Innovation Fund: what is new?

We all love the Innovation Fund programme, but still, this remains one of the most difficult European Programmes. Companies from several sectors have failed in the first two calls for large-scale projects but have now a great opportunity with the largest call ever!

The 3rd call for proposals for large-scale projects is now open with a budget of 3 Bn € and deadline 16th March 2023.

In this article we will try to analyse what were the most most common mistakes in the applications of the 2nd call for large-scale projects, and what are the novelties of the 3rd call for large-scale projects

Common mistakes in the second call for large-scale projects

Did you know that, out of 139 submitted proposals, 16 were ineligible or inadmissible in the last call? It hurts thinking about the amount of time and resources wasted! In addition 2 proposals were withdrawn by the applicants..

From the remaining 121 proposals, 17 proposals were selected to start grant agreement preparation and 31 proposals met all requirements but could not be funded due to budget constrains. The rest (73 proposals) did not pass all evaluation thresholds or included manifest errors.

But where did most proposal failed? CINEA shared very detailed statistics about the evaluation process, and there are a few data that are surprising.

• A transversal problem is inconsistency of data. Yes, the application is very long and is composed by several documents, and everything has to add up. Please don't introduce last minute changes in GHG calculations, for example, who will have a great impact in data included in the Feasibility Study, the Scalability and the Cost-efficiency sections.
• The criteria "GHG emissions avoidance" is certainly a challenging one, and in the last call it showed a quite large spread of scores. Proposals can fail in so many aspects here! Selecting the reference scenario, defining the boundaries of the project, not backing the assumptions or data with strong evidence, wrong application of the methodology (e.g. where to claim the additional GHG savings)... In the second call, there were 5 proposals that showed manifest errors and therefore were automatically rejected, and many others which score below the threshold. This calculations are, however, the corner stone of the project and it is worth to get advice from someone very familiar with the methodology.
• The criteria "Degree of innovation" (DoI) was not totally understood by many applicants. Indeed, there are sectors where consistently the score of DoI is lower than others (hydrogen, surprisingly, scored the lowest). The most common mistake here is failing in providing an adequate, objective description of the state-of-the-art, and explaining how our solution will go beyond the existing ones.But even more important, we need to substantiate every statement with robust hypothesis and good-quality KPIs, such as costs, starting and ending TRL, energy efficiency, etc). Unfortunately many proposals failed here.
• One of the difficult concepts in Innovation Fund is "Maturity", an evaluation criteria which is expressed in 3 sub-criteria. The lowest score, in average, was obtained in the sub-criterion "Financial Maturity". This is seen by many applicants like a chicken-egg situation. But for these huge projects, you are expected to have secured part of the funding, even if you expect the Innovation Fund will help you to unlock a part of it. It is surprising the number of companies which have not even initiated contacts with funding entities like EIB or private banks before the application, or do not provide any info about the own funds they plan to assign to the project. Moreover, several "manifest errors" were detected in the financial calculations, some of them related with the definition of financial close. My conclusion is clear: not every consultancy is prepared to provide the level of financial knowledge required for this programme.
• In contrast, the sub-criteria "Technical maturity" and "Implementation maturity" scored higher than "Financial maturity". The key issue here is to be able to show contractual evidence (contracts, MoU, LoS from up-takers and suppliers) and a detailed engineering plan.
• On the opposite side, we find that a majority of proposals scored high in "Scalability" and "Cost-efficiency" criteria
• Many of the winners of the 2nd call were resubmissions from the 1st call. Resubmissions are welcome, especially those who adequately took into account the comments of evaluators.

Novelties of the third call for large-scale projects

The thirds call closing on 16th March 2023 will have 3,000 billion euros.

For the first time, the call will be organised around 4 "topics". The fact of introducing topics allow to assign the budget to specific areas, which may be in favour of the medium-scale projects.

However, it also imposes challenges for very popular topics, as a project with a lower score can be funded if it belongs to a less-competitive topic that a project with a higher score.

The 4 topics are:

• Innovative electrification in industry and hydrogen (budget: EUR 1 billion)
• Clean tech manufacturing (supporting manufacturing of components and final equipment such as electrolysers and fuel cells, innovative renewable equipment, energy storage, or heat pumps), (budget: EUR 700 million)
• “Mid-sized pilots” projects for validating, testing and optimising highly innovative solutions (budget: EUR 300 million)
• General decarbonisation, which is available to all projects eligible for the Innovation Fund except those which fall under dedicated RePowerEU topics (budget: EUR 1 billion).

The new proposals to be submitted will be evaluated against the same set of criteria but there are some subtle changes in some of the the sub-criteria. For example, proposals will need to take into account what projects have already been selected for funding in the 1st and 2nd call. This will be evaluated under "Degree of innovation", and is one of the important changes.

The "Scalability" criteria is redefined and now it will one criterion be looking at

• Scalability in terms of efficiency gains
• Scalability in terms of further technology or solutions deployment
• Quality and extent of the knowledge sharing

Also, for the pilot projects (topic 3) some extra requirements will be needed under "Degree of Innovation" and "Cost efficiency".

Do you need help to finalise your application for 16th March? Please contact me if you want to learn more! At EY we have several teams with the required expertise in the technical and financial aspects of Innovation Fund.