EU launches €1 billion industrial heat decarbonization pilot auction

The European Commission is running a European-wide, €1 billion ($1.16 billion) pilot auction to support industrial heat decarbonization. Made available under the EU Innovation Fund, the IF25 Heat Auction targets heat used in manufacturing sectors such as chemicals, steel and cement by supporting electrified and direct renewable heat technologies. The bidding window will open in early December for projects that electrify industrial processes using technologies such as heat pumps, induction heating, plasma torches, solar-thermal and geothermal heat systems, as well as hybrid projects that combine different electrification and direct renewable heat technologies.

Projects from across the European Economic Area are invited to apply. The auction will feature three categories sharing the €1 billion budget. The first covers medium-temperature heat projects between 100°C and 400°C with a size higher or equal to 3 MW but lower than 5 MW and a project budget of up to €150 million. The second category is for medium-temperature projects between 100°C and 400°C with a size higher or equal to 5 MW and a project budget of up to €350 million. The final category is for high-temperature heat produced above 400°C, with a size higher or equal to 3 MW and a project budget of up to €500 million.

Projects in the first two categories will be subject to a maximum award of €100 million, while a maximum award of €250 million applies in the high-temperature category. According to the auction’s terms and conditions, successful bidders will receive a fixed premium subsidy linked and proportional to each tonne of direct CO2 emissions abated for a maximum five-year period after entry into operation.

Projects will have two years to reach financial close after the grant agreement, and a maximum of four years to enter into operation after the grant agreement. In a statement, the Commission said that by de-risking innovative projects, the auction will help enhance the competitiveness of clean industries in Europe, reduce greenhouse gas emissions, boost energy independence and security, and improve energy price affordability.

Last week, the European Commission launched a call for interest under its Hydrogen Mechanism, designed to connect potential suppliers with buyers of renewable or low-carbon hydrogen and derivatives, including ammonia, methanol, certain aviation fuels and eMethane.