Heat Auction: EU funding to decarbonize industrial process heat

The Heat Auction Pilot is a new program under the EU Innovation Fund that supports companies investing in electrified and direct renewable heat as an alternative to fossil-based process heat. It targets investment-ready projects in energy-intensive industries and aims to close the cost gap with fossil-based alternatives. The Heat Auction Pilot call is financed by the Innovation Fund, with a budget of about €1 billion, and may be supplemented by national top-ups. Maximum awards are up to €100 million for medium-temperature projects (heat produced between 100°C and 400°C) and €250 million for high-temperature projects (> 400°C).

Key aspects of the Heat Auction include:

• A fixed premium per ton of CO₂ avoided, linked to verified heat production. Bids compete on price.
  
  
• Eligible solutions include heat pumps, e-boilers, electric resistance heating, induction and plasma heating, and direct renewable heat such as solar or geothermal. Projects must add new capacity at a single EEA site.
  
  
• Semi-annual payments after entry into operation, with ISO 50001-based monitoring and temperature metering, for a maximum of 5 years.
  
  
• Deadlines after grant signature: up to two years to financial close and up to four years to entry into operation, secured by a six percent completion guarantee.

The current timeline foresees the call opening in the beginning of December 2025 and running until February 2026. Selection is budget-constrained and price-ranked, with pass/fail screening on relevance, quality, and the Do No Significant Harm principles. Key target sectors in scope of this new funding instrument include chemicals, metals and minerals, paper, food and beverages, and glass and ceramics.

For more information on the Innovation Fund Heat Action, an assessment of your project and support with developing an application, do not hesitate to reach out to your EY contact.