Innovation Fund

Innovation Fund

EU Innovation Fund

The EU Innovation Fund is one of the world’s largest programmes to demonstrate and deploy innovative low-carbon and net-zero technologies. It is financed through the EU Emissions Trading System (EU ETS): part of the allowances that would normally be auctioned for the general EU budget are ring-fenced and reinvested in breakthrough projects that decarbonise Europe’s industry and energy system. Beyond providing grants, the Fund creates strong financial incentives for companies to invest in clean technologies, scale up net-zero solutions and reinforce Europe’s industrial leadership in a highly competitive global landscape. It operates mainly through Net-Zero Technologies (NZT) grants and competitive auctions for mature, investment-ready projects

With an expected volume of around €40 billion between 2020 and 2030 (depending on the carbon price), the Innovation Fund is one of the largest climate innovation instruments globally. It is financed by auctioning a share of EU ETS emission allowances and channelling these revenues into climate innovation instead of the general EU budget, following a “polluter pays, innovator benefits” logic that directly links carbon pricing to clean investment. The Fund is managed by the European Climate, Infrastructure and Environment Executive Agency (CINEA) on behalf of the European Commission (DG CLIMA).

The Fund focuses on highly innovative low-carbon technologies with high impact, especially in energy-intensive industries such as steel, cement, chemicals, refineries, glass and paper, as well as renewable energy, energy storage, CCUS and net-zero mobility and buildings. It supports first-of-a-kind or highly innovative projects that go beyond incremental improvements, demonstrate at commercial or near-commercial scale, deliver substantial GHG emission reductions and can be replicated across Europe.

The Innovation Fund is open to a wide range of public and private organisations established in eligible countries, as detailed in each call fiche. For the 2025 NZT and auction calls, applicants (beneficiaries and affiliated entities) must be legal entities established in any country worldwide, while project locations must be in EU Member States or EEA countries (Norway, Iceland or Liechtenstein). Typical applicants include industrial companies of all sizes, energy-intensive industries, hydrogen and renewable-energy developers, utilities and infrastructure operators, technology developers and equipment manufacturers, SMEs and start-ups, as well as research centres and universities, often working together in consortia that combine industrial users, technology providers, infrastructure operators, off-takers and financial partners.

To be eligible, projects must be implemented in eligible countries, demonstrate substantial GHG emission avoidance against a credible reference technology, reach financial close and entry into operation within the deadlines set in the call and meet the minimum CAPEX thresholds for each topic. They must also comply with EU rules on state aid, Do No Significant Harm (DNSH) and other horizontal requirements such as the EU Taxonomy and environmental and social safeguards. For promoters unsure about their eligibility, it is advisable to start with a high-level eligibility and innovation check before committing resources to a full proposal.

Innovation Fund support is based on “relevant costs” and is provided mainly as lump-sum grants under the NZT calls or as unit contributions and fixed premiums in auctions. For NZT grants (LSP, MSP, SSP, Clean-Tech Manufacturing and Pilots), the Grant Agreement sets a lump sum linked to the project’s relevant costs and the applicable funding rate. The Fund can cover up to 60% of relevant costs, although applicants may request a lower rate. Relevant costs are calculated as the net extra costs of the innovative project compared with a conventional reference, using the official calculator and guidance, and must meet minimum CAPEX thresholds (above €100 million for LSP, €20–100 million for MSP, €2.5–20 million for SSP and at least €2.5 million for Clean-Tech Manufacturing and Pilots).

Instead of a classical pre-financing model, NZT grants are typically paid through one or more interim payments before financial close, up to around 40% of the maximum grant, and a significant portion during the operational phase, based on verified performance and GHG emission avoidance. If relevant costs decrease, the grant may be reduced to ensure it does not exceed 60% of recalculated relevant costs. In auctions (AUC-HEAT and AUC-H2), support takes the form of unit grants, i.e. fixed premiums per MWh of decarbonised heat or per kilogram of hydrogen produced, paid on a pay-as-bid basis for up to 10 years. While the ETS Directive allows auctions to cover up to 100% of relevant costs, in practice the premium is meant to close the cost gap between decarbonised output and expected market revenues. In all schemes, payments are made only once projects are in operation and subject to strict GHG accounting, monitoring and verification.

What type of projects does the Innovation Fund support

The Innovation Fund backs a broad range of technologies and sectors, from heavy industry and clean energy manufacturing to net-zero fuels. Under the 2025 Net-Zero Technologies call (INNOVFUND-2025-NZT), general decarbonisation topics are divided by project size according to CAPEX:

  • Large-Scale Projects (LSP) above €100 million
  • Medium-Scale Projects (MSP) between €20 million and €100 million, and
  • Small-Scale Projects (SSP) between €2.5 million and €20 million.

Large-Scale Projects typically involve full-scale industrial plants switching from fossil-based to renewable or low-carbon energy, major CCUS clusters or utility-scale renewable and storage projects with innovative business models, all of them expected to deliver very significant GHG avoidance and contribute to EU industrial leadership.

Small- and Medium-Scale Projects offer major opportunities for SMEs, technology centres and pilot lines. SSPs often focus on single industrial sites or smaller portfolios testing innovative low-carbon processes, digital optimisation of energy use or modular CCUS and renewables solutions. Dedicated Clean-Tech Manufacturing topics (INNOVFUND-2025-NZT-CLEAN-TECH-MANUFACTURING) support manufacturing facilities for components such as electrolysers, fuel-cell parts, batteries, PV and heat pumps, provided they exceed €2.5 million in CAPEX. Pilot topics (INNOVFUND-2025-NZT-PILOTS) target first-of-a-kind pilots at meaningful scale, helping technology developers and R&D-intensive SMEs de-risk their concepts before full commercial deployment.

Across all NZT topics, the Fund seeks projects with high GHG emissions avoidance compared to conventional technologies, strong innovation beyond the state of the art and sufficient technical, financial and operational maturity to reach financial close and enter into operation within the required timeframe. In addition to grants, the Innovation Fund uses competitive auctions to support mature projects.

The industrial process heat auction (INNOVFUND-2025-AUC-HEAT) focuses on replacing fossil-based heat with electrified or renewable solutions such as industrial heat pumps, electric boilers, solar thermal or geothermal heat. The hydrogen auction (INNOVFUND-2025-AUC-H2) supports the production of renewable hydrogen (RFNBO) and, for some topics, electrolytic low-carbon hydrogen for industrial users and e-fuels for maritime and aviation. In both cases, support is awarded as a fixed premium linked to verified decarbonised output, paid only after certified production and allocated through highly competitive, price-based auctions.

Innovation Fund call 2025 with deadline in 2026

The current work programme includes a major Innovation Fund 2025 package with deadlines in 2026, combining classical grants and competitive auctions. The Net-Zero Technologies call (INNOVFUND-2025-NZT) has an estimated budget of €2.9 billion and covers Large-, Medium- and Small-Scale general decarbonisation projects, clean-tech manufacturing and pilot projects. The call is expected to open on 3 December 2025, with a proposal deadline on 23 April 2026. Evaluation will run from April to September 2026, with information on results in October–November 2026 and Grant Agreement signatures between November 2026 and March 2027.

In parallel, a €1 billion auction for industrial process heat (INNOVFUND-2025-AUC-HEAT) will support electrified and renewable process heat across segments such as medium- and high-temperature applications. A €1.3 billion hydrogen auction (INNOVFUND-2025-AUC-H2) will provide fixed premiums for RFNBO and electrolytic low-carbon hydrogen, including specific topics for maritime and aviation. Both auctions share the same timeline: opening on 3 December 2025, a proposal deadline on 19 February 2026, evaluation from March to May, results in May–June and Grant Agreement signatures between September and November 2026.

Compared with earlier rounds, the 2025 calls reinforce the focus on net-zero manufacturing and industrial scale-up, extend coverage to new sectors such as maritime, aviation, buildings and net-zero mobility, and make systematic use of auctions to discover prices, potentially cover up to 100% of relevant costs through fixed premiums and reduce administrative burden. They are closely aligned with key EU policy initiatives, including the Net-Zero Industry Act, REPowerEU, the European Hydrogen Bank and the broader Clean Industrial Deal and Green Deal Industrial Plan.

Innovation Fund grants and funding opportunities

For organisations seeking Innovation Fund support, the current landscape revolves around NZT grants for capex-intensive demonstration and first-of-a-kind commercial plants, auctions for decarbonised industrial heat and auctions for renewable and low-carbon hydrogen.

NZT grants can cover up to 60% of relevant costs while strongly rewarding GHG impact, innovation and replicability.

AUC-HEAT auctions provide fixed premiums per MWh of electrified or renewable process heat, helping industrial sites overcome the cost gap with fossil alternatives, while AUC-H2 auctions offer fixed premiums per kilogram of hydrogen for up to 10 years, supporting both general industrial demand and maritime and aviation off-takers.

Projects that score well but are not selected may receive Project Development Assistance, i.e. technical, financial and legal advisory services to reach bankability and resubmit in future calls, subject to work programme decisions and budgets. As selection is highly competitive and only a fraction of proposals secure funding, many promoters now rely on specialised Innovation Fund consultancy services to maximise their chances. If you are considering applying to the EU Innovation Fund 2025 calls, this is the right time to validate eligibility and innovation level, choose the right topic or auction and start building a robust technical, financial and GHG case—ideally with the support of partners like Euro-Funding so you do not have to navigate this demanding process alone.

How to apply for the Innovation Fund step-by-step

Applying to the Innovation Fund is complex and resource-intensive, especially for Large-Scale projects and auctions, and often requires specialised expertise.

A typical process starts with project preparation and an innovation assessment: promoters clarify how their technology goes beyond the state of the art, identify the most appropriate topic (LSP, MSP, SSP, Clean-Tech Manufacturing, Pilots, AUC-HEAT or AUC-H2) and check eligibility in terms of location, CAPEX, technology readiness and alignment with DNSH and EU Taxonomy requirements.

They then analyse GHG reduction potential by calculating absolute and relative GHG emission avoidance over a 10-year period using the official calculator and methodology, ensuring robust data and transparent assumptions.

In parallel, applicants prepare technical and financial documentation. For NZT grants, this includes drafting Application Form Part B (the technical description) covering the innovation concept, implementation plan, schedule, risk management, replicability and contribution to EU industrial competitiveness, as well as building a detailed financial model and relevant cost calculator and compiling all supporting documents such as permits, off-take agreements, financing commitments and feasibility studies. For auctions, the focus is on developing a solid bid price model for the premium, demonstrating bankability and showing the ability to reach financial close and enter into operation within the maximum implementation period.

All proposals are submitted electronically via the EU Funding and Tenders Portal, where organisations must be registered. Applicants complete Part A (administrative data and summary budget), Part B (technical description within a strict page limit), Part C (KPI and statistical data) and annex all mandatory documents. Proposals submitted late or incomplete are rejected. NZT grants are evaluated by independent experts and the Commission against five main award criteria (degree of innovation, GHG emission avoidance, maturity, replicability and cost efficiency), while auctions combine relevance and quality checks with a ranking based on bid price until the budget is exhausted. Successful projects then enter a grant-preparation phase with CINEA, which defines the maximum grant, funding rate, milestones, deliverables and monitoring and knowledge-sharing obligations.

Throughout this journey, experienced partners such as Euro-Funding can support applicants from early eligibility checks and concept shaping to full proposal writing, financial modelling, bid strategy and grant preparation.

Why work with Euro-Funding for your Innovation Fund proposal

Euro-Funding is a European consultancy specialised in large-scale EU climate and innovation funding. Since 2020, Euro-Funding has helped secure around €100 million in Innovation Fund support for industrial clients (Innovation Fund Large-Scale and Small-Scale calls combined).

Working with Euro-Funding for your Innovation Fund application means:

  • Proven track record in winning Innovation Fund grants: Experience across multiple calls and topics, including heavy industry, renewable energy, CCUS, hydrogen and storage.
  • Deep understanding of ETS and industrial decarbonisation: Strong familiarity with ETS-linked business cases, carbon price dynamics and the specific economics of net-zero investments.
  • Integrated technical, financial and administrative support: Support on innovation framing, GHG modelling, relevant costs, financial modelling, consortium building and risk management. Alignment of the project structure with state-aid, taxonomy and DNSH requirements.
  • Full life-cycle accompaniment: From initial idea and eligibility check to proposal writing, clarification replies during evaluation, and grant-preparation support. Post-award advisory on reporting, milestones, knowledge sharing and communication obligations.

In short, Euro-Funding acts as your end-to-end consultancy for Innovation Fund, increasing the probability that your project is selected, bankable and successfully implemented.

Success stories and sectors we support

Euro-Funding has supported a wide range of successful Innovation Fund projects across Europe, helping clients advance cutting-edge solutions in renewable fuels, clean-tech manufacturing, energy storage and circular bioeconomy. These include industrial-scale projects that convert captured carbon into sustainable fuels, highly automated manufacturing facilities reinforcing the renewable-energy supply chain, innovative storage systems repurposing existing infrastructure to provide grid flexibility, and next-generation bioenergy plants that valorise waste streams into high-purity renewable gas.

Collectively, the projects we have accompanied deliver substantial greenhouse-gas reductions, create high-quality jobs, strengthen strategic value chains and accelerate the deployment of first-of-a-kind technologies—illustrating the depth of our expertise and our ability to guide complex initiatives from concept to bankable, competitive Innovation Fund applications.