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New solutions for funding Europe’s energy transition

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Credits: CORDIS - European Commission

This CORDIS Results Pack specifically introduces you to 10 EU-funded projects that have been working to develop tools and solutions that will help to accelerate the financing of energy efficiency investments, as well as offering concrete demonstrations that these solutions have been extensively tested, are ready and can be scaled up further. Making European societies and economies more energy-efficient will play a key role in allowing the EU to meet its climate ambitions, create growth and improve well-being, particularly to meet the goal of making the EU carbon-neutral by 2050.

 

Whilst the EU has increased the amount of public funds available for energy efficiency, there is a need to further unlock private financing. In order to meet the EU’s 2030 climate and energy targets, such as cutting carbon emissions by 40 % from 1990 levels and achieving an energy efficiency target of 32.5 %, all as a part of the ambitious European Green Deal, an additional EUR 260 billion per year will be necessary over the period 2021-2030. Much of that finance will need to come from the private sector.

 

The truth is, energy efficiency investments often come with high transaction costs because projects are small and not sufficiently aggregated to be interesting to investors. Another challenge is that energy efficiency investments such as deep retrofits of buildings tend to have relatively long paybacks, which is not very attractive. Investors are also not fully sure if the reality will match the level of expected savings after the energy retrofit. However, there is growing evidence that the risks associated with energy efficiency investments are lower than the level perceived by markets. So, the trick is to not only reassure investors that energy efficiency projects are overall a safe and sound business case but also help banks and other financial organisations to really understand and easily assess any and all risks and opportunities associated with a particular project.

 

To simplify transactions and increase the confidence of financial institutions, technical and legal standardisation is highly needed at all steps of the investment value chain. The lack of standardisation of projects also prevents securitisation of energy efficiency assets (loans or equity) so that financial institutions are not able to refinance their debt on the capital markets.

Additional documents