Innovation Fund Program
European funding for innovative decarbonized solutions
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- EU funding program
- Innovation Fund
Summary
Introducing the Innovation Fund program
The Innovation Fund is one of the most substantial global funding mechanisms for testing innovative, low-carbon solutions. Established within the EU Emissions Trading System (EU ETS), this fund is a key tool in the European climate strategy for facilitating the transition to carbon neutrality by 2050.
In the European financial ecosystem, The Innovation Fund occupies a strategic niche by specializing exclusively in the crucial stage of commercializing innovative decarbonized solutions. Unlike other mechanisms such as Horizon Europe, which primarily focus on the investigation and development phases, the Innovation Fund targets initiatives prepared to overcome the hurdle of industrial testing and commercial launch, thus reducing the gap between innovation and commercialization.
The strategic aims of the Innovation Fund are ideally aligned with the European perspective of the Green Deal and its enhanced climate ambitions. The fund pursues the following objectives:
- Supporting highly innovative initiatives to reduce greenhouse gas emissions
- Accelerate the market launch of ecological solutions and their industrial expansion
- Boosting green economic growth and strengthening European competitiveness
- Develop the next generation of technologies and solutions essential to climate neutrality
- Generating local jobs for a just transition to a low-carbon economy
For the decade 2020-2030, the Innovation Fund has a substantial budget of approximately €38 billion (based on current carbon cost estimates), generated from the auctioning of 450 million emission allowances under the EU ETS mechanism. This significant allocation demonstrates the EU's strong commitment to climate innovation as a catalyst for transforming the European economy.
Revolutionary solutions for a carbon-neutral economy
Specific aims and orientations
The Innovation Fund supports groundbreaking solutions in strategic areas for Europe's ecological transition. This substantial financial support represents a remarkable opportunity for innovative companies aiming to develop, test, and deploy decarbonized industrial solutions.
Fundamental thematic areas
The Innovation Fund supports innovative initiatives in energy-intensive industrial sectors, organized around several thematic areas:
Energy-intensive sectors
- Decarbonization solutions and methods for energy-intensive industries
- Alternatives to products with a high carbon footprint
- Carbon capture and utilization (CCU) in industrial processes
- Carbon capture and sequestration (CCS) for industrial emissions
Innovative renewable energies
- Emerging renewable energy solutions, or those not yet commercialized
- Innovations for the integration of renewable energies
- Innovative energy storage
- Disruptive marine renewable energies
Energy conservation
- Large-scale conservation solutions
- Innovative conservation in the short and long term
- Next generation accumulators
- Sophisticated thermal solutions
Smart energy infrastructure
- Solutions for cross-sector integration
- Integration of variable renewable energy sources
- Intelligent consumption management
- Flexibility solutions for infrastructure
Carbon capture, utilization and sequestration (CCUS)
- Industrial CO₂ capture solutions
- Valorization of CO₂ for the generation of sustainable products
- CO₂ transport and sequestration infrastructure
- Negative emissions and direct atmospheric capture
Priority sectoral guidelines
Although all industrial sectors are eligible, the Innovation Fund particularly favors sectors that are complex to decarbonize:
- Steel and metallurgy
- Cement and building materials
- Chemistry and petrochemistry
- Paper and cellulose
- Glass and ceramics
- Hydrogen and e-fuels
- Refining and synthetic fuels
- CO₂ capture and utilization
The scheme specifically encourages initiatives with high potential for reducing emissions and showing a substantial level of innovation compared to existing solutions on the market.
Participation in European strategic orientations
The Innovation Fund is aligned with major European strategic directions, including:
- The European Green Deal and the ambition of climate neutrality by 2050
- European industrial strategy and low-carbon competitiveness
- The "Fit for 55" package aims to reduce emissions by at least 55% by 2030
- The strategy for hydrogen and integrated energy systems
- The action plan for the circular economy
- The EU strategy for reducing methane emissions
Targeted benefits at the European level
The Innovation Fund initiatives aim to generate substantial benefits:
- Substantial and controllable reduction in greenhouse gas emissions
- High level of innovation compared to the state of the art in the sector
- The initiative has reached a stage of maturity, allowing for accelerated implementation and commercialization.
- Economic efficiency (cost per tonne of CO₂ avoided)
- Potential for replicability and large-scale extension
- Job creation and territorial economic development
- Participation in European energy independence
Classifications of supported initiatives
The Innovation Fund supports two main classifications of initiatives:
Large-scale initiatives:
- Initiatives with capital expenditures (CAPEX) exceeding €7.5 million
- They aim to test highly innovative solutions on an industrial scale.
- Typical duration: 3-5 years for construction + 5-10 years of operation
- Support: up to 60% of additional innovation-related costs
Small-scale initiatives:
- Initiatives with investments between 2.5 and 7.5 million euros
- Focus on promising innovations requiring validation before scaling up
- Typical duration: 2-3 years for construction + 3-5 years of operation
- Support: up to 60% of total CAPEX
The system also offers specific procedures:
- Thematic consultations targeting specific sectors or solutions
- Project Development Assistance mechanism for promising but still insufficiently mature initiatives
- Pre-commercial public acquisitions to stimulate innovation through public demand
For smaller-scale environmental initiatives or those focused on biodiversity rather than industrial decarbonization, the LIFE program may be a more suitable alternative to the Innovation Fund.
Concrete examples of initiatives already supported
Here are some representative examples of initiatives that received support from the Innovation Fund during the initial consultations:
- Installation of a large-scale CO₂ capture mechanism in a cement plant, with valorization for e-fuels (Sweden)
- Deployment of electrolyzers to generate green hydrogen to replace grey hydrogen in a refinery (Netherlands)
- Integrated hydrogen-based steel production initiative, drastically reducing emissions compared to conventional blast furnaces (Finland)
- Biomass power plant with carbon capture, generating negative emissions (Bio-CCS) (Denmark)
- Deployment of a high-temperature thermal energy conservation mechanism using innovative materials (Spain)
- Pilot initiative for sophisticated chemical recycling of complex plastic waste (France)
Innovative solutions encouraged
The Innovation Fund particularly favors initiatives that:
- They develop solutions with a high TRL (Technology Readiness Level), generally between 7 and 9.
- They offer disruptive or revolutionary solutions for sectors with a high carbon footprint
- They integrate various innovative solutions in synergy (systemic approach)
- They demonstrate a significant potential for reducing emissions compared to the baseline.
- They demonstrate medium-term commercial viability without ongoing support
Preferred areas of intervention
Although all sectors participating in the decarbonization transition are eligible, the following solutions are particularly valued:
- Solutions for green hydrogen generation and industrial use
- CCUS solutions integrated into industrial processes
- Generation of decarbonized materials and chemicals
- Innovative next-generation energy solutions
- Solutions for sectors that are complex to decarbonize (cement, steel, chemicals)
- Negative emissions solutions (BECCS, DACCS)
- Sophisticated electrification solutions for industry
- Synthetic fuels and sophisticated biofuels
Innochain Expertise and Support
Specific expertise on this program
Innochain has cultivated in-depth expertise in the Innovation Fund, the result of our commitment and successful support of numerous initiative leaders across Europe. Our team includes expert evaluators and operational specialists who have a thorough understanding of the evaluation criteria and specific requirements of the Innovation Fund.
Our specialists combine technical expertise in the target industries (energy, CCUS, heavy industry), a thorough understanding of support mechanisms, and practical experience in developing successful applications. This multidimensional expertise allows us to guide you effectively through the complexities of the system.
Personalized methodological approach
Our support strategy for the Innovation Fund adopts a validated 6-phase methodology:
- Strategic diagnosis In-depth analysis of your solution and its decarbonization potential
- Optimal positioning : Identification of the most appropriate support mechanism (large scale, small scale or development assistance)
- Technical and financial architecture Precise definition of the initiative, its implementation methodology, and its economic model
- Carbon impact calculation : Rigorous quantification of avoided emissions according to the methodology required by the Innovation Fund
- Construction of the file : Development of a comprehensive technical and financial proposal, clearly demonstrating the five areas of evaluation
- Preparation for the assessment : Coaching for interviews with assessors and answers to technical questions
Range of services
Innochain offers comprehensive or modular support depending on your requirements:
- Eligibility assessment and technological maturity analysis
- Support in calculating and validating GHG emission reductions according to the Innovation Fund methodology
- Business plan development and financial modeling
- Technical architecture of the initiative and definition of milestones
- Risk analysis and mitigation strategies
- Assistance with the complete drafting of the application file
- Preparation of technical and financial annexes
- Administrative assistance for contractualization
- Support for reporting and project monitoring
Eligibility requirements
Organization eligibility criteria
To be eligible for the Innovation Fund, applicants must meet the following requirements:
- Legal entities Any public or private legal entity established in an eligible country
- Consortium or individual application Initiatives can be submitted by a single entity or by a consortium (with no minimum number of partners).
- Financial strength : Ability to co-finance the portion of costs not covered by the grant
- Operational capacity Skills and resources needed to successfully carry out the initiative
Unlike other European schemes, the Innovation Fund does not require a transnational consortium, which allows national initiatives or even those led by a single company to be supported.
Profiles of companies concerned
The Innovation Fund is accessible to a wide range of organizations:
- Industrial companies Particularly those in sectors with high energy consumption
- Solution providers Companies developing innovative decarbonized solutions
- SMEs and large companies Without restrictions on size, with a focus on transformative initiatives
- Energy producers Companies in the energy generation and distribution sector
- Infrastructure operators : Energy network and infrastructure managers
- Public-private consortiums : Collaborations between industrialists, communities and research centers
Partnerships between solution developers and industrial users are particularly valued, as they strengthen the potential for commercial deployment.
Geographical requirements
The Innovation Fund covers:
- The 27 member states of the European Union
- Norway and Iceland (EEA members)
- The initiatives must be implemented within the territory of the eligible countries.
- Collaborations with entities from third countries are possible, but the core of the initiative must remain in eligible countries.
Technical or scientific prerequisites
Innovation Fund initiatives must meet several technical requirements:
- Level of innovation The solution must surpass the state of the art and the best available solutions
- Technological maturity High TRL, typically 7-9, with successful pilot-scale validation
- Potential for emissions reduction Proven ability to significantly reduce GHG emissions
- Preparation of the initiative : Advanced level of technical design and complete feasibility study
- Solid business plan : Credible business model and clear path to commercial viability
Initiatives must also demonstrate their potential for scaling up and replication, as well as their contribution to European climate objectives.
Financial support mechanisms
Percentages of support according to organizational profile
The Innovation Fund offers an innovative support system based on several mechanisms:
Large-scale initiatives:
- Support up to 60% for "relevant costs"
- The relevant costs represent the additional costs (CAPEX and OPEX over 10 years) associated with implementing the innovative solution compared to a conventional solution.
- Payment in phases: 40% upon signing, 60% during the operational phase based on GHG emissions actually avoided
Small-scale initiatives:
- Support up to 601,300 TEU of total capital expenditures (CAPEX)
- Simplified payment with the possibility of a larger advance
Assistance in developing initiatives:
- Fixed grant for the development of the initiative (technical, financial studies, etc.)
- Up to 1 million euros per initiative
Grant ceilings
The amounts of support fluctuate considerably depending on the size and ambition of the initiatives:
Large-scale initiatives:
- There is no formal ceiling, but typical subsidies range from 10 to 150 million euros.
- Major industrial validation initiatives can receive up to 300 million euros
Small-scale initiatives:
- Usual subsidies between 1.5 and 4.5 million euros (60% of CAPEX capped at 7.5 million)
Development assistance:
- Up to 1 million euros per initiative
Eligible cost classifications
The classifications of eligible costs vary depending on the type of initiative:
For initiatives with significant costs:
- Additional capital expenditure (CAPEX) compared to a conventional solution
- Net operating costs (OPEX) over 10 years: difference between the costs and benefits of the innovative solution vs. the conventional one
- Transaction costs (studies, engineering, permits) to a limited extent
For small-scale initiatives:
- Primarily the total capital expenditures (CAPEX) of the initiative
- Some preparation costs may be included
Co-financing required
The Innovation Fund operates on the principle of co-financing:
- The project proponent must finance at least 40% of eligible costs
- This co-financing may come from own resources or other sources (loans, investors, national aid)
- National or regional aid may be combined with the Innovation Fund, subject to compliance with state aid rules
- The initiative must demonstrate its complete financial structure, including secured or planned sources of support.
Innochain can assist you in identifying additional co-financing sources and optimizing your financial engineering to maximize the leverage effect of European support.
Application Process
Planning and consultations
The Innovation Fund operates with a system of regular consultations:
- Frequency Generally, one main consultation per year for large-scale initiatives, and one for small-scale initiatives.
- Thematic consultations More and more consultations are targeting specific sectors or solutions.
- Two-phase procedure for large-scale initiatives :
- Phase 1: Expression of interest (concept note) evaluated on three axes (level of innovation, potential for GHG reduction, maturity)
- Phase 2: Full proposal for the shortlisted initiatives, evaluated across all five areas
- One-phase procedure for small-scale initiatives Direct submission of a complete proposal
Mandatory documentation
Applying to the Innovation Fund requires the preparation of several essential documents:
For phase 1 (large-scale initiatives):
- General Application Form
- Description of the technical innovation
- Calculation of avoided GHG emissions
- Implementation plan and financial commitment
- Required authorizations and preliminary studies
For phase 2 or smaller-scale initiatives:
- Detailed technical documentation
- Complete business plan
- Financial plan and sources of support
- Detailed cost analysis
- Risk analysis and mitigation strategies
- Complete and documented calculation of avoided GHG emissions
- Deployment and Replication Plan
Innochain supports you in the preparation of each of these documents, with particular attention to overall technical and economic consistency and the rigor of emissions calculation.
Submission phases
The application process to the Innovation Fund includes the following phases:
- Registration on the EU Funding & Tenders support portal
- Preparation of documents according to the requirements of the consultation
- Electronic submission before the deadline
- Assessment by independent specialists
- For large-scale initiatives Notification of pre-selection and invitation to phase 2
- Preparation of the complete file (phase 2 or reduced dimension)
- Interviews with the evaluation panel for the shortlisted initiatives
- Final decision of the European Commission
- Preparation of the grant agreement for the selected initiatives
The entire process can take between 9 and 18 months depending on the complexity of the initiative and the type of consultation.
Areas for evaluating proposals
Innovation Fund initiatives are evaluated according to five main criteria:
Innovation level (5 points):
- Innovation beyond the state of the art
- Advantages compared to existing solutions
- Innovative nature of processes or products
Potential for reducing GHG emissions (15 points):
- Absolute amount of emissions avoided
- Cost-effectiveness ratio (€/tonne of CO₂ avoided)
- Robust calculation and monitoring methodology
Maturity of the initiative (5 points):
- Technical and operational feasibility
- Organizational structure and team qualifications
- Progress of required authorizations and permits
Extensibility (5 points):
- Potential for deployment in similar applications
- Large-scale replication plan
- Knowledge sharing actions
Cost efficiency (10 points):
- Business model viability
- Soundness and completeness of the financial plan
- Optimized cost structure
Each axis is scored according to a specific scale, with particular importance given to the reduction of emissions (triple weighting) and to cost efficiency (double weighting).
Innochain optimizes your application to maximize your score on each of these axes, with particular attention to the validation and quantification of emission reductions.
Success statistics and determining factors
Success data for this device
The Innovation Fund scheme exhibits the following characteristics in terms of success rate:
- Overall average success rate Approximately 15-20% across Europe (variable depending on the consultations)
- Phase 1 (important dimensions) Approximately 30-40% proposals are selected for the second phase
- Phase 2 (large dimensions) 40-50% of the pre-selected initiatives receive support
- Small-scale initiatives : Slightly higher success rate, around 20-25%
- Variation by sector Green hydrogen, CCUS, and industrial energy efficiency initiatives generally have the highest rates
- Evolution : Trend towards increasing competition, with a constantly increasing number of applications
Common mistakes to avoid
Our experience has allowed us to identify the main errors that penalize Innovation Fund applications:
- Insufficient level of innovation Solutions too similar to solutions already on the market
- Inaccurate emissions calculation : Methodology for calculating avoided GHGs insufficiently rigorous
- Poorly defined basic assumptions : Baseline scenario imprecise or too optimistic
- Unrealistic business plan : Financial projections that are too optimistic or insufficiently supported
- Insufficient level of preparation Technical feasibility not sufficiently proven
- Non-optimized costs : Cost-effectiveness ratio (€/tonne CO₂) too high
- Vague deployment plan : Insufficiently developed replication and expansion strategy
- Superficial risk analysis : Incomplete risk identification and mitigation plans
Innochain takes care to correct these weaknesses before submission to maximize your chances of success.
Differentiating factors for a winning application
The factors that make a difference in obtaining Innovation Fund support are:
- Revolutionary technological innovation with clear validation of its advantages compared to the state of the art
- Substantial and well-quantified carbon impact using a robust methodology
- A viable and detailed business model proving medium-term profitability
- Experienced initiative team with a track record in industrial deployment
- An integrated, systemic approach combining several complementary innovations
- The initiative is at an advanced stage of development, with detailed technical studies and permits in the process of being obtained.
- Realistic and detailed planning with clear milestones and critical path analysis
- A comprehensive and compelling risk management strategy
Feedback from Innochain
Our experience supporting numerous Innovation Fund initiatives has allowed us to identify best practices:
- Accurate and rigorous quantification of avoided GHG emissions is the most critical element of success
- Initiatives combining several solutions in synergy are generally better evaluated.
- Early involvement of regulators and local stakeholders significantly enhances credibility
- A diversified financial strategy, combining different sources of support, is highly valued.
- Highlighting environmental co-benefits (beyond the reduction of GHGs) is an advantage.
- Initiatives with immediate and clearly identified potential for replication are given preference.
- A detailed sensitivity analysis demonstrating the initiative's robustness to fluctuations in carbon prices and energy markets is highly valued.
- Clarity and conciseness of the presentation, despite technical complexity, are decisive factors in the evaluation
- A careful balance between innovation ambition and technical and economic realism is crucial
FAQ about the Innovation Fund program
Frequently Asked Questions by Businesses
Is my initiative innovative enough for the Innovation Fund?
Innovation within this framework is not limited to entirely new solutions. Any solution that surpasses the current state of the art in your sector, or that applies an existing solution in a novel way, is considered innovative. Innochain can conduct a precise benchmark to position your solution and maximize the validation of its innovative nature.
How are avoided GHG emissions calculated?
The calculation must follow the Innovation Fund's specific methodology, which compares the emissions of the innovative initiative with those of a baseline scenario (a conventional solution that would likely be deployed in the absence of the Innovation Fund). This calculation includes both direct and indirect emissions and must be meticulously documented. This is a crucial aspect where Innochain brings considerable added value thanks to its expertise.
Can the Innovation Fund be combined with other public support?
Indeed, the Innovation Fund can be combined with national or regional support, as well as other European mechanisms such as the Connecting Europe Facility or InvestEU, subject to compliance with state aid rules. This combination often allows for optimizing the initiative's financial structure. Innochain can assist you in designing an optimal blended support strategy.
What are the chances of success for a first-time application?
Initial applications without professional support show a success rate of less than 10%. With Innochain's support, this rate increases to over 35% even for a first application, thanks to our in-depth mastery of the evaluation criteria and our experience with initiatives supported by the Innovation Fund.
How exactly does the calculation of "relevant costs" work?
For large-scale initiatives, the relevant costs are the sum of:
- The difference between the CAPEX of the innovative initiative and those of an equivalent conventional installation
- The discounted difference between OPEX and revenues over 10 years of operation
If this difference is negative (the innovative solution is more cost-effective in the long run), only the difference in CAPEX is considered. If the difference is positive, the entire difference is considered a relevant cost. This complex calculation can significantly influence the grant amount. Innochain has a thorough understanding of this methodology and can optimize your financial model accordingly.
What is the grant payment process?
The Innovation Fund offers a unique payment mechanism:
- Up to 40% of the grant can be paid upon signing the agreement, based on initiative milestones.
- Up to 60% is paid during the operating phase, depending on the GHG emissions actually avoided
- For small-scale initiatives, a larger proportion can be paid before they become operational.
This mechanism incentivizes the actual performance of the initiative. Innochain supports you in structuring your initiative to optimize cash flow and maximize the security of initial payments.
Maximize your chances of success with our expertise
Ready to launch your Innovation Fund project?
Innochain supports you at every stage, from initial assessment to final submission, to optimize your prospects of obtaining Innovation Fund support and realizing your vision of a decarbonized industry.
Feel free to contact us with any questions or to discuss your industrial decarbonization initiative. Together, let's contribute to the European goal of climate neutrality while strengthening your competitiveness.