The Paris Climate Agreement is a historical milestone on global climate action. Sustained investments in energy efficiency, renewables and power grids and interconnectors are vital to speed up the decarbonisation of the EU economy. There is a strong need to step up research, development and innovation (RDI) activities to achieve the EU climate and energy objectives in a cost-effective manner and to strengthen EU leadership in the manufacturing industry of low-carbon and energy-efficient technologies. Financial instruments are set to play an increasingly prominent role to meet this challenge.
The Investment Plan for Europe was supporting investments in energy efficiency and renewables. The European Fund for Strategic Investments (EFSI) was the central pillar of the Juncker Plan. It provided a first loss guarantee, allowing the EIB to invest in more, often riskier, projects. The new EFSI 2.0 underlines the importance of sustainability by linking EFSI to more cross-border and sustainable projects, in particular those that help achieve the COP21 climate targets, to help the transition to a resource efficient, circular and zero-carbon economy. At least 40% of EFSI infrastructure and innovation projects will aim to contribute to climate action in line with the Paris Agreement.
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Investment platforms
Investment platforms, as vehicles which pooled smaller projects by location or sector, could be utilised to make it easier for individual energy projects to unlock financing. Energy projects did not necessarily need large loans. Instead, a number of these smaller projects could be bundled within a larger platform that could be backed by the EFSI. For example, there was an investment platform in France to finance the energy efficiency retrofitting of up to 25,000 social housing units.
EFSI in combination with other EU funds
The EFSI was just one of many EU financing tools available to project promoters in the energy sector. For example, projects suitable for financing in the energy sector under the EFSI could also be combined with other funding sources in the EU budget, in particular the European Structural and Investment Funds (ESIF) or the Connecting Europe Facility (CEF). These funding sources could finance part of the project — in the form of a grant or a loan — while an EFSI-backed loan could cover the remaining costs of the project. The effectiveness of the EFSI could therefore benefit from the combination of financial instruments, EIB loans and grants in a combined “blending” approach.
By combining together cash collateral, a technical assistance facility and EIB loans, the "Private Finance for Energy Efficiency" (PF4EE) financial instrument, already deployed under the LIFE programme, has a high potential to unlock financing to energy efficiency investment. In light of the significant energy efficiency investment gap, ESIF and EFSI could be blended together to expand this model at a national level to reach a wider scope of retail banks.
Finally, support to research and innovation for renewables could have been increased by orienting EFSI resources towards existing instruments such as InnovFin under the H2020 programme. At the time, InnovFin Energy Demo Projects provided loans or loan guarantees to first-of-a-kind commercial-scale demonstration projects in the fields of renewables, hydrogen and fuel cells.
Technical support and visibility for projects
The Investment Plan, or so-called Juncker Plan, encompassed far more than the provision of a guarantee to unlock additional investments through the EFSI. The energy sector could also benefit from the other elements of the Plan.
As for all sectors, project promoters in the energy sector can seek technical assistance through the European Investment Advisory Hub (EIAH). The Hub offers a single access point for advisory and technical assistance services to allow promoters to get their projects off the ground.
The European Investment Project Portal – the #InvestEU Portal – was a platform designed to boost the visibility of investment opportunities, including those in the energy sector, across Europe. The aim of the Portal was to bring together project promoters seeking investment with investors seeking projects.
Examples of EFSI projects in the energy sector
Norther wind farm, Belgium
The EIB lent €438 million to build the Norther wind farm off the Belgian coast. It comprised 44 wind turbines and supplied electricity to around 324,000 Belgian families. The wind farm cut about 593,000 tons of CO2-equivalent greenhouse emissions per year.
BRUA gas interconnection project, Romania
The EIB provided a loan of €100 million for the development of the first phase of the BRUA gas interconnection project in Romania, located on the Bulgaria-Romania-Hungary-Austria Corridor.
Italgas Gas Smart Metering, Italy
The EIB provided €300 million in financing to Italgas to improve the efficiency of the gas distribution system, as well as to increase customer information and awareness. The project allowed consumers to read their meters remotely and more frequently, which led to cost savings as well as a reduction in energy consumption.
VVO near-zero-energy building, Finland
The EIB extended €170 million in financing to VVO for the construction of several near-zero-energy residential buildings, totalling around 1,800 housing units in Helsinki, Vantaa, Espoo and Tampere. The construction of new NZEBs had the goal of reducing energy consumption and lowering CO2 emissions, contributing to security of supply and EU climate impact mitigation objectives.