
Beyond these pre-selected projects, there is a solid project pipeline of promising proposals across all sectors. They can advance with their preparations and resubmit applications in the future under the next call for proposals, planned for the end of 2023.
How is the Innovation Fund contributing to the REPowerEU objectives?
The Commission has adapted the Innovation Fund to help implement the REPowerEU Plan to phase out Europe's dependency on Russian fossil fuels. The “clean-tech manufacturing” and “industry electrification and hydrogen”” topics are integral to the ambitions of the REPowerEU Plan. In the manufacturing category, the production of innovative components needed for renewable energy, electrolysers, heat pumps and energy storage has been sought. In the electrifying industry and hydrogen category, the industry was directly stimulated to become less gas-dependent by helping it transition to electrical and hydrogen usage.
To ensure that projects are ready to use the grant to test the scaling up of their production in a short term, the criteria of ‘project maturity' had a higher weight compared to the other criteria in this call. As a result, the most mature projects were more successful and should be ready to enter into operation sooner and thereby speed up Europe's clean energy transition. All pre-selected projects will be operational by 2030.
How is the Innovation Fund responding to the priorities of the Net-Zero Industrial Act?
The Innovation Fund fully supports the Net-Zero Industrial Act (NZIA) priorities. It remains the key funding instrument at EU level in the transition towards a low- and net-zero carbon economy, helping to bridge the cost gap between conventional and clean energy and industry, and accelerating the demonstration and deployment of innovative low-carbon solutions in Europe. It is therefore one of the key tools of the EU Green Deal Industrial Plan and element of the response to industrial policy supporting the clean-tech led by the EU's global partners.
The application of a Seal of Sovereignty proposed under the Strategic Technologies for Europe Platform(STEP) would bring EU industry closer to achieving the EU's climate targets, to Net-Zero Industry Act (NZIA) objectives for domestic manufacturing capacities and CO2 storage targets as well as REPowerEU Plan renewable hydrogen goals.
In particular, the dedicated “clean-tech manufacturing” project category helped to attract a number of such projects to the third large-scale call and as a result, 11 projects were pre-selected for funding. The “clean-tech manufacturing” projects will also benefit from the other actions under the Net Zero Industry Act (NZIA).
Comparing the capacity set out in the project applications to the NZIA objectives of boosting domestic manufacturing capacity, it can be estimated that all the proposals submitted to the 3rd large-scale call could contribute up to 38% of the NZIA 2030photovoltaic panels production capacity objective and up to 42% of the electrolyser production capacity objective. Taking all Innovation Fund projects awarded so far or pre-selected for grants under the 3rd large-scale call would cover 17% of the NZIA 2030photovoltaic panels production capacity objective and 11% of the electrolyser production capacity objective.
Likewise, the projects submitted to the third large-scale call could capture 32% of the CO2 for the storage target proposed in NZIA and all Innovation Fund projects awarded or pre-selected for grant so far would cover 21% of NZIA CO2 storage target.
Are the hydrogen projects funded under this call linked to the European Hydrogen Bank (EHB)?
Under this call, the topic “industry electrification and hydrogen” was available to support the whole renewable hydrogen supply chain and demand sectors. The five award criteria were applied by independent experts to select the best projects. The regular grants of the Innovation Fund project will be disbursed upon achievement of project milestones. It is expected that projects awarded with Innovation Fund grants will help demonstrate that renewable hydrogen is ready for commercialisation and has a business case.
This is different from the European Hydrogen Bank, presented in March 2023 alongside the Net-Zero Industry Act. The European Hydrogen Bank will be operationalised through the upcoming pilot auctions for the production of renewable hydrogen.
The first auctions will target renewable hydrogen production and will provide output-based support in form of a fixed premium. Under this mechanism, successful projects are those which bid for the lowest level of support (while fulfilling a set of checks in terms of the soundness and credibility of the bids). Consequently, the disbursement schedule of the support will be very different from the regular grants, prioritising the most mature projects. The future auctions will bring hydrogen a step closer to full roll-out by the private sector in the EU. The pilot auction is scheduled to be launched in the fourth quarter of 2023.
Projects from the topic “industry electrification and hydrogen” that met the minimum requirements but were not awarded funding in the end, would be eligible to participate in the auctions, provided they were about hydrogen production and they are ready for grant disbursement schedule that starts only after entry into operation.
Does the Innovation Fund support projects involving natural gas?
The Innovation Fund does not support the use, transportation or production of natural gas. It does support innovative CCS (carbon capture and storage, involving the permanent storage of CO2 in geological formations) and CCU projects (carbon capture and use, involving the reuse of CO2 to produce low carbon materials or fuels). This CO2 may originate from natural gas, or other fossil fuels.
The Innovation Fund supports projects that score the highest in the evaluation process within the available call budget, regardless of the technology they use, as long as it is an innovative technology that is scalable and has potential to avoid greenhouse gas (GHG) emission.
There are industries such as the cement sector where capturing CO2 is one of the very few potential technologies to achieve high GHG emission reductions. CCUS technologies are scalable options for EU industries to avoid GHG emissions, as illustrated by the very high demand that we see in terms of project applications in each Innovation Fund call.
In addition, applying CCUS to bioenergy projects has the potential to deliver net carbon removals, which will be needed to compensate for residual emissions from transport and agriculture in order to reach climate neutrality by 2050.
Is there a pre-allocation of funding per Member State or other measures aiming at geographical balance?
The Innovation Fund is allocated on the basis of excellence and through competitive calls for proposals following the application of the main award criteria described in the Delegated Regulation, Financing Decision and respective call texts: substantial greenhouse gas emission avoidance potential, level of innovation, operational, technical and financial maturity, scalability and cost efficiency. The projects are selected based on the highest scores across all 5 award criteria. The projects that score the highest in the evaluation process within the available topic budget are selected, regardless of the sector or location.
The legal basis of the Innovation Fund provides for the possibility to use a specific award criterion to ensure geographical balance. However, Innovation Fund-supported projects are now located in 22 Member States and it is not deemed necessary at this stage to resort to a specific award criterion considering that the overall balance is improving with each call, notably with these latest results. This improved geographic spread is also the result of other measures taken to support applications from all eligible Member States, such as the option for small-scale projects to define innovation based on the state of the art at national level, and not at European level.
Currently there are three major initiatives to support Member States to develop a high-quality national innovative project pipeline and improve the geographical balance:
- The revision of the EU Emissions Trading System (EU ETS) Directive introduced ‘Technical Assistance for Member States with low effective participation' – aiming to increase the overall quality of the Innovation Fund applications
- The Commission's Technical Assistance Instrument (TSI)
- Training sessions for all Member States National Contact Points and the Innovation Fund Expert Group representatives on award criteria, outreach and communication.
When is the next call for projects scheduled?
The next call for large-scale, medium-scale and small-scale projects will be launched at the end of 2023. This call will feature a higher budget of €4 billion and implement new elements brought by the recent revision of the ETS Directive and operationalised by the revised rules for the Innovation Fund, currently under feedback period. These elements include the introduction of the medium-sized projects category and competitive bidding, the latter implemented through the pilot auction for the production of renewable hydrogen also to be launched at the end of this year. More information is available in Innovation Fund Project Portfolio Dashboard.
The Innovation Fund is one of the world's largest funding programmes for the demonstration and commercialisation of innovative low-carbon technologies. Financed by revenues from the auctioning of allowances from the EU ETS, it has already held two large-scale calls awarding €1.1 billion and €1.8 billion in grants to 7 and 16 projects respectively.
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