Questions and Answers: EU-Catalyst Partnership*

What is the EU-Catalyst partnership?

The EU-Catalyst partnership brings together the Commission, the European Investment Bank (EIB) and Breakthrough Energy Catalyst. The partnership plans to mobilise up to €840 million ($1 billion) between 2023 - 2026 to accelerate the deployment of and rapidly commercialise innovative technologies that will help deliver on the European Green Deal ambitions and the EU's 2030 climate targets. Investments will be directed towards a portfolio of EU-based projects with high potential, in the following sectors:

• Clean hydrogen;
• Sustainable aviation fuels;
• Direct air capture;
• Long-duration energy storage; and
• Decarbonisation of industry, starting with steel and cement.

These priority areas are critical to meeting Europe's climate goals and where technologies are at the right stage where they need catalytic support for commercial deployment.

How does the partnership work?

The EU-Catalyst partnership will target technologies with a potential to accelerate the reduction of greenhouse gas emissions, but which are currently too expensive to roll out at scale and to compete with fossil fuel-based technologies; the so-called “green premium”. The projects will be large-scale, pre-commercial demonstration projects or industrial scale “first-of-a-kind” projects for clean technologies.

By supporting these innovative technologies in the demonstration and first-of-a-kind processes and creating a market for the green products, the EU-Catalyst partnership will drive down their ‘green premium', that is reduce their costs to a level that is eventually competitive with fossil-fuel based options.

The partnership will bring together the public and private sectors to invest in these projects. The European Investment Bank, supported by EU funding, will provide funding up to the amount provided by Breakthrough Energy Catalyst. EU funding for the partnership comes from the EU's research and innovation programme, Horizon Europe, as well as the Innovation Fund, managed through the InvestEU program. The EU-Catalyst partnership will be open to national investments by EU Member States or through InvestEU at project level.

Who can apply and how?

All types of organisations based in Europe (EU and associated countries to InvestEU), which are developing innovative technologies in the specific areas with high potential for deployment and scale-up, will be able to apply. They can learn more through the Breakthrough Energy Catalyst website, or directly via InvestEU for financing through the InvestEU Green Transition Facility (which will manage the EU contribution to the partnership).

Who pays for what in the programme?

The Breakthrough Energy Catalyst contribution is funded entirely by private entities signing up to the Catalyst partnership. These private actors wish to accelerate the development and up-take of green technologies. Catalyst has raised over USD$1bn of direct capital from 14 funding partners to deploy into project companies.

The EU contribution to the Partnership comes from Horizon Europe (the Cluster on Climate, Energy and Mobility) and the Innovation Fund, which is funded from the revenues of the EU Emissions Trading Scheme. Since 2022, both programmes have topped up the InvestEU Green Transition Product, which will allow the EIB to deploy the funding directly to the beneficiary and match the private funding.

Why fund the EU-Catalyst partnership instead of funding directly on EU research or innovation projects?

Climate challenge is global in nature and requires joint efforts from all sectors. With Breakthrough Energy Catalyst, Europe has a partner fully committed to contributing to fight climate change and promote innovation on equal terms with the EU funding and strategy. For the EU, this partnership can become a blueprint for public-private support for innovative technologies that cannot yet be financed in the traditional market and which will help mobilise additional public investments and private sector resources.

The Partnership is a joint effort that will support the implementation of the European Green Deal, ensuring a tangible added value for Europe. Through the experience of the EIB and its efficient management of the funds under InvestEU and other predecessor programmes, the Partnership ensures strong potential for scalability, replicability and impact potential of the selected projects in Europe.

How will you ensure that projects will be selected fairly?

Support from the Partnership is open to all European projects developing innovative technologies the sectors of scope. The final decision on awarding EU funds to projects will be governed under InvestEU rules and entrusted to the EIB, which will carry out its own independent assessment and due diligence of projects, including those proposed by Breakthrough Energy Catalyst. All projects will be subject to the confirmation of eligibility by the European Commission under the InvestEU ‘policy check' procedure.

Can Horizon Europe or the Innovation Fund not do this alone?

The cooperation allows public and private funds to be pulled into the best initiatives reflecting highly aligned priorities in a simplified approach for the partner and beneficiaries. The fact that Horizon Europe and the Innovation Fund formed the EU counterpart to Breakthrough Energy Catalyst shows that we have instruments in place that are not only compatible but also highly synergetic. InvestEU greatly simplifies the available range of EU- funded financial instruments, while the EIB and other partners have a recognised track record in providing, under EU guarantees, financial support where it matters the most. And by cooperating with Breakthrough Energy Catalyst, the EU will be able to benefit and leverage a multiplying effect, which means more money and momentum for priority projects throughout its development to deployment journey. By enlarging the offering on the EU side to its projects and technologies, the EU can only gain in terms of closing technological gaps and accelerating the green transition. Finally, implementation via InvestEU ensures a one-stop-shop for projects, including those partly funded by Horizon Europe.

When can we expect the first projects to achieve results?

First-of-a-kind projects are necessary to demonstrate the viability of technologies in real-world conditions and at scale, which is critical to securing capital for further scale-up and deployments. Demonstration projects provide evidence of the design, engineering, and construction, that helps de-risk projects to secure additional financing in order to de-risk technical performance before proceeding to a commercial-scale project. For commercial-scale projects, the viability of the project's revenue model will be proven out, ideally through long-term offtake agreements, which are critical to secure financing for capital intensive projects. The support of these early-stage projects is crucial as the clock is ticking towards 2030.

What is the expected impact?

The initiative will accelerate the reduction of the green premium in key areas, allow for wider, faster up-take and contribute to the creation of jobs in the EU in green industries. Unprecedented investment is needed to turn climate policy targets into reality. Attaining the 2030 target of at least 55% net emissions reduction is estimated to require €350 billion of additional annual investment.

Blended finance is a crucial tool to mobilise urgently needed private capital, especially in domains considered too risky for the markets to function autonomously. This is the case for the technologies selected to be supported under this Partnership, which will benefit from investments in demonstration and scaling-up. In turn this will lead to increased confidence among market participants, economies of scale in production and deployment, and significant cost reductions. The project pipeline of the InnovFin Energy Demonstration Projects scheme (implemented under Horizon 2020 with the support of the EIB), as well as the high number of submitted proposals under the Innovation Fund calls and the Horizon 2020 European Green Deal call, indicate the richness of the EU ecosystem for innovative technologies. However, funding support is needed today to advance these early projects into construction and deployment.

How much grant money will the projects receive?

The grant quantum is negotiated as a function of the project's merits and needs. However, a strong commitment by the project sponsors is also necessary. For projects which receive grant funding, EU grants will be deployed by both the EU and Breakthrough Energy Catalyst. Before grant funds are deployed, the Commission, EIB and Breakthrough Energy Catalyst will analyse carefully the maturity, risks and quality of the project, taking into account the funds available to the project and the potential to reduce the Green Premium.

Why the chosen technologies?

Investments will be directed towards a portfolio of EU-based projects with high potential in the decarbonisation of the economy in the following sectors: clean hydrogen; sustainable aviation fuels; direct air capture; long-duration energy storage, and manufacturing, starting with green steel and cement.

*Updated on 01/12/2023