EU invests €400 million in industrial clean heat to cut fossil fuel use

The European Commission has awarded nearly €400 million to 65 industrial clean heat projects across Europe

The funding has been provided through the EU Innovation Fund and is part of the push to cut carbon emissions and reduce dependence on fossil fuels. It is also the first EU-wide auction dedicated specifically to decarbonising industrial heat production.

The selected projects cover 10 countries across the European Economic Area, including Austria, Belgium, Czechia, Denmark, France, Germany, Hungary, Portugal, Slovenia, and Spain.

All the projects are expected to prevent more than 6.6 million tonnes of carbon dioxide emissions over the next decade by replacing natural gas-based heat systems with cleaner alternatives.

Industrial decarbonisation

Industrial heat is one of the most difficult sectors to decarbonise, particularly in heavy industries that rely on high-temperature processes powered by fossil fuels. The Commission’s new Heat Auction aims to accelerate the transition by supporting innovative technologies capable of producing low-carbon or carbon-free heat at scale.

The projects selected are expected to generate around 16.3 terawatt-hours of decarbonised heat during their first five years of operation. With a combined thermal capacity of 766 megawatts, the installations could replace more than 1.5 billion cubic meters of natural gas over that period.

Funding for the initiative comes from revenues generated by the EU Emissions Trading System, which channels money from carbon pricing into climate and clean energy projects.

Technologies backed by the funding

The successful projects involve a mix of technologies designed to electrify or directly decarbonise industrial heating systems. Many rely on direct or indirect electric resistance heating, while others will use industrial heat pumps, solar thermal energy, electromagnetic heating, and hybrid systems.

Several hard-to-abate sectors are included in the funding round, such as iron and steel, ceramics, glass, construction materials, and pulp and paper. These industries have historically been more difficult to decarbonise due to the high temperatures required in production processes.

Additional projects involve food and beverage manufacturing, pharmaceuticals, and textile production.

Split funding across three categories

The auction was divided into three separate categories based on temperature levels and project size.

Five projects were selected under the high-temperature heat category, receiving a combined €62.1 million in support. The largest share of funding went to 44 medium-temperature projects with a capacity above 5 MW, which secured €286.5 million. A further 16 medium-temperature projects between 3 MW and 5 MW received €47.9 million.

Project sizes range from 3 MWth to 45 MWth, while grant awards vary from €444,000 to €37.1 million.

The next phase

The European Climate, Infrastructure and Environment Executive Agency will now begin preparing grant agreements with the successful applicants. Agreements are expected to be signed during the second half of 2026.

Projects must reach financial close within two years and begin operations within four years of signing their agreements. The Commission will monitor implementation to ensure projects remain on schedule and comply with funding conditions.

The strong response to the first auction has already encouraged the Commission to expand the program. A second Heat Auction worth €1 billion is planned for 2026 as part of the future Industrial Decarbonisation Bank initiative.