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Climate Action

Competitive bidding

A new tool for funding innovative low-carbon technologies under the Innovation Fund

The European Commission’s Innovation Fund is one of the world’s largest funding programmes for low-carbon energy technologies. In addition to the Innovation Fund’s current grants programme, we are developing a new way to support projects: competitive bidding (also known as auctioning). The implementation of competitive bidding will be a novel financial instrument at the EU level with major advantages. In line with Innovation Fund’s objectives, it will support innovative low-carbon technologies, whose market penetration is held back by lower costs of incumbent fossil-based technologies and high-risk perception by financial markets. The scheme will seek cost-efficiency in awarding the support and thus minimise the costs to the public and maximise the leverage of private capital.

Competitive bidding will expand the portfolio of support mechanisms that the Innovation Fund currently provides in the form of grants, project development assistance and blending with other financial instruments, and in this way allow a faster roll-out of the technologies needed for the green transition. Competitive bidding has been very successful to support the uptake of renewable energy in Member States.

The proposal to set up a competitive bidding instrument is part of the wider proposal to revise the Emissions Trading System directive, one of the ‘Fit for 55' proposals presented by the Commission in July 2021 to make the EU's climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. Competitive bidding as support for hydrogen production and uptake in the EU industry has been highlighted in the REPowerEU Plan.

The Commission is currently considering the following types of support to be awarded by competitive bidding to hydrogen producers or purchasers:

  • Contract for Difference (CD): a contract that provides the producer with support from the Innovation Fund by covering the difference between the auction’s winning price (the strike price) on the one hand, and a reference price, as derived from the price of the produced low-carbon product, the market price of a close substitute or a combination of those two on the other hand.
  • Carbon Contract for Difference (CCD): a contract that provides the producer with support from the Innovation Fund by covering the difference between the winning price (the strike price) on the one hand and a reference price, as derived from an average price of the EU ETS allowances on the other hand;
  • Fixed premium contract: a contract that provides the producer with support in the form of a fixed amount per unit of the produced product.

You can find more information on these types of support in the documents and past events section below.