August 22, 2025

Renewable energy challenges and lessons from the Innovation Fund

Europe’s push on renewables – where do we stand?

In July 2025, the European Commission released the “2025 Annual Knowledge Sharing Report of the Innovation Fund”.

The report provides insight to various risks, delays, and possibilities of failure for renewable projects in Innovation Fund. This article examines the challenges, data, and key observations relevant for project developers, grant applicants, and policy stakeholders considering opportunities related to the Innovation Fund or other EU programs.

Innovation Fund and renewables at a glance:

Out of 130 projects from 4 call rounds, a number of 22 projects on renewable energy were funded. This sums up to a total of €742 million Innovation Fund support, corresponding to €3.9 billion total CAPEX. Projects are active in 13 countries, most notably France, Spain, Germany, and Norway.

The real-world hurdles: Why projects struggle

Innovation Fund’s data shows that many projects face structural issues, even after receiving funding.

Permitting delays

  • Varying regulations across Member States delay implementation.
  • Innovative concepts (e.g., airborne wind energy or hybrid furnaces) often fit no clear permitting category, leading to delays and costly redesigns.

Supply chain bottlenecks

  • Projects often can’t secure components and materials from EU sources.
  • Non-EU imports are cheaper and faster but raise questions about long-term reliability and sustainability.

Global market pressures

  • EU PV manufacturers face dumping price competition from Asia.
  • US tariffs on Chinese panels pushed oversupply into the EU market, driving prices below EU production costs.

Financing

  • Delays and uncertainty make it hard to secure co-financing.
  • Renewable projects rely heavily on off-take agreements and price signals (e.g., future energy rates), which are often unstable.

Terminated projects – what went wrong

11 Innovation Fund projects have already been terminated; mostly due to deteriorating business cases, excessive CAPEX increases, or inability to secure contracts and permits.

While the report does not name every cancelled project, it reveals that 8 of the 11 terminated projects were small-scale, often affected by:

  • Cost overruns
  • Market disruptions (e.g. changing incentives)
  • Lost off-taker agreements
  • Inability to secure grid connections or construction permits

For instance, some solar manufacturing projects found themselves priced out of the market before construction even began.

What can future applicants learn?

If you think about applying to the Innovation Fund, here are five strategic takeaways:

  1. Consider permitting details: The permission timing and details are part of the application documents. Permission timelines need to be aligned with the overall project planning. For example, the average permit preparation time in the evaluated IF funded projects was >16 months – this can kill momentum.
  1. Address supply chain risks: As part of the application, supply chain strategies and mitigation measures must be described. Thus, applicants should consider e.g.: advanced procurement, local sourcing and back-up suppliers.
  1. Develop a strong financing strategy: EC understands itself as co-investor. Requirements for a credible and evaluation-ready financing strategy are strong, incl.
  • Clear off-take agreements and early-stage buyers
  • Trusted suppliers providing letters of intent
  • Scenario-based risk analysis and mitigation plans

Comment

Europe’s path to net-zero is paved with ambition, but also with hard-won experience. The Innovation Fund report offers more than just numbers but also some insights of what works, what fails, and what must evolve. DIAMONDS4IF takes its part to support applicants for Innovation Fund in the renewable energy sector.