(1)

Directive (EU) 2023/959 of the European Parliament and of the Council (2) amended Directive 2003/87/EC by extending the range of pojects that the Innovation Fund can support, by specifying how projects applying for Innovation Fund support are to be evaluated and by strengthening the governance of the Innovation Fund. Directive (EU) 2023/959 has also enabled the Commission to award Innovation Fund support through competitive bidding procedures.

(2)

The Commission Communication of 1 February 2023‘A Green Deal Industrial Plan for the Net-Zero Age’ (3) provides that a first competitive bidding procedure will be launched in autumn 2023 to support the production of renewable hydrogen under the Innovation Fund. The Commission Communication of 16 March 2023 on the European Hydrogen Bank (4) reaffirmed that objective.

(3)

In light of the amendment of Directive 2003/87/EC and the objectives expressed in those communications, it is necessary to amend Commission Delegated Regulation (EU) 2019/856 (5).

(4)

Chapter II of Delegated Regulation (EU) 2019/856 lays down the rules for awarding grants under the Innovation Fund. Those rules have proven to be effective overall since the publication of the first call for proposals on 3 July 2020. However, they should be amended to align them with the new requirements of Directive 2003/87/EC as amended by Directive (EU) 2023/959 and to improve the efficiency and effectiveness of the grant award procedure based on the experience gained in the past few years.

(5)

Calls for small-scale projects have been undersubscribed, notably because small-scale projects have easier access to funding at national level, while calls for large-scale projects have been heavily oversubscribed. It is therefore appropriate to modify the definition of small-scale projects to include projects with a total capital expenditure not exceeding EUR 20 000 000 and to introduce a new category of medium-scale projects to address both under- and over-subscription issues, allow the selection of projects within similar size brackets and thereby support the highest quality projects of all sizes at the EU level.

(6)

Directive 2003/87/EC provides that grants that are not awarded through a competitive bidding procedure are limited to 60 % of the project’s relevant costs. It is appropriate to distinguish between the economic revenues and the operational benefits of projects in the calculation of the relevant costs to establish the correct value of relevant costs that can be supported. It should also be possible to decide in a decision launching a call for proposals that the relevant costs are calculated by comparing the project’s estimated costs with a conventional production counterfactual, depending on the nature of the call and past experience.

(7)

To avoid overcompensation of small-scale projects that have significant economic revenues, their relevant costs should no longer be calculated as their total capital expenditure costs. The same method for the calculation of relevant costs should apply to all projects, ensuring fair and equal treatment of applicants considering also the increase in the ceiling of total capital expenditure for small-scale projects. This calculation method should also better accommodate projects relying on a high level of consumption of renewable electricity since operational costs of such projects will be taken into account in the calculation of the relevant costs.

(8)

Some innovative projects can have a positive climate impact that is broader than just a reduction in greenhouse gas emissions. That is, for example, the case for projects that reduce black carbon emissions in the maritime sector, which account for 75 % of the non-carbon dioxide climate impacts from shipping. It is also the case for projects in the aviation sector that reduce the climate impact of non-greenhouse gases, which have two to four times the impact of carbon dioxide. The criterion on greenhouse gas reduction potential should therefore be amended to include such broader climate benefits beyond the reduction in greenhouse gas emissions in the criteria used for the assessment of projects.

(9)

The criterion of technical and market potential for widespread application or replication should also be broadened to take into account the potential of a proposed project to address multiple environmental impacts as well as its contribution to the EU’s zero pollution, and circularity objectives.

(10)

The criterion of cost efficiency should be amended to indicate how other public support is considered in the calculation.

(11)

Projects in the maritime sector are already being supported by the Innovation Fund in advance of the inclusion of maritime emissions in the EU Emission Trading System (‘EU ETS’) from 2024, where those involve the use of renewables or energy storage. By 2030, 20 million allowances from the EU ETS should be deployed to support the decarbonisation of the maritime sector. In addition, projects in sectors covered by the Carbon Border Adjustment Mechanism should be given special attention under the Innovation Fund.

(12)

In light of the new types of projects and sectors eligible under the Innovation Fund, the Commission may launch dedicated calls or topics for certain sectors. In the context of those sector-specific calls or topics, additional award criteria or requirements may be applied to evaluate the potential contribution of the proposed projects to the objectives and priorities of the European Green Deal. Such additional award criteria or requirements may include the potential contribution of the project to the EU’s access to a secure and sustainable supply of net-zero technologies needed to safeguard the resilience of the EU’s energy system and to contribute to the creation of quality jobs.

(13)

Given the technical nature and variety of the projects applying to the Innovation Fund, it is appropriate for the evaluation committee to be composed of independent external experts who have the necessary expertise to assess the applications in the best possible way. The inclusion of independent external experts makes it possible to adapt expertise to the types of projects or sectors concerned by a call for projects and to adequately process a large number of applications. Articles 12 and 12a should be amended to specify that applications can be assessed by an evaluation committee fully or partially composed of independent external experts.

(14)

In view of the limited number of projects currently eligible for project development assistance and in order to enlarge the scope of such assistance, it should be possible to apply for project development assistance in respect of any projects falling within the scope of the Innovation Fund, irrespective of whether a grant under the Innovation Fund has been previously applied for in respect of such projects. However, in order for the assistance to be effective, only projects demonstrating a sufficient degree of innovation and having the potential to significantly reduce the climate impacts and potential for widespread application should be awarded project development assistance. The eligibility and award criteria should be consistent with the requirements of the amended Directive 2003/87/EC. In order to maintain synergies between the grant award procedure and the project development assistance mechanism, it should be possible to decide whether the applicants who have participated in a call for proposals and have met the emission reduction effectiveness and innovation criteria may, if they so wish, have their applications automatically considered for project development assistance. To reflect the decoupling of project development assistance from the grant award procedure, provisions on the selection procedure should be amended.

(15)

The amended Directive 2003/87/EC provides that the Innovation Fund may award support through competitive bidding for the production of low or zero carbon products, which include products that can be used to reduce an activity’s emissions. The basic set of rules governing the granting of support through the competitive bidding should therefore be set out. Competitive bidding should especially contribute to the new objective of the Innovation Fund of scaling up innovative techniques, processes and technologies, with a view to their broad roll-out across the EU.

(16)

In view of the Green Deal Industrial Plan for the Net-Zero Age and the Communication on the European Hydrogen Bank, support granted through the first competitive bidding procedures should take the form of fixed premiums. The applicants that offer the lowest bid price should be selected for a fixed premium contract, which sets out a fixed amount of support for each unit of production. The amount of each fixed premium should be equal to the bid price offered by the applicants. The fixed premiums should be considered to be grants within the meaning of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (6) (‘the Financial Regulation’).

(17)

Each competitive bidding procedure should be designed by the Commission in accordance with the principles of openness, clarity, transparency and non-discrimination, and with a view to minimise the risk of speculative bidding. The design of each competitive bidding procedure should include the main economic parameters that directly influence the incentive structure and bidding behaviour of potential project proponents, and should be published sufficiently in advance of the publication of the call for proposals in order to enable effective competition. Ex post adjustments to the bidding procedures outcome such as subsequent negotiations on bid results or rationing should be avoided.

(18)

In order to ensure sufficient and effective competition between applicants, the competitive bidding procedure should have a maximum budget or volume that acts as a binding constraint in that it can be expected that not all applicants would receive support. If a competitive bidding procedure is undersubscribed, the design of the subsequent competitive bidding procedures should be adapted to ensure effective competition.

(19)

Each competitive bidding procedure (including the definition and requirements of the low or zero carbon product for which support may be granted) should be designed in such a way that only those projects are selected that have the potential to reduce emissions in several sectors and to contribute to the EU’s climate and energy targets and the EU’s zero pollution and circularity objectives. The auctioned product should have a potential for widespread application and to reduce the costs of the transition to a climate-neutral economy in the sectors concerned. In addition, priority should be given to products that have the potential to address multiple environmental impacts.

(20)

For each competitive bidding procedure, the Commission should clearly set out qualification requirements that must be met in order for a proposal to be ranked. Those qualification requirements should be limited to what is necessary to ensure an effective competitive bidding procedure and a completion of the proposed project in accordance with the objectives of the call for proposals and in compliance with EU law.

(21)

Proposals meeting the qualification requirements should be ranked from the lowest to the highest bid price. It should be possible, in exceptional cases, to use additional criteria to rank the proposals, provided that the bid price, put in direct relation to the product or objective forming the subject of the competitive bidding procedure, accounts for at least 70 % of the weighting of the ranking criteria.

(22)

The projects involving the production of low or zero carbon products may already be supported to varying degrees in different Member States. In order to ensure a level playing field between applicants and to ensure that the most cost-efficient projects are selected, it should be possible to restrict the possibility for projects already receiving public support for the production of low or zero carbon products to participate in a competitive bidding procedure. Such restriction should be clearly set out in a decision launching a call for proposals.

(23)

Deposits can be required in order to avoid speculative bidding and ensure the sincerity and high quality of proposals, as well as to facilitate the assessment of the proposals through lighter project maturity checks. Deposits should take the form of cash deposits, bank guarantees, guarantees from a mother company or other commonly used forms of guarantee.

(24)

In order to operationalise ‘Auctions as a Service’ (the EU Auction Platform referred to in the Communication on the European Hydrogen Bank), the implementing body in charge of ranking the proposals might be required to rank the proposals whose bid price is higher than the clearing price, so that these projects can be supported by Member States in the context of the Auction as a Service.

(25)

In accordance with Directive 2003/87/EC, the Commission shall provide technical assistance to Member States that request it and that have a low level of effective participation in projects funded under the Innovation Fund. That technical assistance should increase the capacities of the requesting Member State to support the efforts of project proponents in their respective territories to submit applications for funding from the Innovation Fund, in order to improve the effective geographical spread of participation in the Innovation Fund and increase the overall quality of submitted projects. In accordance with Article 110 of the Financial Regulation, the Commission is to determine the amount available for technical assistance to the Member States and the list of Member States eligible for technical assistance. Member States eligible for technical assistance should be those with the lowest ratio between the Innovation Fund support received by projects on their territory (both in terms of number and monetary amount) and their share of EU ETS verified emissions over the period 2013-2020. The list of eligible Member States should be updated at least once every two years.

(26)

In accordance with Directive 2003/87/EC, the Commission is to seek synergies between the Innovation Fund and the Horizon Europe Framework Programme for research and innovation, and, where relevant, between the Innovation Fund and other EU programmes. It is therefore appropriate to require the implementing body to foster synergies between the Innovation Fund and other EU funding programmes that it manages.

(27)

In order to ensure the visibility of the funding from the Innovation Fund, project proponents should promote their projects and their results and impact, and they shall clearly indicate the origin of the support received by using the promotional elements pre-agreed with the implementing body.

(28)

Delegated Regulation (EU) 2019/856 should therefore be amended accordingly,

(1)

Article 2 is amended as follows:

(2)

in Article 3, the following point (aa) is inserted:

(3)

Article 4 is amended as follows:

(4)

The title of Chapter II is replaced by the following:

(5)

Article 5 is replaced by the following:

(6)

Article 6 is amended as follows:

(7)

Article 9 is amended as follows:

(8)

in Article 10, paragraphs 2 and 3 are replaced by the following:

(9)

Article 11 is amended as follows:

(10)

Article 12 is amended as follows:

(11)

Article 12a is amended as follows:

(12)

after Article 12b, the following Chapter title is inserted:

‘CHAPTER IIa

Project development assistance ’;

(13)

Article 13 is replaced by the following:

(14)

the following Chapter IIb is inserted:

‘CHAPTER IIb

Specific provisions applicable to competitive bidding procedures

(15)

the following Chapter IIc is inserted:

‘CHAPTER IIc

Specific provisions applicable to technical assistance provided to Member States with a low level of effective participation

(16)

the title of Chapter III is replaced by the following:

‘Specific provisions applicable to other forms of Innovation Fund support’;

(17)

Article 18 is amended as follows:

(18)

Article 19 is amended as follows:

(19)

in Article 20, paragraph 4 is replaced by the following:

(20)

in Article 21, paragraph 2 is amended as follows:

(21)

in Article 23, paragraphs 5 and 6 are deleted;

(22)

in Article 24, paragraph 1 is replaced by the following:

(23)

Article 27 is amended as follows: