It is difficult to understand why the Innovation Fund programme of the European Union (IF) has gone so unnoticed in a country like Spain. The Innovation Fund, the buoyant successor to the NER300, is a programme for industries dedicated to reducing greenhouse gas emissions based on the EU ETS (European Trading System) and is also the only programme at a European level that funds large investments of up to 60% of the CAPEX of the project.
Colloquially called “Greta’s program”, because it is part of the Green Deal, a green commitment that the EU assumed in extremis at the Madrid Climate Summit (COP-25 2019), the programme was born just before the pandemic and has been designed to take technical and financial criteria specific to the EU into account to mitigate the climate change through projects established within its borders.
The Innovation Fund will distribute € 10,000 million in non-refundable funds between 2020 and 2030. The programme finances up to 60% of the CAPEX of an investment that avoids greenhouse gas emissions.
An important feature of the IF is that the disbursement is made based on the real savings in emissions that the project generates compared to only a reference scenario; so the monitoring and compliance part is key. It is a programme for companies with their feet on the ground and with their R&D duties already done.
The first call for Large Projects (projects with a minimum CAPEX of € 7.5 million per project, without an upper limit) closed in October 2020 and will distribute € 1,000 million in grants. And yet, it received only 310 proposals, out of which 70 managed to enter the second stage. Of these, the best will have been selected by the end of 2021.
The first call for Small Projects (projects with a CAPEX between € 2.5 and € 7 million) closed in March 2021 with only 232 proposals.
In both calls, the Spanish participation was much lower than expected, according to the evaluators with whom I have spoken.
This low participation is disappointing, considering that our country intends to become the leader in renewable energies and not lose track of green hydrogen and second-generation biofuels. If we compare IF’s Large Projects’ call with the extraordinary Green Deal call of Horizon 2020, which had the same budget, we see that the competition in case of the Innovation Fund is almost 5 times less (310 IF proposals compared to 1550 Green Deal proposals). Perhaps the fact that a dissemination and support office has not been set up in Spain for this programme has something to do with that — although there is an e-mail box from the Ministry of Ecological Transition and another one at a European level that work perfectly well.
On the other hand, the fact that Spain got a guarantee for millions for ecological transition (42% of the budget of the Next Generation EU funds) possibly does not motivate our large and small companies enough to participate in the IF. But let’s not forget that the concept of recovery funds (Next Generation) was not even born when the first IF calls were opened.
My theory is that many companies backed out when they noticed the apparent complexity of the proposal (of about 400 pages on average for the first stage in Large Projects) and that it includes an extensive Excel file to calculate the savings in emissions.
I think that it is a serious mistake not to participate in the IF or having only the big energy and oil companies in the country participate. Apparently, many Spanish companies thought: “I’ll try next year, let’s see how it goes for the first participants”. The problem with this is that we run a serious risk of not even having a single Spanish project among the first winners, especially among large projects.
I maintain that it is a major strategic mistake to let this programme go by. The best thing about the Innovation Fund is that it generously finances investments, the great forgotten in other programmes, and the worst that for both large and small projects, the format is rather complex.
The complexity of the process could possibly be overcome by working with consultants who know this programme and its evaluation system and, of course, by planning the applications. Preparing an IF proposal is an arduous task that requires technical, financial, and legal knowledge. But a fourth factor is also necessary: to know in depth how these projects are evaluated. For example, for the project to be selected it requires high levels of technological and financial maturity. Almost all companies obtain a good score in the first aspect and fail resoundingly in the second: the funds must be supplemented with other capital (equity, commercial or EIB loans, or other public aid) and the financing plan must be crystal clear. In addition, we must not present the IRR of the project calculated in a period that seems attractive to us, but rather a period of 10 years from the start of operations.
This is where Spain can create fantastic synergies between the IF and Next Generation EU funds, which are perfectly compatible.
In short, the Innovation Fund is without a doubt the ideal opportunity to complement the investments of green transition projects of any size. Do not hesitate to contact me if you are interested in knowing more about the Innovation Fund and especially if you are thinking of submitting a project for the 2021 calls, which will be announced in September-October of this year.