Annexes to COM(2022)416 - Implementation of the Innovation Fund, including the review referred to in Article 24 of Regulation (EU) No 1031/2010

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dossier COM(2022)416 - Implementation of the Innovation Fund, including the review referred to in Article 24 of Regulation (EU) No 1031/2010.
document COM(2022)416 EN
date August 26, 2022
agreement can be regrouped in seven bigger technological pathways, with most projects covering energy storage, renewable energy and hydrogen.

Figure 6: Technological Pathways first call for small-scale proposals (awarded projects)


2.4.3. Mature projects

The first two Innovation Fund calls are supporting projects with high financial and business maturity.

As the Innovation Fund aims to support clean-tech solutions which can be deployed fast, projects have to reach financial close 15 within maximum four year from grant signature, i.e. in 2025-2026 at the latest for the first two calls. The graph below illustrates that of the 37 awarded projects, 20 (54%) are expecting to reach financial close within one year, 13 (35%) within 2 years and 4 (11%) within 3 years. Small-scale projects plan to reach financial close relatively faster which correlates with their smaller costs and usually simpler financial structure.


Figure 7: Number of projects planning to reach financial close per quarter 16


Furthemore, all projects awarded a grant in the first Innovation Fund calls plan to enter into operation by 2026, demonstrating a high level of operational maturity. Most of the projects, 29 out of 37, plan to enter into operation by Q1 2025. This would ensure emission reductions already before the end of the decade.

2.4.4. Project development assistance for less mature projects

The Innovation Fund has a special facility – Project Development Assistance 17 - to improve the maturity of projects through high-quality technical and financial advisory support provided by the European Investment Bank (EIB), and tailored to the needs of the projects. The Project development assistance aims to benefit especially small-scale projects and projects in lower-income Member States to help achieve a geographically balanced distribution of the Innovation Fund support. The project development assistance is available to both large and small-scale projects, and can help increase their chances of reaching financial close and entering into operation. A Contribution Agreement on providing project development assistance was signed with the European Investment Bank in April 2021 and is already being implemented.

Under each call, up to 20 proposals rejected for a grant are being offered project development assistance: under the first call for large-scale proposals, 15 proposals were invited 18 to access project development assistance worth EUR 4.4 million, and under the first call for small-scale proposals, 10 projects were awarded project development assistance worth EUR 1.7 million.

Projects awarded project development assistance also cover a very large range of technology pathways: from green hydrogen and synthetic aviation fuels in energy intensive industries to energy storage. The expectation is that these projects re-apply for future Innovation Fund calls, contributing to the creation of a continuous pipeline of excellent projects to be funded. In terms of geographical location, project development assistance is contributing in reaching a good spread of Innovation Fund-supported projects among Member States as well.

Future calls will aim to use even more the potential of project development assistance to support projects in underrepresented countries and smaller applicants.

2.4.5. Geographical and sectoral balance

The Innovation Fund aims to achieve geographical and sectoral balance in its lifetime until 2030. As illustrated below, the two calls concluded received applications from almost all Member States, projects are developed in many Member States, albeit with a lower representation in Eastern Europe. There are many cross-sectoral and cross-border projects with significant potential to decarbonise whole regions and sectors, beyond national and sectoral borders.

Figure 8: First call for large-scale projects: proposals by country


While implementing the Fund, the Commission will seek to further broaden the geographical balance through three specific avenues. First, the regular calls for small-scale projects with costs under EUR 7.5 million can be better suited to companies from smaller Member States which are looking to invest in clean tech at a smaller scale. Second, the project development assistance provided by the European Investment Bank to large and small projects can help companies prepare better applications and increase their chances to receive an Innovation Fund grant. Third, the Commission established a network of national contact points on the Innovation Fund in all EU Member States, Iceland and Norway 19 that can provide information to potential applicants about the Fund and its interactions with national funding instruments and other EU programmes available in each Member State. 

Projects from nearly all sectors have been supported through the first two calls. The technological pathways of applying and awarded projects as outlined in Section 2.4.2. illustrate the variety of the project pipeline and shows that the Innovation Fund can serve all sectors currently eligible and potentially eligible in the future. For example, the Innovation Fund has already supported projects relevant to waterborne and road transports and until 2030 it can support the green transition of the whole EU economy, by funding clean tech solutions spanning from energy generation, to energy-intensive industries, transport, buildings and agriculture. The figure below illustrates the impact of the Innovation Fund per sector so far.

Figure 9: Innovation Fund impact by sector


2.4.6. Financial support tailored to the projects’ needs

The Innovation Fund support is tailored to the market needs and risk profiles of the supported projects. This helps attract additional public and private resources.

The initial budget (EUR 1 100 000 000) for the first two Innovation Fund calls has been entirely allocated and the 20% budget flexibility allowed under the Financing Decision 20 has also been used to address the budget oversubscription.

The total expected capital expenditures (total CAPEX), as calculated and communicated by applicants in their applications, is used as a proxy measure for total expected investment volumes mobilised by the Fund grants.

The total expected CAPEX of all awarded projects in the 2020 calls amounts to EUR 4 783 136 117 (91% of which under the large-scale call, and 9% under the small-scale call). Figure 12 shows that Innovation Fund grants will leverage investments 4 times bigger than their volume.


Figure 10: Total grants awarded vs. CAPEX under the first Innovation Fund calls

The total expected CAPEX of the awarded projects significantly exceeds the Innovation Fund grants awarded. This illustrates the need for additional private and public investments into these clean tech solutions, the commitment of companies to find financing for their green innovative solutions and shows the positive leverage effect of the Innovation Fund grants.

Figure 11: First call for large-scale projects: funding examples


2.5. Contribution to other EU policy objectives

2.5.1. Circular economy, Energy Efficiency and Renewable Energy

The awarded projects will bring other environmental benefits to the European economy within the framework of the European Green Deal, and support EU strategies related to hydrogen, sector integration, and circular economy. For example, awarded projects will:

-Advance deep-decarbonisation solutions for energy intensive industries such as Hydrogen DRI 21 in the steel sector or CCUS solutions for the cement industry;

-Bring solutions to facilitate the system integration of renewables such as offering the provision of renewable electricity during peak demand through the use of second-life car batteries;

-Promote sector coupling and indirect electrification through green hydrogen production for hard-to-electrify sectors;

-Support the application of circular economy and energy efficiency principles at various levels, through for example recycling of material residues and use of heat that would otherwise be lost, and the cooperation of different industries; Support the replacement of fossil-fuels and the deployment of additional innovative renewable energy capacity such as wind energy, solar energy, and geothermal power.

2.5.2. Positive spillovers to other sectors

While the Innovation Fund aims to support the decarbonisation of the energy and industry sectors, through the production and use of renewable energy carriers, including hydrogen and synthetic fuels, the Innovation Fund has been able to support a wide variety of projects with application in sectors currently not covered by the ETS such as maritime, road and railway transport and agriculture:

·Supporting the development of new sectors and/or markets: e.g. production of hydrogen for zero-emissions transportation (H2 VALCAMONICA and ZE PAK green H2) or replace fossil-based plastics (TLP Production);

·Decarbonizing the maritime transport through the production of low-carbon bio-liquefied natural gas (bio-LNG) to replace conventional maritime fuel (FirstBio2Shipping). Three other relevant projects are supported through project development assistance: a pusher vessel combining a battery and a fuel cell in freight transport (HyPush); a large sailing cruise ship featuring an innovating wind propulsion technology (WAVE) and a zero-emission vessel powered by a large-scale fuel cell system will exclusively use green hydrogen from renewable sources (HYDROGEN EU-ROPAX);

·Benefiting agriculture with integrated large-power photovoltaic irrigation systems (PVI) that do not require back-up batteries and significantly reduce risks related to the integrity of the water distribution infrastructure (CO2-FrAMed);

·Contributing to reducing emissions in transport infrastructure: a seaport (GREENMOTRIL) and an airport (PIONEER) will maximize their use of renewable energy.


2.5.3. Social and economic benefits

The awarded projects will also bring social and economic benefits such as enhanced growth of new sectors (e.g. production of green hydrogen), creation of quality jobs in the green transition, support for local economies and cooperation between different industries to foster innovation and sustainability. Further, they will lead to specific economic benefits, for example by lowering prices of new technologies and products and creating new markets. The Innovation Fund can also help address the social and labour markets aspects of a fair green transition.

2.5.4. Synergies with other funding instruments

The Innovation Fund aims to ensure synergies with other investment support instruments, such as InvestEU or lending programmes of the European Investment Bank, and other relevant EU funding programmes, such as Horizon Europe or Connecting Europe Facility.

InvestEU Programme

Since attracting additional public and private resources is a fundamental objective of the Fund, it is important that there are synergies with InvestEU, which is the EU’s flagship tool to support investment (via loans and other types of support) needed for recovery, green growth, employment and a just transition. Cumulation of InvestEU and Innovation Fund funding for a specific project is possible. Furthermore, the European Investment Bank is implementing the so-called Green Transition thematic product 22 under the InvestEU Programme. The Green Transition product will be available for highly risky projects with high policy added value eligible under the sustainable infrastructure and research, innovation and digitalization policy windows. The product will benefit from a top-up from the Innovation Fund 23 aiming to further support deep decarbonization projects in energy and industry sectors.

EU-Breakthrough Energy Catalyst (BEC) partnership will enable to enlarge the impact of the Green Transition product. This partnership brings together the European Commission, the European Investment Bank and Breakthrough Energy Catalyst 24 . A Memorandum of Understanding between these parties was signed at the COP26 in Glasgow. The partnership seeks to mobilise up to EUR 820 million (USD 1 bn) for innovative projects in the EU between 2022 and 2027.

In January, Breakthrough energy Catalyst Europe published a request for proposals 25 for large-scale projects. The call focuses on the fields of clean hydrogen, sustainable aviation fuels, direct air capture and storage, and long-duration energy storage. EU funding for the partnership comes from Horizon Europe 26 (in the form of grants to be used as blending for selected operations) and the Innovation Fund (in form of a top-up of the EU guarantee available to de-risk EIB lending), managed under InvestEU  GT product. Catalyst funding (in the form of grants and equity funding) comes from philanthropies and corporates. Both the European Investment Bank and Breakthrough Energy Catalyst will provide equivalent amounts of financing for the projects. 


Examples of synergies achieved by awarded projects

Effective and operational synergies with other Union programmes notably to promote faster dissemination and uptake of research and innovation results and to enable the pursuit of common objectives and common areas for activities has been anchored in the objectives of different Union progammes.

Several of the awarded projects under the first round of Innovation Fund calls already demonstrate the existing strong synergies between the Fund and other EU and national funding mechanisms:

·Six projects are building on prior work supported under Horizon Europe predecessor programmes - Horizon and FP7 (CarBatteryReFactory, CO2-FrAMed, GtF, Silverstone, TLP and TANGO);

·Three projects have also benefitted from the support of other EU instruments such as NER300, the LIFE programme and the CEF transport call (CCGeo, FirstBio2Shipping and HELEXIO line); and,

Apart from this, five out of the seven awarded large-scale projects have already or are planning to receive financial support from national or regional authorities (Kairos-at-C, BECCS at STHLM, K6, HYBRIT demonstration and SHARC). The financial supports may constitute State aid within the meaning of Article 107 TFUE. The Commission has exclusive competence to assess the compatibility of State aid measures with the internal market and Member States need to notify any such aid pursuant to Article 108 TFEU.

2.5.5. Knowledge-sharing on clean-tech solutions

To ensure cost reductions and accelerated commercialisation of clean technologies across Europe, the Innovation Fund is supporting knowledge-sharing among projects and stakeholders on clean tech solutions.

The Delegated Regulation requires that grant agreements are conditional on knowledge sharing by the grant beneficiary. The project proponent is to submit a knowledge-sharing plan at the application stage covering the full project cycle. These knowledge-sharing requirements are critical to safeguard the public interest while respecting non-disclosure of commercially sensitive information. They facilitate market penetration of the demonstrated technologies and lower risks in the transition to large-scale production and use of low-carbon products. Knowledge sharing has to start at grant award to build on learnings of challenges met and strategies for overcoming them in the critical phase between grant award and financial close, as well as between financial close and start of operation. The first reports on knowledge-sharing are expected to be submitted by the awarded projects in 2022-23. Later on, during the operation phase, knowledge-sharing efforts will focus on the technological deployment of the projects.

In 2020 and 2021, over 10 virtual events were successfully organised to support all types of stakeholders to understand better the current and potential developments of clean tech solutions in the EU, such as specific knowledge-sharing event for innovative clean tech projects “From NER300 to the Innovation Fund” 27 , clean tech financing conferences 28 , webinars on the application process for the Fund and the lessons learned 29 and a general Innovation Fund event during the 2020 Sustainable Energy Week. The Commission organised regular meetings of the Innovation Fund Expert Group to discuss with Member States and industry representatives the implementation and future orientations of the Fund. In addition, DG CLIMA and/or CINEA participated in multiple events organised by third parties to increase the knowledge and awareness of the Fund. 

2.6. Review referred to in Article 24, paragraph 3, of Regulation 1031/2010

According to the second subparagraph of Article 24(3) of Regulation 1031/2010 (also known as the Auctioning Regulation), the Commission shall review every two years the amount of allowances to be auctioned for the Innovation Fund, paying particular attention to ‘the support available for future calls for proposals, the maximum amount of the Innovation Fund support available for project development assistance, the part of the total amount of the Innovation Fund support available for the call to small-scale projects reserved by the Commission, the support foreseen for the awarded projects as well as the disbursement and the recovery rate’.

This part of this report constitutes the first such review.

The amount available for each call for proposals, including the maximum amount available for project development assistance, is determined in each financing decision and call text. The graph below summarises the 2020 Financing Decision. 30  

Figure 12: Financing Decision 2020 

The graph below shows the total amounts of grants and of project development assistance awarded under each call.

Figure 13: Grants and project development assistance amounts under each call


The table below summarises the number of allowances auctioned for the Innovation Fund for 2020 and 2021, and the funds available (EUR) available on the Innovation Fund account in mid-May 2022.

End 2020End 202113/5/2022
Number of allowances         50,000,000         40,000,000           15,582,000
Assets available (EUR m Nominal amount)1,335,841,072   4,146,382,569     5,434,617,254

The assets available include the amounts committed to projects that have received grants from the first two calls. No payments have been made yet to Innovation Fund projects.

Overall, the pace of auctioning of Innovation Fund allowances addresses the need of clean tech projects. In the context of the RePowerEU Plan, it was decided that the Commission will double the funding available for the 2022 Large Scale Call of the Innovation Fund this autumn to around EUR 3 billion. Specific REPowerEU windows will be instituted to support (1) electrification and hydrogen applications in industry, (2) clean tech manufacturing and (3) mid-sized pilot projects for validating highly innovative solutions.


3. Conclusions and Next Steps

The first two calls of the Fund gathered very big interest from businesses and received applications that by far exceed the available budget of each call, creating strong competition among clean-tech projects. This clearly shows the strong and varied clean-tech project pipeline that the Fund can support in its next calls, which calls to further upscale the budget. A third call for large-scale projects is planned for autumn 2022.

The calls for small-scale projects play a unique role in supporting projects with smaller capital costs (between EUR 2.5 and 7.5 million) but with decarbonisation potential in new sectors and in smaller EU Member States. The second call for small-scale projects opened on 31 March 2022 with a budget of EUR 100 million and projects can apply until 31 August 2022.

Already with the first two calls and the projects benefiting from project development assistance, the Innovation Fund was able to support projects across the eligible sectors and countries. The Fund has several instruments to further encourage geographical and sectoral balance of awarded projects. There is the special facility of project development assistance provided by the European Investment Bank to promising but not yet mature projects, the network of national contact points, the helpdesk replying to applicants’ questions for each call, the multiple targeted webinars and info days, the self-check questionnaire. These instruments have shown to help companies prepare their applications for the Fund. The Commission will further develop and exploit these tools to enhance the geographical and sectoral balance of the Fund.

In terms of the governance, the clear definition of responsibilities (between the European Commission, the European Climate, Infrastructure and Environment Executive Agency, the European Investment Bank and the Member States) and the collaboration between these entities have delivered an effective implementation of the Innovation Fund within the foreseen timelines. .

The REPowerEU Communication 31 recognised the Fund as one of the key instruments to accelerate industrial decarbonisation, outlining three avenues.

Firstly, increased revenues due to the higher carbon price can enable larger calls. Based on the experience of the first calls, the project pipeline indicates that the market can absorb an increase of the available budget, while keeping the approach that only highly innovative, high impact and market-ready projects get funding.

Secondly, the Innovation Fund can broaden its portfolio of instruments for support of clean tech projects. For instance, an EU wide competitive bidding mechanism (e.g. Contracts for Difference or Carbon Contracts for Difference) for specific technology baskets can be a powerful instrument to encourage the production and cost-effective deployment of low-carbon solutions. Such an instrument is already proposed by the Commission as part of the Fit for 55 package.

Thirdly, while preserving a bottom-up and excellence-based approach, the Innovation Fund can become more focused on strategic priorities, as put forward in the REPower EU Plan 32 .


(1)

Depending on carbon price, the volume is estimated using EUR 75 / tCO2 as carbon price.

(2)

  EU economy and society to meet climate ambitions (europa.eu)

(3)

 Commission Regulation (EU) No 1031/2010 of 12 November 2010 on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the European Parliament and of the Council establishing a system for greenhouse gas emission allowances trading within the Union EUR-Lex - 02010R1031-20191128 - EN - EUR-Lex (europa.eu)

(4)

  Policy development (europa.eu) under Stakeholder Engagement

(5)

  First Innovation Fund call for large-scale projects: 311 applications for the EUR 1 billion EU funding for clean tech projects

(6)

  First Innovation Fund call for small-scale projects: 232 applications for the EUR 100 million EU funding for small clean tech projects

(7)

  Large-scale projects (europa.eu) and Small-scale projects (europa.eu) under Webinars

(8)

  policy_innovation-fund_best_practice_en_0.pdf (europa.eu)

(9)

The Delegated Regulation allows conducting large-scale calls in one or two stages, whereas small-scale calls are run in one stage. The first large-scale call was conducted in two stages.

(10)

232 initial applications of which 2 were disregarded before evaluation.

(11)

  Statistics of the proposals received for the first large-scale call of the Innovation Fund in October 2020.docx (europa.eu)

(12)

  policy_funding_innovation-fund_large-scale_successful_projects_en.pdf (europa.eu)

(13)

  policy_innovation-fund_lsc_statistics_en_0.pdf (europa.eu)

(14)

  Small-scale projects (europa.eu)

(15)

In the framework of the Innovation Fund, financial close is defined as: the moment in the project development cycle where all the project and financing agreements have been signed and all the required conditions
contained in them have been met.

(16)

Data based on application form and adapted when necessary, based on latest information from project coordinators.

(17)

  https://ec.europa.eu/clima/eu-action/funding-climate-action/innovation-fund/project-development-assistance_en  

(18)

14 Large-Scale proposals signed a project development assistance support agreement with the EIB, as one project withdrew from the process.

(19)

  National Contact Points (europa.eu)

(20)

  https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/innovfund/wp-call/wp_innovfund-2020_en.pdf  

(21)

Hydrogen Direct Reduced Iron

(22)

EIB, Relevance of Thematic Impact Finance for Innovation Fund eligible projects (6.7.21 presentation to the 8th Meeting of the IFEG). Available at: https://ec.europa.eu/clima/system/files/2021-07/20210706_ifeg_4_en.pdf  

(23)

 The Commission Decision C(2021) 7404 of 19.10.2021 on the activities related to the Innovation Fund, serving as the financing decision for 2021 and as a decision launching the second calls for proposals and its  Annex

(24)

  https://www.breakthroughenergy.org/scaling-innovation/catalyst  

(25)

  EU-Catalyst Partnership: Request for proposals of pioneering green technology projects is launched | European Commission (europa.eu)

(26)

Regulation (EU) 2021/695 of the European Parliament and of the Council of 28 April 2021 establishing Horizon Europe, Annex IV, Art. 15 details synergies between the Innovation Fund and Horizon Europe, and Council Decision (EU) 2021/764 of 10 May 2021 establishing the Specific Programme implementing Horizon Europe, section 5.1 lays out the need for complementarity between the Innovation Fund and Cluster 5 of the Horizon Europe programme.

(27)

  From NER 300 to the Innovation Fund: knowledge-sharing for innovative clean tech projects (europa.eu)

(28)

  First Financing Innovative Clean Tech virtual conference (europa.eu)  
How can the Innovation Fund foster innovative clean tech small-scale projects? (europa.eu)
Delivering on the European Green Deal: Financing clean technology with the Innovation Fund (europa.eu)

(29)

  Events and webinars (europa.eu)

(30)

Commission Decision amending Decision C(2020) 4352 of 2 July 2020 as regards the launch of the call for proposals for small-scale projects in 2020

(31)

COM(2022)108, REPowerEU: Joint European Action for more affordable, secure and sustainable energy, Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions

(32)

COM(2022)230, REPowerEU Plan, Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions