Innovation Fund: European financing for low-carbon technologies
From industrial demonstration to the deployment of net-zero technologies in Europe
- Welcome
- EU funding program
- Innovation Fund
Summary
Introduction to the Innovation Fund program
The Innovation Fund is one of the European Union's main funding instruments for the demonstration and deployment of innovative technologies that contribute to the decarbonization of European industry. Funded by revenues from the EU Emissions Trading System (EU ETS), it supports projects capable of significantly reducing greenhouse gas emissions while strengthening European industrial competitiveness.
The program primarily targets projects that have moved beyond the initial R&D phases and are mature enough to demonstrate their technology on an industrial or commercial scale. It therefore intervenes at a different stage than...Horizon Europe, more oriented towards research and innovation, supporting the transition to demonstration, industrialization and deployment.
Projects submitted to the Innovation Fund's regular calls for proposals are assessed in particular on their potential to reduce greenhouse gas emissions, their degree of innovation, their technical, financial and operational maturity, their potential for replication and their cost-effectiveness.
- Support highly innovative projects to reduce greenhouse gas emissions
- Accelerate the commercialization of clean technologies and their industrial deployment
- Boosting green economic growth and strengthening European competitiveness
- Developing the next generation of technologies and solutions needed for climate neutrality
- Creating local jobs for a just transition to a low-carbon economy
Pioneering technologies for a carbon-neutral economy
What projects and technologies does the Innovation Fund finance?
The IF supports the deployment of innovative technologies capable of significantly reducing greenhouse gas emissions and contributing to the decarbonization of European industry.
It supports projects that are mature enough to move to industrial-scale demonstration and commercial deployment.
Support for European manufacturing capacities for clean technologies and their components, particularly in the fields of renewable energy, energy storage, heat pumps and hydrogen production.
- Manufacturing of components for renewable energy technologies
- Manufacturing of components and equipment for energy storage
- Manufacturing of heat pumps and their components
- Manufacturing of equipment and components for hydrogen production
A bottom-up funding programme
The Innovation Fund supports innovative projects in energy-intensive industrial sectors, focusing on several thematic areas:
Energy-intensive industries
Innovative technologies and processes aimed at reducing greenhouse gas emissions from energy-intensive industries, in particular through the decarbonization of production processes and the development of products with a lower carbon footprint.
- Decarbonization of industrial processes and reduction of direct emissions
- Electrification and integration of low-carbon energy solutions
- Substitution of carbon-intensive processes, materials or products
- Innovative technologies enabling significant reductions in industrial emissions
Renewable energies
Innovative technologies for producing energy from renewable sources and solutions enabling their large-scale deployment.
- Innovative renewable energy production technologies
- Solutions improving the performance, efficiency, or competitiveness of renewable technologies
- Offshore renewable technologies and other innovative solutions
- Integration of renewable energies into industrial and energy systems
Energy storage
Innovative energy storage technologies contributing to flexibility, the integration of renewable energies and the decarbonization of energy systems.
- Large-scale energy storage solutions
- Short, medium and long term storage
- Advanced electrical storage technologies and batteries
- Thermal storage and other innovative energy storage solutions
Industrial Carbon Management (CCUS/CCS)
Technologies for capturing, utilizing, transporting and storing CO₂ to reduce emissions from industrial activities that are difficult to decarbonize.
- Capture of CO₂ from industrial processes and installations
- Use of CO₂ in products or processes enabling an effective reduction of emissions
- Transport, infrastructure and permanent storage of CO₂
- Carbon removal solutions, including direct CO₂ capture from the air, when they fall within the scope of the call
Net-zero mobility and buildings
Innovative technologies and solutions contributing to the decarbonisation of the mobility and building sectors covered by the extension of the European Emissions Trading System (EU ETS).
- Technologies and solutions for decarbonizing maritime transport
- Innovative solutions for aviation and road transport
- Technologies to reduce emissions and energy consumption in buildings
- Integrated solutions contributing to the electrification and decarbonization of these sectors
Cleantech manufacturing
What are the different types of projects funded by the Innovation Fund?
The structure, budgets, and thresholds are defined for each call. For reference, the IF25 Net-Zero Technologies call distinguishes five topics according to the size and nature of the projects:
- General Decarbonization – Small Scale: CAPEX €2.5M – €20M
- General Decarbonization – Medium Scale: CAPEX €20 M – €100 M
- General Decarbonization – Large Scale: > CAPEX >€100 M
- Cleantech Manufacturing: > €2.5M
- Pilot: CAPEX > €2.5M
The three topics General Decarbonisation cover decarbonisation projects according to their level of CAPEX. The Cleantech Manufacturing and Pilot topics address specific objectives: the former aims to develop European manufacturing capacities for clean technologies, while the latter supports highly innovative projects with significant emission reduction potential.
Thresholds, budgets, eligibility conditions and funding arrangements may change from one call to another, so they must be checked in the documents for each call.
Support by MarketKaps
Specific expertise on this program
Marketkaps supports companies and industrial players in the analysis, positioning and structuring of projects under the Innovation Fund.
Our expertise focuses in particular on the assessment of financial and operational maturity, the consistency of the business plan, the financing strategy, the risks of the project and its ability to achieve industrial deployment.
This approach combines knowledge of the European framework, understanding of industrial challenges and financial analysis of decarbonization projects.
A structured approach to project maturity
Strategic positioning
Analysis of the project's alignment with the scope and objectives of the Innovation Fund.Project maturity
Analysis of technical, financial and operational maturity and identification of key areas requiring attention.Business plan and financial model
Review of the consistency of economic assumptions, CAPEX/OPEX, revenues, profitability, financing and sensitivities.Emissions reduction
Analysis of the methodology and assumptions used to quantify the potential for reducing GHG emissions.Project structuring
Consistency between industrial strategy, schedule, risks, financing, contracting and deployment trajectory.
Services offered
- Eligibility and relevance assessment
- Analysis of financial and operational maturity
- Review of the business plan and financial model
- Risk analysis and financing strategy
- Structuring the project and its main milestones
- Critical analysis and consistency review of the application
What are the main eligibility requirements for the Innovation Fund?
The specific conditions are defined in each call for proposals. For regular calls for proposals from the Innovation Fund, several elements must be verified:
- Project location: the project must be carried out in a territory eligible for the Innovation Fund.
- Perimeter: the project must fall within the sectors, technologies and activities covered by the relevant call for proposals.
- Project size: CAPEX must respect the threshold of the topic to which the project is subject.
- Candidate: An application may be submitted by a single entity or, where the conditions of the call allow, by several entities.
- Schedule and specific conditions: the project must comply with the requirements, deadlines and other conditions set by the relevant call for proposals.
Eligibility alone is not enough to make a project competitive. Applications to regular calls for proposals are then evaluated according to five criteria: reduction of greenhouse gas emissions, degree of innovation, project maturity, replication potential, and cost-effectiveness.
Who can apply to the Innovation Fund?
The Innovation Fund is open to eligible public and private entities. Projects may be led by industrial companies, technology developers and suppliers, energy producers, or infrastructure operators.
An application can be submitted by a single entity or by several entities. The size of the company is not in itself the determining factor: it is primarily the nature of the project, its level of innovation, its decarbonization potential and its maturity that determine its relevance to the Innovation Fund.
Project location: the project must be carried out in the European Union, Norway, Iceland or Liechtenstein, territories covered by the Innovation Fund.
Financing arrangements
How much can the Innovation Fund finance?
For regular calls, the Innovation Fund can finance up to 60 % of relevant costs of the project, calculated according to the methodology defined in each call for tenders.
Relevant costs represent the additional economic cost associated with deploying the innovative solution compared to a baseline scenario. Their calculation generally takes into account investment and operating expenses, less the revenue generated over the period considered.
The amount of the grant therefore does not necessarily correspond to 60 % of the total CAPEX of the project.
How is the subsidy paid?
The grant is paid progressively according to the project's funding needs and the achievement of predefined milestones.
For regular calls, Up to 40 % of the grant can be paid based on defined milestones before the project is fully operational.
And what about the Innovation Fund auctions?
Competitive auctions, particularly in the hydrogen and industrial heat sectors, utilize specific financing mechanisms. The terms, support levels, and conditions are defined for each auction.
KEY TAKEAWAY:
For regular calls: up to 60 % of relevant costs, and not necessarily 60 % of total CAPEX.
How are Innovation Fund projects evaluated?
For regular calls for proposals, projects are evaluated according to five main criteria. The detailed scoring and ranking methodology is defined in each call for proposals.
1. Reduction of greenhouse gas emissions
Project capacity to avoid or reduce GHG emissions according to the methodology applicable to the call.
2. Degree of innovation
Level of innovation of the project compared to the state of the art and the solutions available or expected on the market.
3. Project Maturity
Assessment of the project's ability to reach financial close and be implemented, particularly with regard to its technical, financial and operational maturity.
4. Replication potential
The ability of the technology or solution to be deployed on a larger scale or replicated in other applications, sites, or sectors.
5. Cost-effectiveness
Ratio between the support requested and the expected results in terms of emissions reduction.
Maturity is a central issue for industrial projects: it notably involves the consistency of the business plan, the financial model, the financing strategy, the schedule, the risks and the commitments necessary for the completion of the project.
Key considerations for an Innovation Fund project
- Innovation not sufficiently demonstrated compared to the state of the art and available solutions.
- Insufficient financial maturity, particularly when the business plan, financial model or financing strategy is based on insufficiently supported assumptions.
- Insufficient operational maturitywith a timetable, authorizations, contracts or organization that are still too far along.
- Risks that are insufficiently identified or controlledincluding technical, commercial, financial and implementation risks.
- Insufficiently supported replication strategy, without a credible trajectory for larger-scale deployment.
- Insufficient coherence between the different components of the project, in particular between industrial ambition, timetable, financing and economic model.
Early identification of these points of concern makes it possible to assess the actual maturity of the project and the work still needed before an application.
FAQ about the Innovation Fund program
Frequently Asked Questions by Businesses
Is my project innovative enough for the Innovation Fund?
The Innovation Fund supports technologies that demonstrate a significant degree of innovation compared to the state of the art. Innovation is assessed in particular with regard to existing technologies, their level of maturity, and the innovative nature of the project at a European level.
A technology that is already widely commercialized may therefore be less well positioned, unless the project brings a significant innovation in its application, integration or performance.
How are avoided GHG emissions calculated?
Greenhouse gas emission reductions are calculated according to the Innovation Fund's specific methodology. The principle involves comparing the emissions generated by the project with those of a reference scenario defined according to the project category.
The calculation makes it possible, in particular, to determine the expected absolute and relative emission reductions. The assumptions, data, and factors used must be documented and consistent with the methodology applicable to the call for proposals in question.
Can the Innovation Fund be combined with other public funding?
Yes. An Innovation Fund grant can be combined with other European, national or regional funding, including Horizon Europe, the Connecting Europe Facility, InvestEU or State aid.
However, the combination must comply with the rules applicable to each source of funding, avoid any overcompensation and be properly integrated into the financial structure of the project.
Is my project mature enough to apply to the Innovation Fund?
The Innovation Fund targets projects with a sufficiently advanced level of maturity to allow for industrial deployment. Maturity is not solely based on technology: technical and operational readiness, the business plan, the financial structure, authorizations, the implementation schedule, and stakeholder commitments are also crucial.
A technologically innovative project may therefore be relevant for the Innovation Fund while still being insufficiently mature to apply to a given call for proposals.
How exactly does the calculation of "relevant costs" work?
The "relevant costs" represent the additional costs related to the deployment of the innovative solution, calculated according to the methodology defined by the Innovation Fund.
Depending on the project and the applicable methodology, their calculation takes into account investment costs, operating costs and relevant operating revenues or profits, compared with a reference situation.
Relevant costs do not necessarily correspond to the total CAPEX of the project. They form the basis used to determine the maximum grant amount in regular calls for proposals, which can reach 60% of the relevant costs.
How is the Innovation Fund grant paid?
For regular calls for proposals, the grant payment is linked to the achievement of milestones defined in the grant agreement. Up to 40% of the grant amount may be linked to milestones achieved before the project becomes operational.
After the project becomes operational, payments are linked to the project's performance and in particular to the GHG emission reductions actually achieved, according to the conditions stipulated in the grant agreement.
The schedule and precise payment terms are defined for each project in the Grant Agreement.
CONNECT WITH AN INNOVATION FUND EXPERT
Is your project ready for the Innovation Fund?
Marketkaps supports companies and technology providers in the analysis, positioning and preparation of their Innovation Fund projects.
Eligibility, degree of innovation, project maturity, business model, financial structure and application strategy: let's discuss your project and its positioning with regard to the program requirements.