Annual knowledge sharing report of the Innovation Fund : de-risking innovative low-carbon technologies

The Innovation Fund (IF), funded with revenues from the EU Emissions Trading System, is one of the world's largest funding programmes supporting the deployment of innovative net-zero and low-carbon technologies and knowledge sharing is an essential part of it. The objective of this report is to share knowledge gathered from the IF portfolio of projects that can help other projects looking to deploy innovative low-carbon technologies and minimise risks associated with scaling up. By the end of 2023, the IF project portfolio included 104 ongoing projects in the areas of energy-intensive industries, hydrogen, industrial carbon management, renewable energy or energy storage, with the committed EU contribution amounting to EUR 6.5 billion. By the end of 2023, 19 IF projects reached financial close, and four projects successfully entered into operation. Given their complexity in terms of size, technical ambition and reliance on external market and regulatory developments, IF projects encounter multiple challenges. This report sheds light on challenges related to difficult market conditions, securing finance and offtake agreements, regulatory bottlenecks, including on permit-granting procedures and technical constraints. The report provides insights into how IF projects apply different strategies to overcome these challenges and mitigate the corresponding risks. For example, delays caused by supply chain disruptions, higher capital expenditures or higher cost of capital are mitigated by ensuring sufficient contingencies in terms of project timing and budget, a clear governance structure and close monitoring.