Auctions in the Innovation Fund
The Innovation Fund is one of the world’s largest funding programmes for the deployment and commercialisation of innovative low-carbon technologies.
Currently, the Fund awards project support through regular grants, auctions, project development assistance, and blended financial instruments such as Invest EU.
In 2023, the Commission developed a new competitive bidding mechanism (‘auctions’) to complement its grants programme. Auctions expand the portfolio of support mechanisms available under the Fund, fostering faster and more cost-efficient support for the roll-out of more mature, low-carbon technologies needed for the green transition.
Auctions are market-based instruments through which the Commission can allocate Innovation Fund support to accelerate innovative, low-carbon projects in Europe.
An auction is a process in which goods or services are offered for bidding. In the case of a subsidy scheme, what is auctioned is a subsidy for a specific activity or product. Typically, bidders requiring the lowest public subsidy for a decarbonisation activity or product will win the subsidy.
In 2023, the Innovation Fund began allocating funds through a fixed-premium pilot auction to support the production of Renewable Fuels of Non-Biological Origin (RFNBO) hydrogen. Project developers can submit a fixed-premium bid (€/kg of produced renewable hydrogen) to receive support on their production.
Following eligibility and quality assessments, bids are ranked from lowest to highest and awarded support accordingly, until the auction budget is fully allocated. Fixed-premium support is paid for up to 10 years, based on certified and verified production of RFNBO hydrogen.
Following the revised European Union Emissions Trading System (EU ETS) Directive, the Innovation Fund can support projects through different types of competitive bidding mechanisms, specifically:
- fixed-premium contracts
- Contracts for Difference (CfDs) or
- Carbon Contracts for Difference (CCfDs).
This support must enable decarbonisation technologies, for which the European carbon price and regulatory framework might not be sufficient incentives.
The Innovation Fund offers a fixed premium to support renewable hydrogen production in the pilot auction.
By definition, a well-designed auction mechanism allows an efficient allocation of support at a competitively determined level. This minimises the costs to the public and, if designed well, sufficiently de-risks projects so that they attract more private capital.
Compared to the regular Innovation Fund grants, auctions provide payments based only on certified and verified production (i.e. no pre-financing or payments before entry into operation) and tackle projects with a different risk profile than those addressed by the existing regular grant programmes.
Competitive bidding is well suited for projects that have moved closer to commercial deployment, with lower technology and construction risks, but still face profitability issues. Auctions also ensure that no public money is spent on covering project development risks that are best handled by the private sector.
Another advantage is that auctions create competition between producers, which may lead to lower consumer prices. In addition, competitive bidding can reduce the risk of providing more public support than necessary, thereby ensuring taxpayers’ best value for money. Competitive bidding is considered proportionate support under the Guidelines on State Aid for Climate, Environmental Protection, and Energy (CEEAG). It has been a significant success story in the renewable power sector in many EEA countries, considerably reducing the funding needs for renewable power.
Competitive bidding can also be used to discover the prices of goods with unknown market prices. For example, there is currently no liquid market for renewable hydrogen and its derivatives. The Innovation Fund publishes key price points to help foster the renewable hydrogen market.
Innovation Fund support is allocated based on excellence through competitive calls for proposals (auctions or regular grants), following the application of award criteria described in the Delegated Regulation and respective Financing Decision call texts. The projects that score the highest in the evaluation process within the available topic budget are selected.
The Innovation Fund’s legal basis allows for a specific award criterion to ensure geographical balance. However, Innovation Fund projects are now located in 26 EEA countries and the overall balance improves with each call, notably with the most recent call results.
Currently, there are 2 major initiatives supporting EEA countries under the Innovation Fund to develop a national pipeline of high-quality, innovative projects and, therefore, improve geographical balance:
- The latest revision of the ETS Directive introduced ‘Technical Assistance for Member States with low effective participation’ – which aims to increase the overall quality of Innovation Fund applications from countries with lower participation levels.
- All EEA countries’ National Contact Points or Innovation Fund Expert Group representatives receive training sessions on award criteria, outreach, and communication, among other topics. The training started in Q2 2024 and is complemented by support for outreach and communication at the national level.
Our latest auction, the IF24 Auction, was launched on 3 December 2024. Following its success, the Commission will assess the preparation of another auction. The plan is, as also announced in the Clean Industrial Deal Communication, to organise a next hydrogen auction with up to €1 billion budget before the end of 2025.
Auctions and the European Hydrogen Bank
As part of the ‘Fit for 55’ package, the Commission proposed setting up a competitive bidding instrument in the proposal to revise the EU Emissions Trading System (EU ETS) Directive. This proposal and several others aim to make the EU’s climate, energy, land use, transport, and taxation policies suitable for reducing net greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels.
The REPowerEU Plan also highlighted competitive bidding as a support mechanism for hydrogen production and uptake, specifically as a central measure to reduce fossil-fuel consumption in hard-to-decarbonise industrial sectors and diversify energy imports away from Russian fossil fuels.
Further, the revised EU ETS Directive introduced competitive bidding as a new possible mechanism for allocating support under the Innovation Fund.
Auctions for renewable hydrogen are a key element of the European Hydrogen Bank (EHB), which establishes EU financing instruments and a coordination platform to cost-effectively secure domestic and international renewable hydrogen volumes in the EU. By helping Europe decarbonise its industry and transition away from fossil fuels, hydrogen will play a crucial role in achieving the EU’s climate neutrality goals.
To learn more about the European Hydrogen Bank, watch the recording of our most recent public webinar on the topic.
The Innovation Fund auctions operationalise the domestic pillar of the European Hydrogen Bank, as detailed in the figure below.
Why hydrogen?
The Innovation Fund aims to support the demonstration and commercialisation of innovative low-carbon technologies and processes.
While many decarbonisation technologies are already mature, climate-neutral options are not yet available or scalable for hard-to-decarbonise sectors of the EU economy, such as heavy-duty transport and energy-intensive industrial processes.
Hydrogen produced using renewable electricity, known as 'RFNBO hydrogen', is a climate-neutral option for these sectors and fully aligned with the REPowerEU Plan's political priorities. The Commission has defined RFNBO hydrogen by adopting two Delegated Acts, as required under the Renewable Energy Directive.
- The first Delegated Act defines under which conditions hydrogen, hydrogen-based fuels or other energy carriers can be considered RFNBOs.
- The second Delegated Act provides a methodology for calculating life-cycle GHG emissions for RFNBOs.
Compliance with the two Acts is also necessary for hydrogen production to be counted towards Member States’ renewable energy targets.
Under its IF auctions for hydrogen, the Innovation Fund allocated funds for the production of renewable hydrogen (“RFNBO Hydrogen” or “Renewable Fuel of Non-Biological Origin Hydrogen”). During the auction, project developers could participate and submit a fixed-premium bid (payment in €/kg of produced RFNBO hydrogen) to receive support for their production.
The IF auction can support RFNBO hydrogen producers located in any EEA country. The complete auction design, including detailed eligibility criteria, can be found in the respective call texts available in the EU Funding & Tenders Portal.
The RFNBO Hydrogen auctions are launched by the Innovation Fund under the umbrella of the European Hydrogen Bank. The EHB’s objective is to close the investment gap and connect the future supply of renewable hydrogen with our goal of 20 million tonnes of renewable hydrogen deployed in Europe by 2030.It will facilitate renewable hydrogen production within the EU and imports, contributing to the REPowerEU objectives and the transition to climate neutrality.
It further supports the goals of the Green Deal Industrial Plan and the Net Zero Industry Act. Scaling up electrolyser manufacturing for renewable hydrogen production will contribute to the competitiveness and resilience of the European industry, including steel, fertiliser, and shipping.
Scaling up the European hydrogen market will also allow European companies to play a leading role in the emerging global hydrogen market, which offers new growth opportunities and quality job creation. The Hydrogen Bank Communication accompanied the legislative proposal for the Net-Zero Industrial Act.
We regularly consult stakeholders to gather comprehensive lessons learned from our auctions.
Documentation from previous stakeholder consultations and support contracts is available:
- 12/06/2024 – Stakeholder consultation on IF24 Auction Terms and conditions
- Please find all relevant material from the 12 June stakeholder consultation on our dedicated event page
- 16/05/2023 - Follow-up stakeholder workshop on the draft economic T&C for the 2023 Innovation Fund pilot auction
- Slides, including a summary of the survey preceding the stakeholder workshop
- 21/11/2022 - Stakeholder workshop on designing a competitive bidding tool to fund hydrogen innovation
- 28/10/2022 - Workshop with academia, think tanks and Member States
- Support Contract - Assistance in the Analysis and Set-up of a Competitive Bidding Mechanism for Contracts for Difference, Carbon Contracts for Difference or Other Comparable Schemes under the Innovation Fund
IF24 Auction
The IF24 Auction, with a total budget of € 1.2 billion, opened on 3 December 2024 and closed on 20 February 2025.
Countries in the European Economic Area (EEA) including the EU27, Iceland, Liechtenstein, and Norway) had the option to allocate additional national funds to support projects using Auctions-as-a-Service (AaaS). Spain, Lithuania, and Austria participated in the IF24 Auctions-as-a-Service and will deploy over €700 million in national funds to support renewable hydrogen production projects located in their countries.
| Key events | Expected timeline |
| Call opening | 3 December 2024 |
| Deadline to submit applications | 20 February 2025 |
| Evaluation results | May-June 2025 |
| Grants award | September-November 2025 |
For more details on the results of the IF24 Auction, please visit our dedicated webpage. To access further resources on the application process, please follow the provided links below.
IF23 Auction
The IF23 Auction was the first EU-wide auction for the production of renewable or RFNBO hydrogen (Renewable Fuel of Non-Biological Origin) and the first competitive bidding mechanism to be implemented under the Innovation Fund. It was launched on 23 November 2023.
To learn more about the IF23 Auction, please consult the dedicated webpage.
Auctions as a Service (AaaS)
To avoid fragmentation at the early stage of the European hydrogen market’s formation and to save administrative costs associated with developing different hydrogen support schemes by the EEA, the Commission extends the Innovation Fund auctions as a platform to interested EEA countries. This mechanism, called Auctions-as-a-Service (AaaS), enables countries of the EEA to use their national budget resources to award support to projects located on their territory while relying on the EU-wide auction mechanism to identify the most competitive projects.
To participate in AAAS, interested countries must have a national budget allocated and follow the State aid notification process before the Innovation Fund auction opens. The Commission will assist countries with pre-filled notification templates reflecting the auction T&C.
In practice, here are the services included in AaaS:
- EEA countries can use the State Aid compliant, EU-wide Innovation Fund auction as a funding mechanism
- the Commission facilitating and speeding up the notification of national schemes
- CINEA informs countries about the auction results with a ranking of potential vetted and cost-competitive projects to be implemented in participating countries (upon agreement of the projects)
- the Commission provides guidance on minimum requirements for contracts to be signed at the national level between project developers and national authorities
The AaaS will work accordingly:
- EEA countries commit a portion of their national budget to the AaaS and communicate their intention to participate to the Commission
- CINEA opens the auction
- Projects across EEA submit bids, which will be assessed, ranked, and cleared in line with the conditions established in the auction documents published in the EU Funding and Tenders Portal
- the lowest bids are cleared under the auction budget until it is exhausted, following the ranking of projects
- the ranking of the remaining unawarded projects is cleared under the national budget(s) and information about the successful bids is passed to the respective country
- additional features may apply for each participating country to ensure required levels of competition. CINEA is responsible for evaluating, awarding, contracting, and monitoring support for projects under the Innovation Fund budget
- participating countries are responsible for awarding, contracting, and monitoring project support under national budgets
The European Hydrogen Bank Communication, published in March 2023, first detailed the AaaS concept. For more information, you can review our AaaS Concept Note.
If a country wants to allocate support to hydrogen production using the AaaS system, it should consider the following steps:
- The participating country must have an existing support scheme or adopt a new one for AaaS.
- National support must be cleared through the State Aid procedure with the Commission and shall comply with CEEAG rules. The IF Auction rules are by design CEEAG compatible, so if no changes to the auction design are made, State aid clearance can be quasi-automatic.
- The participating country must ensure certain elements are present in its support scheme (e.g., provisions on monitoring, transparency, reporting, and payment arrangements, as well as an indication of the budget it intends to allocate for the national compartment of the auction). Once this is ensured, they send the complete notification (pre-filled by Commission services) for using the AaaS. Countries seriously interested in participating in the auction and an available budget must inform the Commission within 2 or more months before the launch of the auction round to which they want to contribute. Upon reviewing the notification, the Commission’s Directorate-General for Competition will issue a decision on the national schemes before closing the auction round.
When bidders apply to the auction, they can indicate their interest in being considered for AaaS. Projects can only be considered for AaaS if they are in a country that has decided to offer a national scheme through AaaS.
Projects will first be considered under the Innovation Fund budget. If not awarded within this budget, they will be considered for AaaS. Applicants will be given the following choice: the project can remain on the Innovation Fund reserve list or be passed on to national funding.
Countries that sign up for the AaaS will receive the ranked list of projects in their territory. Countries must follow the Innovation Fund’s ranking of projects and cannot add additional award criteria.
Projects awarded through AaaS will sign corresponding national grant agreements and documentation with the respective awarding country.
