Commission outlines plan for EU financing mechanism to support new renewable energy projects

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The Commission has this week opened a four-week public consultation for feedback on draft rules to establish a new EU financing mechanism to support renewable energy projects. The main objective of this mechanism is to enable Member States to work more closely together in order to achieve their individual and collective renewable energy targets. As a result, it will also facilitate a more cost-effective deployment of renewables across the EU, in areas that are better suited for it in terms of geography and natural resources and ultimately, it will feed into the European Green Deal ambition of achieving EU carbon-neutrality by 2050. The mechanism should be in place by the start of 2021, as foreseen under the Governance Regulation.

Commissioner for Energy, Kadri Simson, said:

”We must use every tool we have to encourage investment in renewable energy. This new mechanism will provide another option for Member States to contribute to our energy and climate targets, investing in locations where renewable resources are abundant and developing them makes the most sense. It is especially relevant in the context of the post-crisis recovery, where the mechanism could help stimulate the economy in hard-hit Member States, both by getting large-scale projects off the ground and by supporting local SMEs and creating jobs.”

Member States are already committed to meeting national binding targets for the share of their energy coming from renewables by 2020. Through their national energy and climate plans, they also commit to meeting a voluntary share of renewable energy by 2030, and, between 2020 and 2030, to follow a national trajectory leading up to that point.

Currently, Member States primarily meet this figure based on the amount of renewables deployed on their territory through national measures. However, there is also an option for using cooperation mechanisms with other Member States (as set up under the revised Renewable Energy Directive) such as statistical transfers or joint projects. For example, Luxembourg has an arrangement with Lithuania under which renewables produced in the latter count towards the former’s renewables total. This new financing mechanism opens a third possibility: Member States can collectively benefit from renewables projects funded through tenders using this EU-wide financing mechanism.

As outlined in the draft implementing act, this new mechanism enables “contributing Member States” to pay voluntary financial contributions into the scheme, which will be used to tender support for new renewable energy projects in all Member States willing to host such projects (“hosting Member States”). This has the advantage that “contributing” countries that are struggling to meet their targets can finance renewables projects elsewhere, which count towards their targets and are potentially more cost effective than renewables produced on their own territory. For the “hosting” Member State, the advantage is that it receives additional local investment in renewables projects – and can therefore enjoy the benefits in terms of local employment, lower greenhouse gases emissions, improved air quality, modernisation of the energy system… Details here.

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