European Commission launches first auction for industrial heat transition - opportunities for electrification and heat storage

The European Commission has published the terms of the first pilot auction within the Innovation Fund, aimed at making industrial process heat more sustainable. With a budget of €1 billion, this is the first European auction to focus directly on the electrification of heat and the use of directly renewable sources such as solar thermal or geothermal heat.

Accelerating industrial electrification

The auction supports innovative projects that replace fossil heat production with electric or renewable technologies - such as heat pumps, electric boilers, resistance or plasma heating.
In doing so, it aims to achieve cost-effective carbon reductions and accelerate the market for sustainable industrial heat.

Three auction categories will be opened:

• Medium-temperature (100-400°C), 3-5 MWth - €150 million
• Medium-temperature (>5 MWth) - €350 million
• High temperature (>400°C) - €500 million

The subsidy is awarded through a fixed premium per ton of CO₂ avoided, for a maximum period of five years.

Heat storage as key to flexibility

An important part of the scheme is the flexibility requirement: to limit the pressure on the grid, only 70% of full-load hours per year are subsidized by default. This restriction can be removed entirely if a project employs thermal or electrical storage.

That means thermal energy storage (TES) and hybrid solutions with battery or buffer capacity directly contribute to higher subsidy revenues and improved efficiency.
For suppliers and developers of thermal storage systems - from large-scale steam or salt storage to modular thermal buffers - this opens up new market opportunities within industrial electrification projects in Europe.

Opportunities for Dutch companies

Dutch companies are already strong in the areas of electrification, heat storage and integrated energy systems. This auction offers concrete opportunities for:

• Industrial companies looking to electrify or make their process heat more sustainable;
• Technology providers of thermal storage, heat pumps, power-to-heat and flexible grid integration;
• Project developers offering integrated solutions on industrial sites.

The auction can thus accelerate the combination of electrification and storage in the industrial sector - a development that also helps alleviate grid congestion and a more stable energy system.

A side note is that in the Netherlands grants may not be stacked: so this scheme cannot be combined with the SDE++. For projects abroad, this may be more advantageous in some cases.

Planning and follow-up

The European Commission expects to publish the call for proposals by the end of 2025. Selected projects must be operational within four years. The scheme is part of the new Industrial Decarbonization Bank, through which the EU is accelerating the transition to climate-neutral industry.