The final Innovation Fund 2026 Heat Auction Terms & Conditions (IF26 Heat Auction) have been published, setting out the detailed requirements of the EUR 1 billion EU funding scheme aimed at decarbonising industrial heat production. The programme is designed to support the replacement of fossil fuel-based industrial heat generation with electrified technologies, direct renewable heat or certain innovative nuclear technologies.
The funding programme for the decarbonisation of industrial heat production is expected to open in December 2026, with the application deadline currently planned for February 2027. The exact submission deadline will be specified in the official Call for Proposals. However, with the publication of the Terms & Conditions, potential applicants now have access to the detailed requirements needed to start the technical and financial preparation of their projects.
EUR 1 billion for the decarbonisation of industrial heat production
According to Innovation Fund 2026 Heat Auction Terms & Conditions, IF26 Heat Auction is open to all industrial sectors, provided that the project meets the applicable technological, geographical and minimum project size requirements. Support can be requested for the installation of new industrial heat generation capacity located within the European Economic Area (EEA). The project must have a minimum CAPEX of EUR 2.5 million, while the new nominal thermal capacity must reach at least 3 or 5 MWth, depending on the relevant temperature category.
The programme is divided into three temperature categories:
| Category | Temperature | Minimum capacity | Planned budget |
| Low temperature | 80–100 °C | 5 MWth | EUR 100 million |
| Medium temperature | 100–400 °C | 3 MWth | EUR 600 million |
| High temperature | Above 400 °C | 3 MWth | EUR 300 million |
According to Innovation Fund 2026 Heat Auction Terms & Conditions eligible technologies include industrial heat pumps, mechanical vapour recompression (MVR), electric boilers, direct and indirect resistance heating, electromagnetic and dielectric heating, plasma heating, as well as related thermal energy storage. The programme also covers direct solar and geothermal heat generation and certain innovative nuclear technologies.
What type of auction mechanism is defined by Innovation Fund 2026 Heat Auction Terms & Conditions?
Based on Innovation Fund 2026 Heat Auction Terms & Conditions state aid is provided in the form of an output-based fixed premium, meaning that it is not calculated as a specified percentage of investment costs. Instead, aid is linked to the amount of eligible industrial heat actually produced and verified.
Applicants determine the requested aid premium themselves in EUR/MWhth. This value is converted into EUR/tCO₂ using a uniform reference emission factor, after which projects are ranked – following the application of any applicable bid bonus – primarily from the lowest to the highest support requirement. The auction is single-stage, static and pay-as-bid.
Based on Innovation Fund 2026 Heat Auction Terms & Conditions, the scheme may also provide a 25% bid bonus for projects meeting certain energy efficiency or flexibility requirements. The bonus does not reduce the actual support premium awarded to the project; it only reduces the bid value taken into account for auction ranking purposes.
What should potential applicants pay particular attention to?
One of the most important decisions under the Innovation Fund 2026 Heat Auction is determining the appropriate support bid. A bid that is too high may weaken the project’s position in the auction ranking. On the other hand, setting the bid too low creates the risk that the project may win support but will not remain financially sustainable with the premium awarded.
For this reason, the technical concept, CAPEX and OPEX estimates, long-term energy price assumptions, expected annual heat production and project financing structure should already be aligned during the preparation phase. These elements provide the basis for a financial model that can be used to determine a competitive support bid while ensuring the long-term financial viability of the project.
Other key considerations include grid connection, permitting, stable industrial heat demand, the feasibility of the required measurement and monitoring system, as well as the applicant’s ability to provide a completion guarantee equal to 6% of the maximum support amount.
Why should project preparation start now?
The application window is expected to be relatively short, while projects will already need to demonstrate an advanced level of technical, financial and operational maturity at the time of submission. Potential applicants should therefore assess their project’s eligibility, applicable temperature category, eligible new heat generation capacity, expected CO₂ emission reductions and annual eligible heat production well in advance.
It is also advisable to assess the potential applicability of the 25% bid bonus, the optimal support bid, the project’s technical, financial and operational maturity, and the main implementation risks before the Call for Proposals opens.
Determining the appropriate bid is particularly important: due to the auction-based structure of the scheme, the balance between the project’s chances of securing support and its long-term financial sustainability needs to be established before the application is submitted.
This summary is based on the Innovation Fund 2026 Heat Auction Terms & Conditions published on 24 September 2026. The final and legally binding requirements will be set out in the Call for Proposals and its annexes.
If your company is planning an investment to decarbonise industrial heat production, contact our expert team to assess your project’s eligibility, technical and financial readiness, and to develop an optimal funding and bidding strategy for the Innovation Fund 2026 Heat Auction.
