Heat Auction: Results decoded to better prepare for the 2nd edition

In May 2026, the European Commission published the results of the first European call for projects dedicated to the decarbonisation of industrial heat: 65 projects selected, €396.5 million awarded, ten European countries represented. Behind these figures lie structural indicators of the market’s true state, and practical lessons for any industrial player considering applying for the second round of the Heat Auction.

How the Heat Auction works: the mechanism explained

The Heat Auction is the first European mechanism dedicated to the decarbonisation of industrial heat.

The principle: an industrial operator submits a bid specifying the amount of subsidy required (in € per tonne of CO₂ avoided) to make their project viable over five years. The most competitive projects are selected until the budget is exhausted, with each receiving exactly the subsidy requested, paid in proportion to the decarbonised heat actually produced.

The first clear signal: 60% of the

funds remained unallocated due to a lack of applications ready for submission. The bottleneck was not the budget but the level of preparation. Of the 85 applications submitted, 16 were rejected at the eligibility stage on formal grounds. Once this filter had been passed, 94% of the projects were selected.

Download the full analysis of the results

Grid flexibility, small-scale sites, the ESCO model: three key takeaways the next HA cannot ignore

Electrical resistance dominates; flexibility is lacking

77% of the selected projects rely on technologies involving direct or indirect electrical resistance. More notably, 63% of projects include no grid flexibility options whatsoever. These installations will consume electricity almost continuously, with no ability to adjust their consumption during peak hours.

In the next HA, thermal storage will benefit from a 25 per cent bonus in the ranking, a direct competitive advantage for projects that incorporate it. A project with thermal storage is not subject to any cap on eligible hours and can purchase electricity at the best price. This is both a competitive advantage at auction and a sound economic argument for the industrial operator.

Small industrial sites are under-represented

The 3–5 MW segment utilised only 32% of its available budget, with just 16 projects. In the next call for tenders, these projects will compete in the same pool as the larger ones (merged into a €700 million pool for the Medium segment). Advance preparation becomes even more crucial for industrial SMEs.

The third-party operator model is becoming the norm in mature markets

In France and Spain, which account for 69% of the selected projects, nearly half of the applications were led by a specialist operator, which designs, finances, develops and operates the facility on behalf of the industrial client. In Germany, in the absence of this ecosystem, the success rate reached only 44%.

Access the full sector analysis (by technology, segment and country)

Up to 93% of CAPEX covered: what a Heat Auction grant is actually worth

For a 5 MW thermal electrification project operating at 70% annual load, the average grant observed for the Mid >5MW basket (~€24/MWh) amounts to €2.1 million over five years. By way of comparison, the CAPEX for an installed 5 MW electric boiler ranges between €2 million and €2.5 million. The HA grant can therefore cover up to 84–93% of the initial investment cost, which is almost full funding for the project.

HA 2nd round: what has changed compared with the first round

The Commission has confirmed a second round with a budget of one billion euros. The changes to the design are a direct response to the feedback from this first auction.

Lowering the threshold to 80°C opens up access to preheating, washing and pasteurisation processes, which are very common in the agri-food sector. The removal of the mandatory letters of intent from energy suppliers removes a major administrative hurdle, particularly for small projects.

Download the full analysis of the changes between HA 1st ed. and HA 2nd ed.

Final terms and conditions in September, call for proposals in December: now is the time to prepare

The final T&Cs for the next Heat Auction are expected in September 2026. The call for tenders will open in December 2026. A robust application, comprising a feasibility study, sizing, technology selection, and financial and contractual structuring, requires 4 to 6 months’ work.

At Newheat, we support industry players from the feasibility study right through to the submission of the application: design, choice of technology (heat pumps, thermal storage, solar thermal, electric boilers), engineering, and financial and contractual structuring. Now is the time to prepare.

Contact us to prepare your Heat Auction application

Sources: European Commission, HA1 Heat Auction Results Publication, May 2026; draft T&C IF26, European Commission, 22 May 2026.