Innovation Fund IF26: €1 billion for industrial heat decarbonisation, auction from December

On 24 September 2026, the European Commission published the final terms and conditions for the IF26 Heat Auction. It is the second European Economic Area-wide auction for decarbonising industrial process heat and has a budget of 1 billion euro from the Innovation Fund. Companies of any size can take part if they replace the burning of fossil fuels with heat pumps, electric heating, solar or geothermal heat, or nuclear technologies. The auction is expected to open in early December 2026.

In brief

• Programme: Innovation Fund – IF26 Heat Auction (industrial heat auction)
• Authority: European Commission (DG CLIMA). The funding authority is CINEA, and in Romania the national contact point is the Ministry of Economy.
• Beneficiaries: industrial operators and project developers of any size, with projects located in the European Economic Area
• Total budget: 1 billion euro, split as follows: €100 million for low temperature, €600 million for medium temperature and €300 million for high temperature
• Form of support: fixed premium per tonne of CO2 avoided, paid for up to 5 years from entry into operation
• Maximum grant per bid: €100 million for low and medium temperature, €250 million for high temperature
• Submission period: opening is estimated for early December 2026. The deadline has not been announced yet.
• Status: the final terms have been published, but the call for proposals has not yet been launched

What kinds of projects are funded?

The auction supports process heat produced in new capacity, using the following technologies:

• electrification: heat pumps (including mechanical vapour recompression), direct and indirect resistive heating, thermal storage, electromagnetic and dielectric heating, plasma;
• direct renewable heat: solar thermal or geothermal;
• innovative nuclear technologies, including small modular reactors;
• hybrid projects combining the technologies above.

Electrolysis (for example, in the aluminium industry), electric arc furnaces for steel, heat for space heating or district heating, biomass and hydrogen are not eligible. The project cannot install new fossil-fuel capacity at the same installation. Glass furnaces are explicitly exempted from this rule. Other applications can be exempted only if they demonstrate similar technical or safety barriers and present a plan for switching to a climate-neutral fuel.

What are the technical and financial thresholds?

Projects are divided into three categories, depending on the measured temperature of the heat:

• Low temperature (80–100°C): capacity of at least 5 MWth, only with heat pumps with a COP above 1.5, direct renewable heat or nuclear;
• Medium temperature (100–400°C): capacity of at least 3 MWth;
• High temperature (above 400°C): capacity of at least 3 MWth.

The investment (CAPEX) must be at least 2.5 million euro. Bids are ranked solely on price, in euro per tonne of CO2 avoided. The ceilings are €400/tCO2 for low and medium temperature and €800/tCO2 for high temperature. Projects with energy storage, with heat pumps with a COP of at least 1.5, or with direct renewable heat or nuclear receive a 25% ranking bonus. In addition, the limit of 70% of subsidised operating hours does not apply to them.

What obligations does the winner have?

• The application must include a letter of intent from a bank. Projects invited to contracting then submit a performance guarantee of 6% of the maximum grant.
• Financial close must be achieved within 2.5 years of signing the contract, and entry into operation within 5 years at most.
• Payments are made annually, based on heat that is measured and verified by an independent third party. Consortia that include an SME can request payments every 6 months.
• Monitoring is carried out through a management system compliant with EMAS or ISO 50001.
• The grant cannot be combined with other public aid for the CAPEX or OPEX of the same project. Only the exceptions set out in the terms are permitted, such as previously funded feasibility studies.

How and by when do you apply?

Applications will be submitted on the Funding & Tenders Portal after the call is launched, estimated for early December 2026. The deadline has not been announced yet. The file includes forms A, B and C, the bid financial calculator, the Gantt chart, the feasibility study, the permitting strategy (environment, construction, grid connection) and the guarantee letter. Works must not start before the application is submitted.

On 5 October 2026, between 10:00 and 11:30, the Ministry of Economy is organising a free online session, with a presentation by DG CLIMA representatives. Registration closes on 2 October, at 12:00.

What this means for your business

Our recommendation: the auction suits factories that use a lot of steam or process heat, for example in food, chemicals, paper, construction materials or ceramics, and that are planning to replace a gas boiler anyway. In the first round (IF25) only 85 bids were submitted and 65 were selected. Industry blamed the low participation on the short preparation time. This time the terms are known more than two months before opening, so it is worth using that advantage.

• Start measuring your actual heat consumption and process temperature now. The temperature category, the price bid and the payments all depend on this data.
• Request equipment quotes in good time and talk to the grid operator about connection. The grid connection strategy is an eliminatory criterion.
• Talk to your bank about the 6% guarantee. The letter of intent is submitted together with the application.
• A common pitfall: if you claim the 25% bonus but do not demonstrate the promised storage or COP at entry into operation, the contract may be terminated and the guarantee called.

If you are not sure which category your project falls into, you can start with the eligibility check.

Frequently asked questions

Can Romanian SMEs take part in the IF26 Heat Auction?

Yes. The auction is open to projects of any size in all industrial sectors in the European Economic Area, including Romania. The project must nevertheless have at least 3 MWth (or 5 MWth at low temperature) and an investment of at least 2.5 million euro.

How is the amount received calculated?

The company bids a subsidy in euro per MWh of heat produced, and the form automatically converts it into euro per tonne of CO2 avoided. The maximum grant is the subsidy per MWh multiplied by the estimated annual output and by 5 years. Payments depend on the heat actually produced and measured.

Is the call open now?

No. Only the final terms were published on 24 September 2026. The call is expected to open in early December 2026, and the submission deadline has not been announced yet.

Can I use biomass or hydrogen?

No. The final terms explicitly exclude heat from biomass and hydrogen. Only electrification, solar or geothermal heat, nuclear technologies and combinations of these are eligible.

Official sources

• European Commission – announcement of the publication of the final IF26 Heat Auction terms
• Innovation Fund IF26 Heat Auction – Terms and Conditions (24 September 2026)
• Innovation Fund – competitive auctions
• Ministry of Economy – information session of 5 October 2026

Information checked on 26 September 2026. Conditions may be amended by the managing authority — check the guide in force before submitting.