The European Commission is following their plans from the Clean Industrial Deal and are in the midst of finishing one of its pillars: the Industrial Decarbonization Bank. This financing tool for electrification is supposed to close the gap for decarbonisation of industries.¹ The program should in the future entail €100bn towards clean energy use for process heat and is supposed to strengthen emission reduction as well as competitiveness of European industries.²

Now, the draft for the Terms & Conditions of the pilot program, spanning one billion Euro, have been published and the direction of the program is more clear. It will support decarbonisation technologies that either use electricity and thus equipment like heat pumps, electric boilers, resistance heating (including thermal storage systems), induction heating, plasma torches, and electric shockwave heating to electrify process heat. Or technologies providing direct renewable heat, such as solar thermal and geothermal for industrial processes.³ As hydrogen and biofuel are covered in other programs, they are excluded here.

Additionally to the technology there is another important aspect that is included: “Further, the auction design aims to avoid incentivising consumption behaviour of electrified solutions that leads to higher emissions from electricity generation and higher system costs (i.e. consumption of electricity during peak hours)” (p.3). This already highlights that the inclusion of thermal storage as well as electric storage cannot only be priced in the bids, but also are a part for a successful auction.

‍Supposed framework

Companies will receive the fixed premium payment according to the bid of the projects for each tonne of CO₂ they demonstrably save. This means, the premium will be bid in €/t CO₂ abated, however the bid is done in €/MW_th and then automatically calculated from the form in the final bid, making it easy for companies to compare and plan ahead. These payments will be made for a maximum period of 5 years. This means, planning ahead becomes important as such process equipment is viable at least for 10 years, in Kraftblock’s case usually 15 years or more. 

Budget and Focus Areas:

• The total budget for this pilot project is EUR 1 billion.
• The funds are equally divided into two categories:
  
  • EUR 500 million for projects producing low-to middle temperature heat (between 100°C and 400°C).
  • EUR 500 million for projects producing high-temperature heat (above 400°C).
• Thermal Storage can be priced in the projects
• It is crucial that the temperatures of the produced heat must be metered using an ISO 50001 management system.

Projects will be ranked and selected solely based on price (price-only ranking), from the lowest to the highest bid price per tonne of CO₂ abated. This program aims to incentivize industrial companies to switch to sustainable heat generation quickly and cost-effectively.

Storage necessity in the draft

Flexibility is an important thought in this program as the subsidy is limited to 80% of the year without a flexibility solution. A specific approach mentioned in the draft is to plan the electrification with thermal storage. High-temperature storage allows large quantities of energy to be flexible and efficient as process heat. This also makes the auction bid more likely to succeed as the prices go down significantly for electrification with storage compared to direct electrification as you can read in our whitepaper. 

This not only makes economic sense. With this aspect of the auction, the EU aims to avoid electricity consumption during peak hours, which is linked to high emissions. 

Future Financing 

In the future, the program will be financed from different sources. 33 billion Euro of the hundred billion program is projected from carbon allowance auctions, €23 billion from InvestEU, €20 billion from the Innovation Fund, and approx. €30 billion from Member State contributions, though the latter introduces some fiscal uncertainty.⁴

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Sources

1) European Commission (2025): Clean Industrial Deal.A plan for EU competitiveness and decarbonisation. Online: https://commission.europa.eu/topics/eu-competitiveness/clean-industrial-deal_en 

2) Table Briefings (2025): Clean Industrial Deal: 100 billion for decarbonization. Online: https://table.media/en/climate/feature/clean-industrial-deal-100-billion-for-decarbonization 

3) European Commission (2025): Innovation Fund IF25 Heat Auction. Terms and Conditions. Online: https://climate.ec.europa.eu/document/download/cfde57b3-d80f-43e1-9ee4-cd96c42c6ca8_en?filename=if_2025_draft_t_c_heat_auction_en.pdf 

4) Mehmet Can Cetin/Natixis (2025): The EU Clean Industrial Deal: towards reconciliation of economic competitiveness, strategic autonomy and decarbonization. Online: https://gsh.cib.natixis.com/our-center-of-expertise/articles/the-eu-clean-industrial-deal-towards-reconciliation-of-economic-competitiveness-strategic-autonomy-and-decarbonization 

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