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Document 52023DC0732

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of the Innovation Fund in 2022

COM/2023/732 final

Brussels, 24.11.2023

COM(2023) 732 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on the implementation of the Innovation Fund in 2022


Contents

1    INTRODUCTION    

2    INNOVATION FUND KEY MILESTONES IN 2022    

3    SECOND CALL FOR LARGE-SCALE PROJECTS (LSC-2021)    

3.1    Project participation in the call    

3.2    Call budget and financial support requested    

3.3    Characteristics of the awarded projects    

3.3.1    Sectors    

3.3.2    Geographical distribution    

3.3.3    GHG-reduction potential    

3.3.4    Level of maturity    

3.3.5    Level of innovation and potential for scalability    

4    SECOND CALL FOR SMALL-SCALE PROJECTS (SSC-2021)    

4.1    Call budget and financial support requested    

4.2    Characteristics of the awarded projects    

4.2.1    Sectors    

4.2.2    Geographical distribution    

4.2.3    GHG-reduction potential    

4.2.4    Level of maturity    

4.2.5    Level of innovation and potential for scalability    

5    CUMULATIVE RESULTS OF THE INNOVATION FUND BY THE END OF 2022    

5.1    Project participation in the call    

5.2    Call budget and financial support requested    

5.3    Characteristics of the awarded projects    

5.3.1    Categories and sectors    

5.3.2    Geographical distribution    

5.3.3    Potential for reducing GHG emissions    

5.3.4    Level of maturity    

5.4    Innovative technologies supported    

5.5    Contribution to other EU policy objectives    

5.5.1    Synergies with other funding instruments    

5.5.2    Knowledge sharing on clean-tech solutions    

6    PROJECT DEVELOPMENT ASSISTANCE FOR LESS MATURE PROJECTS    

7    CONCLUSIONS AND NEXT STEPS    

1INTRODUCTION

1.1Context and objectives of the Innovation Fund

The Innovation Fund is one of the world’s largest funding programmes for the demonstration of innovative low-carbon technologies. It is funded by the European Union’s Emissions Trading System and supports the European Union’s objective to reach climate neutrality by 2050.

The European Union (EU) is committed to reducing greenhouse gas (GHG) emissions and mitigating the effects of climate change. In 2021, the European Climate Law 1 was approved as one of the core initiatives for the delivery of the European Green Deal, setting ambitious targets for 2030 in areas such as reductions in GHG emissions, the deployment of renewable energy technologies, and energy efficiency. The Regulation aims to achieve climate neutrality by 2050 in the EU. This aim will require considerable efforts, including regulatory and public sector support, to promote innovation and hasten the path to market of zero-carbon and low-carbon solutions.

The European Union Emissions Trading System (EU ETS) is a cornerstone of the EU’s policy to combat climate change and is a key tool for reducing GHG emissions in a cost-effective manner. Established in 2005 2 , it is the world’s first and now the world’s largest carbon market, covering around 40% of the EU’s GHG emissions. In 2018, the revised ETS Directive created the Innovation Fund (IF) using revenues from auctioning 450 million emission allowances to support innovation in low-carbon technologies and processes in the sectors covered by the EU ETS. In 2019, with the adoption of its Delegated Regulation 3 , the IF officially started its activities to provide grants and contributions to blending operations to support the relevant costs of eligible projects.

The IF is now one of the world’s largest funding programmes for the commercial demonstration of innovative zero-carbon and low-carbon technologies aimed at bringing to market industrial solutions to decarbonise Europe and support its transition to climate neutrality. The IF provides funding in five key areas: (i) energy intensive industries (EII), (ii) renewable-energy technologies, (iii) carbon capture and geological storage (CCS), (iv) energy storage, and (v) net-zero mobility and buildings.

In July 2021, the European Commission adopted a revision of the EU ETS Directive 4  as part of the ‘Fit-for-55’ package of legislative measures to implement the EU’s increased climate ambition for 2030. The package of measures included an amendment to the provisions governing the IF and it had three main aspects set out in the bullet points below.

I)More ETS allowances allocated to the IF: an increase from 450 million to about 530 million. This means that the IF will make available an estimated EUR 40 billion for investment between 2020 and 2030 5 .

II)An expanded scope for funding both in terms of sectors (which now also include maritime, aviation, buildings, and road transport) and in terms of the level of innovation, with technologies at greater levels of maturity now eligible.

III)A new support mechanism, through which projects are selected on the basis
of a competitive bidding procedure (i.e. auction). This makes it possible to implement supporting schemes such as fixed premium contracts, contracts for difference or carbon contracts for difference, covering up to 100% of their relevant costs.

Figure 1: Key aspects of the Innovation Fund after the EU ETS revision

The Commission is working on amending the IF’s legal framework 6 to ensure that it: (i) is fully aligned with the most recent amendments of the ETS Directive; and (ii) draws on the lessons learnt from the first years of implementation. A final version of the Delegated Regulation is planned for adoption by the end of 2023.

According to the EU ETS Directive 7 , by 31 December 2023 and every year thereafter, the Commission shall report on the implementation of the IF to the Climate Change Committee.

1.2Overview of the operation of the IF

The IF seeks to support innovative technologies, techniques, and processes that: (i) have the potential to substantially reduce GHG emissions in the sectors covered by the EU ETS; (ii) have wide market replication potential; and (iii) are cost-efficient. The IF supports the funding gap through: (i) grants awarded through calls for proposals or auctions; (ii) other financial structuring, such as contributions to blending operations; and (iii) technical and financial advisory support through the project development assistance programme.

The IF is designed to provide financial support to projects demonstrating highly innovative technologies, processes, or products that have significant potential to reduce GHG emissions. This support is provided mainly in the form of grants, although it can also take other forms, such as contributions to blended operations under other EU investment support instruments or advisory support through the project development assistance (PDA) programme, instruments defined in the Delegated Act of the Innovation Fund. The grants provided by the IF can cover a maximum of 60% of the relevant costs 8 of a project if awarded through a regular call for proposals, or up to 100% if awarded through a competitive bidding mechanism. This design ensures both cost-efficient allocation of the support and the mobilisation of private investment.

By the end of the reporting period for this report, which covers the year 2022, the main awarding mechanism used by the IF was through open calls for proposals. These calls for proposals were launched separately for two categories of projects: one with estimated capital expenditures below EUR 7.5 million (small-scale projects) and another with estimated capital expenditures greater than EUR 7.5 million (large-scale projects). Regardless of whether the projects are large-scale or small-scale, funding is awarded without any discrimination as to the type of technology being proposed in the project, provided that the project is in one of the sectors eligible for the IF.

The proposals are evaluated against five criteria: (i) GHG emissions avoidance, (ii) degree of innovation; (iii) maturity at technical, financial, and operational level; (iv) scalability potential; and (v) cost efficiency in the avoidance of GHG emissions. The IF supports highly innovative projects that facilitate the comprehensive transition to climate neutrality of industrial ecosystems. To be considered for funding, projects must offer more than an incremental degree of innovation in comparison to the state-of-the-art in the EU. Typically, the selected projects are evaluated as constituting either very strong innovation or breakthrough innovation. These projects also show high technological maturity and substantial potential for scalability, i.e. they will both: (i) enable further GHG reductions by transferring the technology or its application to other locations and sectors; and (ii) entail the cooperation of different actors in the regional and European economy. The IF thus supports highly innovative projects that will help European industrial ecosystems make a comprehensive transition to climate neutrality.

The IF also provides, through its PDA programme, tailor-made support to promising projects that could not be selected in a call due to insufficient maturity, in the form of grants and technical assistance. The objective of the PDA is to help these unsuccessful projects to increase their maturity levels and increase their chances of success at subsequent IF calls.

The IF is operated through the coordinated work of four main actors. The contribution of each of these actors is discussed in the bullet points below.

·The European Commission’s Directorate-General for Climate Action (DG CLIMA) has overall responsibility for implementing the IF, including the decisions on the amount of financial assistance, policy priorities, and essential elements of every call for proposals. DG CLIMA also has overall responsibility for adopting the award decisions.

·The European Climate Infrastructure and Environment Executive Agency (CINEA) is responsible for: (i) launching the calls for proposals; (ii) evaluating the calls; (iii) preparing and formalising the grant agreements; and (iv) carrying out the monitoring, supervision, and payments during the implementation of the projects.

·The European Investment Bank (EIB) is responsible for providing PDA to selected projects.

·EU Member States play an essential role in contacting potential applicants on their territory and supporting them in both applying for projects (e.g. through support schemes at Member-State level) and implementing them (e.g. through facilitating permitting). Member States are consulted by the European Commission on both: (i) the financing decisions that determine the periodic calls for proposals of the IF; and (ii) the list of projects selected for award.

1.3Contribution of the IF to EU policy objectives

The IF, through its objective of supporting the deployment of European net-zero and innovative technologies, contributes to several specific policy objectives under the European Green Deal. The bullet points below set out the seven main objectives to which the IF contributes.

·It contributes to the targets of the EU Climate Law 9 to achieve a 55% reduction in GHG emissions by 2030.

·It contributes to the objective of developing the use of renewable hydrogen in Europe, as set out in several initiatives, such as: (i) the REPowerEU 10  initiative to make 10 million tonnes of renewable hydrogen available in Europe from domestic production and another 10 million tonnes from international imports by 2030; (ii) the objective of the European hydrogen strategy 11 to ensure that 40 GW of electrolysers producing 40 million tonnes of hydrogen are installed in Europe by 2050; and (iii) the objective in the Renewable Energy Directive 12  to ensure that 42% of hydrogen used in industry is renewable by 2030, reaching 60% by 2035.

·It contributes to the EU’s objectives for developing alternative fuels, such as those set down in REfuelEU Aviation 13 to make 2% of the fuel made available at EU airports sustainable aviation fuel by 2025 (and 6% in 2030, 20% in 2035 and 70% in 2050). It also contributes to the biomethane action plan’s objective of reaching domestic production (i.e. production within the EU) of 35 bcms of biomethane by 2030.

·It contributes to the objectives in the Renewable Energy Directive 14 and REPowerEU of rolling out renewable energy generation and reaching a share of 45% renewables in the energy mix by 2030 (through goals such as doubling the generation of solar power by 2025, installing 600GW of solar power by 2030, doubling the rate of deployment of heat-pumps, and promoting the integration of district heating systems with geothermal and solar energy sources). It also contributes to the objectives of the offshore energy strategy 15 which aims to have installed 300 GW of offshore wind generation and 40 GW of ocean-based generation by 2050.

·It contributes to the objectives of the Batteries Regulation 16  to strengthen the functioning of the EU’s internal battery market (including in products themselves, production and disposal processes, waste batteries, and recycled materials), to promote a circular economy. It also contributes to the Batteries Regulation’s objective to reduce environmental and social impacts throughout all stages of the battery life cycle.

·It contributes to the overall objectives of the Net Zero Industry Act (NZIA)  17 , aiming at innovating and scaling up manufacturing capacity for net-zero technologies so that EU companies are able to provide at least 40% of EU deployment needs for these technologies by 2030. It also contributes to the objective of reaching 50 Mt/y of CO₂ storage capacity by 2030.

·From 2023, the IF will also actively contribute to the European Strategic Technologies for Europe Platform (STEP) 18 , which has the objective of enforcing and making the most of existing EU funding instruments to quickly deploy financial support to the benefit of business investments in strategic technologies. The Commission proposes 19 to reinforce the IF with EUR 5 billion from the STEP programme, earmarked to benefit projects located in Member States with GDP per capita below the EU average. The platform also adds a ‘Sovereignty Seal’ to projects during their selection process, which is a new label intended to help project promoters attract public and private investments by certifying a project’s contribution to the STEP objectives, regardless of whether the project has been able to receive EU funding.

The awarded projects will also bring social and economic benefits, such as the creation of quality jobs in the green transition, support for local economies, and cooperation between different industries to foster innovation and sustainability. Support for domestic manufacturing capabilities in new technologies, such as electrolysers and batteries, will strengthen Europe’s industrial base and create economies of scale that will make these technologies more competitive at international level. Furthermore, the IF can also help address the social and labour-market aspects of the fair green transition by supporting the reconversion of industrial activities into low carbon options and incorporating existing expertise in the new green economy.

1.4Synergies with other EU funding instruments

The IF aims to ensure synergies and complementarities with other investment-support instruments, such as: (i) InvestEU; (ii) the lending programmes of the EIB; and (iii) other EU funding programmes, such as Horizon Europe or the Connecting Europe Facility. Further details on the synergies and complementarities that have been achieved so far with these instruments can be found in Section 5.5.1 of this report.

1.5Knowledge sharing on clean-tech solutions

Knowledge sharing is an essential part of the IF because it supports the replication and faster market penetration of technologies or solutions supported by the IF.

The Delegated Regulation on the IF requires all proposals applying for IF support to include a knowledge-sharing plan to ensure that they: (i) actively disseminate the acquired knowledge; (ii) help encourage scaling up to commercial readiness; and (iii) accelerate the deployment and commercialisation of the proposed technologies. Projects receiving support from the IF should make information about the design and implementation of the projects available to the public on their websites, also acknowledging the EU funds the project has received. It is also of particular importance that the projects gather lessons learnt in the projects on challenges encountered in reaching financial close 20 and entry into operation. This information is expected to help the market penetration of the demonstrated technologies and reduce the risks in the transition to the large-scale production and use of low-carbon products.

The information collated from the projects is used by the Commission as to inform subsequent policymaking. This information is also used to support other IF projects, industrial stakeholders, and future applicants. CINEA and the knowledge-sharing framework ensures that commercially sensitive information will remain confidential. The activities within the knowledge-sharing framework include: (i) closed-door events between IF projects; (ii) open door events to share knowledge, strengthen synergies with other EU funded projects and Member States, and help disseminate the generated knowledge; and (iii) information on the IF project portfolio. Further details on the work carried out so far in knowledge sharing can be found in Section 5.1.2 of this report.

1.6Purpose of this report

This report gives an account of the status of implementation of the IF at 31 December 2022, presenting: (i) the results from the calls for proposals and PDA implemented during 2022; (ii) the cumulated results of the IF; and (iii) conclusions and expected next steps.

According to the EU ETS Directive 21 , by 31 December 2023 and every year thereafter, the Commission has to report on the implementation of the IF to the Climate Change Committee. This report should provide an analysis of projects that have been awarded funding, by sector and by Member State, and the expected contribution of those projects to the objective of climate neutrality by 2050 in the EU.

The purpose of this specific report is to fulfil this requirement and report on the implementation of the IF up until 31 December 2022. It includes the following information:

(I)a general overview of the most relevant milestones achieved in the implementation of the IF during 2022;

(II)implementation and results of the IF calls for proposals carried out during 2022;

(III) cumulated results of the IF from its beginning until the end of 2022;

(IV) the status of implementation of the PDA up until the end of 2022;

(V)on overview of key next steps planned for 2023.

2INNOVATION FUND KEY MILESTONES IN 2022

The six key milestones achieved by the IF in 2022 are set out in the paragraphs below.

1.Award of grants in the second call for large-scale projects (LSC-2021). The call had a total budget of EUR 1.5 billion for projects with an estimated capital expenditure above EUR 7.5 million per project. The call was launched on 26 October 2021, and the grants were awarded on 11 July 2022.

2.Launch and award of second call for small-scale projects (SCC-2021). The call had a budget of EUR 100 million for projects with an estimated capital expenditure below EUR 7.5 million per project. It was launched on 31 March 2022 and the grants were awarded on 12 December 2022.

3.Launch of the third call for large-scale projects (LSC-2022). The call had a budget of EUR 3 billion for projects with an estimated capital expenditure above EUR 7.5 million per project. It was launched on 3 November 2022. The results of the call were published on 13 July 2023 22 . As a result, 41 projects were selected for grant-agreement preparation.

4.Implementation of communication and engagement activities around each call for proposals. For each call, the Commission and CINEA organised dedicated webinars 23 and information days during which: (i) the call texts were explained in detail to potential applicants; (ii) the questions of potential applicants were answered; and (iii) further application guidance material was shared with potential applicants. In parallel, a dedicated helpdesk telephone line was activated, which during 2022 answered more than 1 100 questions (778 for the large-scale call and 334 for the small-scale call).

5.Implementation of the first PDA and selection of additional potential beneficiaries. By the end of 2022, a total of 40 projects from the large-scale calls were offered support under the PDA programme. By that date, the EIB had completed the implementation of the PDA for 19 projects, while 3 projects were still receiving the PDA, and 15 projects were in negotiations to receive it. Three projects had declined the PDA.

6.Start of the development of competitive bidding mechanisms under the IF. 2022 also marked the start of preparations for the new competitive bidding procedure (i.e. auctions) under the IF. Studies were conducted on the possible economic design and pricing mechanisms of the competitive bidding procedure. The first pilot auction will be launched in 2023, and corresponding information will be included in the IF’s annual report for 2023. The competitive bidding procedure will also include an ‘auction-as-a-service mechanism, which will enable countries in the EEA to use their national budget resources to award support to projects located on their territory while relying on an EU-wide auction mechanism to identify the most competitive projects.

3SECOND CALL FOR LARGE-SCALE PROJECTS (LSC-2021)

The LSC-2021 targeted projects with capital expenditures of more than EUR 7.5 million per project. It selected 16 projects requesting a total of EUR 1.78 billion (an average grant of EUR 111 million per project). The call attracted many excellent projects, and LSC-2021 was only able to provide 36% of the total grants requested by projects that met or exceeded the evaluation’s threshold requirements for ranking. The most supported sector in LSC-2021 is ‘cement & lime’, with four projects receiving EUR 653 million in total to implement CCS solutions. Altogether, the selected projects are expected to support the avoidance of 132 million tonnes of CO₂e over 10 years.

3.1Project participation in the call

The LSC-2021 proposals had an original budget of EUR 1.5 billion and aimed to support projects with an estimated capital expenditure greater than EUR 7.5 million per project in any sector eligible under the IF. The financing decision preceding the call also set a maximum 20% flexibility provision on the total budget if the budget was insufficient for the received proposals above the minimum thresholds). The call was launched on 26 October 2021, with a deadline to receive proposals by 3 March 2022. The results of the evaluation were announced on 11 July 2022.

The call received 139 proposals, out of which 121 (87%) were considered admissible and eligible for evaluation (see Figure 2). The quality of the proposals was high, leading to 48 proposals meeting or exceeding the minimum evaluation threshold for award consideration. Once ranked according to their assessment score under the applicable award criteria, and considering the limited available budget, 16 projects were selected and invited for grant preparation while 5 projects were allocated to the reserve list.

Figure 2: Evaluation Results for LSC-2021

Two proposals 24 that were selected for grant-agreement preparation did not finalise the process. As a result, the first proposal from the reserve list 25 was invited to grant negotiation. By the end of 2022, 15 projects had signed a grant agreement with CINEA to benefit from the support of the IF, while the unfinalised project from the reserve list was still in the process of preparing a grant agreement.

Out of all the proposals received in LSC-2021, 59 (45% of all proposals received) were resubmissions from the previous LSC-2020 call, including 3 that had received PDA under LSC-2020. Out of the 16 finally selected proposals in LSC-2021, 9 were among these 59 resubmissions. This experience showed the extent to which projects can benefit from experience in applying and subsequently improve their competitiveness, especially by tackling the shortcomings in the technical, financial and operational maturity of their projects. Also, this experience illustrates the importance of having the PDA programme in place to help projects to become more mature. After LSC-2021, out of the 32 projects that were not selected due to the limited available budget, 18 projects were invited to receive the PDA provided by the EIB.

3.2Call budget and financial support requested

The total grant support requested by all projects that applied for the second LSC (LSC-2021) amounted to EUR 11.2 billion. Projects that were assessed as meeting or exceeding the minimum threshold requirements accounted for a total grant request of EUR 4.97 billion. This figure considerably exceeded the available budget of EUR 1.5 billion. For that reason, the Commission used the 20% flexibility rule to maximise the impact of this call for proposals. The flexibility rule, as defined in each of the IF financing decisions, allows changes in the available budget in several situations. One of the situations is when the results of the call for proposals are such that many projects are evaluated as meeting or exceeding the minimum threshold requirements, but cannot all be invited to prepare a grant agreement due to the budget constraint of the call. As a result, and despite the application of the flexibility rule, the proposals invited to prepare grant agreements corresponded to only 36% (EUR 1.78 billion) of the total amount requested by proposals that met or exceeded the evaluation threshold requirements.

The total capital expenditure of projects finally selected under LSC-2021 amounted to EUR 8.47 billion, while the maximum IF grant support to those projects was EUR 1.78 billion. That means that the IF was leveraging other investment worth almost 4 times the IF’s own contribution. The average capital expenditure (CAPEX) per project has been EUR 530 million and the average grant amount requested was approximately EUR 111 million per project.

LSC-2021 has revealed an increased interest in the IF by developers with projects seeking more than EUR 7.5 million per project. Therefore, the available budget for this type of calls has proven insufficient. After LSC-2021, out of the total EUR 4.97 billion requested by projects that met or exceeded the minimum threshold requirements for selection, projects worth EUR 3.2 billion could not be selected due to insufficient budget. At the same time, LSC-2021 has shown that the competitive nature of the calls for proposals provides an efficient approach to mobilising private funding, with IF grants representing an average of 23% of the projects’ capital expenditure.

3.3Characteristics of the awarded projects

3.3.1Sectors

The 16 projects finally selected for grant-agreement preparation were distributed along 8 sectors of activity (see Figure 3). The largest number of projects (4 projects or 25% of all the projects selected) were in the “cement and lime” sector. These 4 projects benefited from 37% of the total grant support (see Figure 4). The selected projects showed the relevance of the IF for supporting large initiatives to decarbonise industrial activities, such as cement production, chemical and petrochemical processes, and the use of hydrogen as an alternative clean fuel. The cement industry has been particularly competitive, putting forward credible and cost-effective solutions to abate GHG emissions through CCS technologies.

Figure 3: Number of projects by sector in LSC 2021

Figure 4: Amount of grants (EUR) for selected projects in LSC 2021

3.3.2Geographical distribution

The selected and awarded projects were distributed across nine Member States, as well as Norway and Iceland. The Member States with the most selected and awarded projects were the Netherlands and Germany (3 projects each). The most budget was awarded to projects located in the Netherlands, Germany, and Poland, with each country representing around 17% of the total budget awarded, or approximately EUR 302 million (see Figures 5 and 6). Projects based in western and northern Europe still performed better during evaluation in this large-scale call, , with lower eligibility rates in Central and Eastern Europe.

Figure 5: Number of projects eligible, above threshold, and selected, by country – LSC 2021

Figure 6: Amount of selected grants (EUR) by country in LSC-2021

 

3.3.3GHG-reduction potential

The estimated total absolute avoided GHG emissions from projects selected and awarded in LSC-2021 is 132 million tonnes of CO₂e over a period of 10 years, with an average contribution per project of 8.2 million tonnes of avoided CO₂e. The greatest contributions to this figure come from projects in the cement-and-lime sector (28%), intra-day electricity storage (26%), and the chemicals sector (11%). The greatest cost efficiency in the relation between the grant amount and the absolute GHG emissions avoided was achieved by projects in intra-day electricity storage, with an average of 458 kg of CO₂e avoided per EUR 1 of grant, showing the significant impact of these technologies when helping to integrate renewable energies into the grid.

3.3.4Level of maturity

All projects selected in LSC-2021 planned to have achieved financial close by the second quarter of 2025 and have entered into operation by the second quarter of 2028, as seen in Figures 7 and 8. On average, the time to achieve financial close is 22 months, and the time to achieve entry into operation is 58 months. Considering that the technical maturity of the projects participating in the IF is in general low, requiring on average of almost 5 years to start operations fits with the innovative nature of the supported technologies. One project, NorthStorPlus, already reached financial closure at the end of 2022.

Figure 7: Expected financial close date in LSC 2021

Figure 8: Expected date of entry into operation in LSC 2021

3.3.5Level of innovation and potential for scalability

The degree of innovation in the selected proposals has been very good, with almost all of the proposals achieving a score of 4 (out of a total possible of 5) or higher in this criterion during their evaluation, with good scores in both the ‘state-of-the-art’ and ‘EU policy contribution’ sub-criteria.

The IF aims to select projects with technical and market potential for: (i) widespread application or replication; or (ii) future cost reduction. Therefore, the evaluation assesses: (i) whether the proposals are scalable at the level of the project and the regional economy; (ii) whether the proposals are scalable at the level of the sector and economy-wide; and (iii) the quality and extent of the knowledge-sharing plan. On this scalability potential, all selected proposals from the LSC-2021 achieved scores of between 3.5 out of 5 and 5 out of 5, with almost all scoring 4 or above.

Projects selected for support under LSC-2021 cover many technological innovations that may be crucial for decarbonising the European economy in the coming years. Examples of key technologies include: (i) the expansion of offshore wind-power coupled with electrolysers producing hydrogen; (ii) the manufacturing, deployment, and recycling of innovative materials (such as high-nickel-content Li-Ion batteries) for electrochemical energy storage in the power grids; (iii) the development of new chemical processes for the large-scale recycling of plastic waste streams; or (iv) the incorporation of CCS techniques into cement-producing industrial processes.

4SECOND CALL FOR SMALL-SCALE PROJECTS (SSC-2021)

SSC-2021 was targeted at projects with capital expenditure of less than EUR 7.5 million per project. It selected 17 projects that received a total of EUR 61.8 million (an average of EUR 3.6 million in grants per project). Although 66 proposals were submitted, only 17 proposals were assessed as meeting or exceeding the evaluation thresholds. The budget of the call was therefore not fully used and the call was therefore undersubscribed by 38%. The most supported sector under the call was the ‘glass, ceramics and construction materials’ sector, with five projects receiving approximately EUR 19 million in total to implement decarbonisation solutions in their industrial processes, such as electrification of furnaces or recirculation of waste-heat. Taken together, the selected projects are expected to help avoid 1.3 million tonnes of CO₂e over a period of 10 years.

The SSC-2021, which was the second call for small-scale proposals under the IF, had a budget of EUR 100 million and was directed at projects with an estimated capital expenditure below EUR 7.5 million per project in any sector covered by the EU ETS. It was launched on 31 March 2022, with a deadline to receive proposals of 31 August 2022. The results of the evaluation were announced on 12 December 2022.

66 proposals were submitted, out of which 53 (80%) were considered admissible and eligible for evaluation. Out of those 53, 17 proposals met or exceeded the minimum evaluation threshold requirements to be considered for a grant award. Since the available budget exceeded the combined requested support of the proposals, all 17 of these proposals were selected for grant-agreement preparation (see Figure 9).

Figure 9: Number of projects participating in SSC-2021

4.1Call budget and financial support requested

The projects applying for SSC-2021 requested a total of EUR 302.8 million. The projects that were assessed as meeting or exceeding the minimum threshold requirements – all of which were selected for grant-agreement preparation – represented a total request of EUR 61.8 million in grant support, an average of EUR 3.64 million per project. The capital expenditure of projects finally awarded under SSC-2021 amounted to EUR 115 million, with an average of EUR 6.7 million per project.

4.2Characteristics of the awarded projects

4.2.1Sectors

The 17 projects finally selected for grant-agreement preparation were distributed across 12 sectors of activity. Out of the 17 projects, 29% (or 5 projects) were related to ‘glass, ceramics and construction material’, and these projects received 31% of the allocated grant budget, as seen in Figures 10 and 11. During this call, the IF proved itself to be a key instrument in supporting industrial decarbonisation activities at small scale, by promoting remarkably competitive projects to improve furnaces in the glass industry with solutions such as electrification or recirculation of waste-heat.

Figure 10: Number of projects by sector in SSC-2021

Figure 11: Amount of grants by sector in SSC 2021

4.2.2Geographical distribution

The selected projects were distributed across 12 Member States. The Member State with the most selected projects was Spain (3 projects), which also received the most budget allocated at 17% of the total (or EUR 10.7 million). There was one project located in three different countries (Czechia, France, and Spain) targeting manufacturing of renewable-energy components. In this small-scale call, almost 53% of the proposals selected were located in the south, centre and east of Europe, with only 1 proposal in the north of Europe (Finland). This is a different picture to that seen in the large-scale call (where most of the projects were from northern and western Europe) thus contributing to a balance in the geographical distribution of funding.

Figure 12: Number of projects by country in SSC-2021