The Heat Auction is Here to Stay: Why Your Heat Pump Water Cylinder Project Can Now Bank on EU Funding

On 19 May 2026—less than a month after industry organisations called for a recurring EU Innovation Fund Heat Auction—the European Commission confirmed that a second auction will take place later this year. The announcement sends a powerful signal that industrial heat electrification is now a core pillar of Europe’s competitiveness, industrial resilience and energy security. For manufacturers of heat pump water cylinders and thermal storage systems, this is the moment to move from pilot to scale.

What the Industry Won

The joint letter signed by eight sector organisations—including EHPA, SolarPower Europe and eurelectric—urged the Commission to continue the pilot IF25 Heat Auction and establish a recurring call as of 2026 as part of the upcoming Electrification Action Plan. The letter highlighted that timing and predictability are essential for investment decisions. Industry also called for an increased budget, especially for the medium-temperature basket (up to 400°C), which was the most oversubscribed.

The Commission heard the call. In addition to confirming a second auction, EU leaders committed to improving the scheme’s predictability, simplifying applications and lowering the current 3 MW project threshold to enable wider participation from sectors such as food and drink. The announcement was welcomed as “exactly the kind of political signal Europe’s industry needs”.

What It Means for You

The IF25 Heat Auction—a €1 billion pilot launched under the Clean Industrial Deal—supports projects that electrify industrial process heat using technologies such as heat pumps, electric boilers and thermal storage. Industrial process heat accounts for three-quarters of industrial CO₂ emissions in the EU, making this one of the largest decarbonisation opportunities anywhere.

For suppliers of heat pump water cylinders, the implications are direct. A heat pump cylinder is not merely a storage vessel—it is a thermal energy storage system that allows industrial facilities to capture low-carbon heat from renewable sources or waste heat recovery and deploy it precisely when needed. Combined with high-temperature heat pumps, thermal storage can deliver decarbonised heat up to 400°C, covering the temperature range where industry saw the strongest demand in the first auction.

Thermal energy storage alone could replace up to 40% of global gas use in industry today and avoid up to 14% of projected energy-related greenhouse gas emissions by 2050. And with the global industrial heat pump systems market projected to grow at a CAGR of 15.5% between 2026 and 2036, with Europe maintaining its leading position, the market tailwinds are unmistakable.

Your Action Plan

The Commission plans to publish the draft Terms and Conditions for the 2026 Heat Auction by the end of May 2026, with stakeholder consultation scheduled for 19 June 2026. This is your window. Preparation is critical: ensuring your heat pump cylinder system is properly metered, capable of achieving at least 100°C process heat for industrial applications, and equipped with robust monitoring, reporting and verification aligned with ISO 50001 requirements.

Europe already has the technology, manufacturers and industrial projects ready to scale. The recurring Heat Auction now provides the policy certainty that investment decisions demand. Whether your project serves food and beverage pasteurisation, paper and pulp drying, or chemical processing, the message is clear: the heat auction is here to stay, and your heat pump water cylinder belongs on the bid list.