IF25 Heat Auction new and attractive funding mechanism for decarbonizing industrial process heat

How the IF25 Heat Auction works

The mechanism serves as a pilot for the future Industrial Decarbonisation Bank. The scheme is structured as follows:

• Industries in EEA countries submit a bid indicating how much subsidy they need per ton of CO₂, expected to be reduced by the project, as well as the expected heat output.
• The lowest-cost bids per ton of CO₂ abated are ranked first and awarded funding until the respective budget is exhausted.

Support requested per unit of produced heat (€/MWh_th) for the volume of expected average yearly electrified/direct-renewable heat is granted for up to five years after entry into operation.

Bids are made in one of the following three categories, known as ‘auction baskets’:

Bids are pay-as-bid, meaning each successful bidder receives the premium they requested, rather than a uniform clearing price.

National funding windows for 2025 (Auction-as-a-Service)

The Auction-as-a-Service (AaaS) mechanism allows Member States to allocate national top-up funding— a tool already adopted by in the IF Hydrogen Auction by Germany, Spain, Austria, and Lithuania in past rounds. For the first pilot heat decarbonisation auction, Spain is topping up 30 million euros for the medium temperature topic <5 MW, and 20 million euros for the medium temperature topic ≥ 5 MWth, supporting Spanish heat decarbonization projects.

For industrial sectors with high-temperature or medium-temperature heat demands

The IF25 Heat Auction is designed for industrial sectors with high-temperature or medium-temperature heat demands. These include chemicals and petrochemicals, metals and glass manufacturing, paper, ceramics, and food processing and textiles and construction materials. Some important conditions for eligibility are that the installation:

• is located in the European Economic Area (EEA);
• uses new electrified or direct-renewable heat technologies (not district or space heating);
• produces heat above 100 °C;
• is not under construction at the time of application;
• will reach financial close within 2 years after grant signature and entry into operation within 4 years after grant signature; and
• has a minimum capacity of 3 MWth or 5 MWth, depending on the topic.

Things to keep in mind when considering submitting an application

While the opportunity is significant, industries should prepare carefully to avoid pitfalls, the most important of which are:

• A 6% bank guarantee of the maximum grant is required to ensure project delivery within the required timelines.
• Projects must show technical and financial readiness, including a robust feasibility study, permitting strategy, and risk analysis at the time of application.
• Flexibility solutions can increase the volume of heat eligible for funding.

When to apply?

The call opening and submission deadline are expected on December 3, 2025 and February 19, 2026 respectively.

Benefit from our expertise, built on a strong IF track record

For industries ready to take the next step toward climate neutrality, the IF25 Heat Auction represents a rare opportunity to secure substantial EU funding while leading Europe’s industrial transformation. However, good preparation and a strong bid map are crucial to success. In recent years, the experts at PNO Innovation have supported many energy-intensive companies and partnerships in successfully applying for the Innovation Fund. So contact our energy, chemical, and high-temperature industry experts today by submitting the contact form on the bottom of this page or by calling +31(0)88 838 13 81.