All the updates on Innovation Fund 2023

The Net-Zero Technology 2023 call from the Innovation Fund, the funding program for innovative low-carbon technologies, introduces some important updates that need to be understood before applying. Perhaps the most evident, as announced a few months ago, is the change in the call’s structure: now projects are submitted under the same call, regardless of their size. Alongside the historical categories of large and small-scale projects, a third category is introduced, that of medium scale. Simultaneously with the main call, the first auction for mature renewable hydrogen projects opens, under the European Hydrogen Bank initiative, closing on February 8, 2024.

Next, let’s analyse the updates of the Net-Zero Technology Call. With a budget of 4 billion euros, this call is open to small-scale projects (with investments between 2.5 million euros and 20 million euros), large-scale projects (with investments over 100 million euros), and, starting this year, medium-scale projects (between 20 and 100 million euros). The budget for each topic is 200 million euros, 1.7 billion euros, and 500 million euros, respectively. The deadline to submit applications is April 9, 2024.

Other topics

As in previous editions, Innovation Fund 2023 also includes a topic dedicated to pilot projects, requiring a higher degree of innovation and a relative reduction in greenhouse gas emissions of at least 75%, among other criteria. The maximum grant for this topic remains at 40 million euros, as in previous calls.

Another confirmed topic for this call is manufacturing, for projects involving the construction and operation of manufacturing facilities (new, renovated, or expanded) to produce equipment or components specific to clean technology (new, recycled, or reused) for renewable energy facilities, electrolyzers and fuel cells, energy storage solutions, and heat pumps.

Projects eligible

Regarding the eligible project typology for the Innovation Fund, a sixth category is added this year to the five historical categories (high-energy-consuming industries, carbon capture and use/storage, renewable energy production, energy storage, and manufacturing facilities), namely, mobility.

In the maritime sector, a non-exhaustive list of examples of projects could include:

• Innovative vessels and their components (e.g., new hull designs, wind propulsion technologies, energy-saving propellers, hull appendages for power trains, and other hull technologies).
• Solutions to reduce greenhouse gas emissions from on-board ship systems (e.g., fuel cells, batteries).
• Wind propulsion technologies and power take-off from propellers (e.g., Flettner rotors, sail rigs, and other wind propulsion devices).
• Fuel switch (e.g., use of electricity, sustainable biofuels, recycled carbon fuels, or non-biological renewable fuels instead of fossil fuels).
• Projects combining the above.
• Port infrastructure projects contributing to the decarbonization of maritime transport (e.g., the supply of renewable energy from shore sources).

In aviation, examples could include:

• Projects reducing energy use per functional unit (e.g., new fuselages, weight optimization, fleet replacement with more efficient aircraft).
• Manufacturing of electric or hydrogen-powered aircraft or their components.
• Fuel switch (e.g., use of SAF, electricity, hydrogen, or alternative kerosene).
• Projects involving modal shift (e.g., a new mode of transport or a combination of various modes).
• Other projects contributing to the reduction of GHG emissions and climate impacts unrelated to aviation-related CO2.

Minimum participation conditions

In the Innovation Fund 2023 call, significant changes related to the reduction of relative greenhouse gas emissions have been introduced, generally requiring a minimum reduction of at least 50% (75% in the pilot projects).

Regarding the budget, the funding requested for each ton of CO2 avoided (profitability criterion) must be less than 200 euros. This limit does not apply to pilot projects.

This year also brings a change in the so-called relevant costs, i.e., the net additional costs borne by the project promoter because of applying innovative technology related to the reduction or elimination of greenhouse gas emissions. These costs, used to calculate the maximum grant to be requested, will default to the “without reference plant” method, although the “reference plant” method can also be applied. In the former, they are the net additional costs, calculated as the difference between the best estimate of economic costs (investment and operation) and economic revenues and operating benefits. In the latter, these costs are compared with those of a conventional technology plant of the same capacity and effective production. To choose this second option, however, grounded reasons must be provided, along with additional documents.

Another novelty is that Liechtenstein is added to the list of countries where Innovation Fund projects can be conducted, which includes EU Member States, Norway, Iceland, and, in the case of certain electrical projects, Northern Ireland.

Evaluation criteria

The evaluation criteria have undergone some changes. In particular, the cost-efficiency criterion is significantly affected, where the reference value for the minimum score has dropped from 600 to 200 euros per ton of CO2 avoided, except for pilot projects, for which the threshold remains at 2000 euros.

Also, the previous criterion called scalability is now named replicability. An added focus is now on the project’s contribution to the resilience of the EU’s industrial system and its environmental impacts.

Finally, beyond the consolidated bonuses in previous editions (for net carbon elimination, other greenhouse gas reductions, or additional electricity from renewable energy sources), Innovation Fund 2023 will also reward the use of non-biological renewable hydrogen or projects in the maritime sector.