Crowding in private finance

Expected Impact:Proposals should present the concrete results which will be delivered by the activities and demonstrate how these results will contribute to the topic-specific impacts. This demonstration should include a detailed analysis of the starting point and a set of well-substantiated assumptions and establish clear causality links between the results and the expected impact.

Proposals should demonstrate how they will contribute to deliver financing schemes that are operational and ready to finance investments, with credible access to financing sources and a prospective pipeline of investments.

Proposals should quantify their results and impacts using the indicators provided for the topic, when they are relevant for the proposed activities. They should also propose indicators which are specific to the proposed activities. Proposals are not expected to address all the listed impacts and indicators. The results and impacts should be quantified for the end of the project and for 5 years after the end of the project.

The indicators for this topic include:

• Number of investment projects and volume of investments processed during the project (i.e. pilot testing phase) and expected to be financed by the financing scheme in the next 5 years; the projection after the project needs to be justified in detail based on the proposed activities and a detailed market analysis.
• Number of investors and project developers using the financing scheme.
• Investments in sustainable energy (energy efficiency and renewable energy) triggered by the project (cumulative, in million Euro).
• Average % of primary energy savings targeted by investment projects.

Proposals should also quantify their impacts related to the following common indicators for the LIFE Clean Energy Transition sub-programme:

• Primary energy savings triggered by the project in GWh/year.
• Final energy savings triggered by the project in GWh/year.
• Renewable energy generation triggered by the project (in GWh/year).
• Reduction of greenhouse gas emissions (in tCO2-eq/year).

Funding rate

Other Action Grants (OAGs) — 95%

Objective:The topic aims to increase the amount of private finance allocated to energy efficiency and renewable energy sources by establishing innovative financing schemes.

Significant investments in energy efficiency and renewables need to be mobilised to achieve the ambition set by the European Green Deal[1] and the objective to reduce EU dependence on fossil fuel imports set out in the REPowerEU Plan[2]. In order to meet the required level of investments, it is necessary to progressively maximise the mobilisation of private capital, using public funds as a catalyst, and to put in place an enabling regulatory framework. This is a central objective of the recently established European Energy Efficiency Financing Coalition[3].

In addition, the revised Energy Efficiency Directive and Energy Performance of Buildings Directive aim to increase the cost-effectiveness of public funding and the mobilisation of private investments in energy efficiency measures, including by promoting innovative financing mechanisms. National Energy and Climate Plans provide a solid framework for Member States to evaluate and report on investment needs and gaps to achieve their 2030 national energy and climate targets, including regarding the mobilisation of private investments.

While significant public sector expenditure is allocated to leverage private finance for energy efficiency and renewables (e.g. through the InvestEU facility), most private investors still view this type of investments as risky, complex and/or insufficiently profitable. This is due to the limited availability of investment opportunities which comply with the requirements of financial institutions in terms of size, scale, standardisation and transaction costs.

There is a need to set up and roll-out private financing schemes which can be expanded and/or replicated at scale, and contribute to the national strategies to achieve the 2030 energy efficiency targets and the building renovation policy objectives. These schemes have to be adapted to the specificities of energy efficiency investment profiles, as well as those of renewables, in buildings, SMEs, district heating and other relevant sectors.

The financing schemes may be initiated by private sector stakeholders or local and regional authorities, as well as other types of actors; they need to work with and use available public funds as a catalyst and/or in blended approaches. The topic aims in particular to stimulate synergies and develop long-term partnerships between financial institutions and energy services market operators.

Scope:Proposals should set up an innovative financing scheme leveraging private finance for investments in energy efficiency, potentially combined with renewables and energy storage.

The financing scheme should be established in at least 1 eligible country under the LIFE programme, in order to ensure the development of a sound and robust investment pipeline.

The financing scheme should be operational by the end of the project, with credible access to financing sources and a prospective pipeline of investments. The related investments may be implemented after project completion, but proposals are expected to pilot test the financing scheme during the project time.

The financing schemes can involve, for example, but are not limited to:

• Equity and debt, potentially combined with non-reimbursable grants (“blending”), in particular for low income households or SMEs.
• Local or regional investment funds blending public grants and private finance, e.g. in the form of loans.
• Guarantees, risk-sharing, insurance or other de-risking instruments.
• Energy services such as energy performance contracting, efficiency as a service, and variants thereof, if used to finance the investments.
• On-bill, on-tax and building-based financing, where the debt is attached to the energy meter or the building rather than the household or company.
• Schemes complementing, with a dedicated financing component, already existing local and regional technical assistance facilities, in particular integrated home renovation services.
• Schemes targeting the secondary market, including refinancing mechanisms, specialised securitisation vehicles and green bond schemes.
• Local investment structures, including citizen financing (e.g. crowdfunding) for energy efficiency.
• Market-based instruments relevant for sustainable energy (e.g. carbon finance instruments, energy efficiency obligations, etc.).
• Brokering, aggregation or clearing houses, which facilitate matching of demand and supply of sustainable energy finance.

Proposals should take into account all the following elements:

• Establish an innovative, operational financing scheme supporting investments in energy efficiency, potentially combined with renewables and energy storage, in at least 1 eligible country. Proposals can build on and/or upscale innovative financing schemes successfully tested previously[4].
• Address the provision of finance as well as ensure the availability of demand in the form of a project pipeline complying with the requirements of the scheme, in particular at regional and national level.
• Define the targeted region(s) and sector(s) and justify how the proposed scheme is innovative and complements available funding schemes.
• Clearly demonstrate the business case and financial viability of the proposed scheme (including e.g. market analysis, investment sizes targeted, transaction and management costs, expected energy/cost savings and other returns, etc.).
• Plan replication and/or rollout of the scheme envisaged beyond the region(s) targeted for the establishment, including the analysis of legal and market conditions for replication.
• Demonstrate support of the targeted stakeholder groups and present in a detailed manner how they will be involved throughout the project.
• Demonstrate the additionality of the proposed financing scheme compared to market practices.
• Where relevant, demonstrate complementarity to available public funds, notably under the EU Cohesion funds in view of the preparation of the multiannual financial framework 2028-2034. Applicants should explain how they build on existing funding programmes and initiatives relevant for the targeted region/sector, in particular related to one-stop shops and project development assistance.
• Coordinate with and potentially participate in the national hubs of the European Energy Efficiency Financing Coalition, when relevant.

Proposals may be submitted by a single applicant or by applicants from a single eligible country.

The Commission considers that proposals requesting a contribution from the EU of up to EUR 1.5 million would allow the specific objectives to be addressed appropriately. Nonetheless, this does not preclude submission and selection of proposals requesting other amounts.

[1] COM(2019) 640 final

[2] COM(2022) 108 final

[3] https://energy.ec.europa.eu/topics/funding-and-financing/european-energy-efficiency-financing-coalition_en

[4] Such schemes may originate outside or inside the European Union, including, for example, those developed and implemented under project development assistance (PDA) facilities under the LIFE and Horizon 2020 programmes (including LIFE/H2020 PDA or ELENA-EIB).