EU needs to overcome the challenge of financing energy efficiency investments, JRC shows

The Joint Research Centre (JRC), the European Commission in-house science service, published a report entitled “Securing Energy Efficiency to Secure the Energy Union: how energy efficiency meets the EU Climate and Energy Goals”. In this piece of work, the JRC shows the central role of energy efficiency in meeting the Energy Union goals, and demonstrates that a 40% energy efficiency target for 2030 is the way forward.

The report addresses the need to overcome the challenge of financing energy efficiency investments. It  is  clear  that the existing  EU  funding  will  not  be  sufficient  to  transform  the  EU  economy  from  a fossil fuel based economy to a low-carbon economy unless they are blended with investments from Member  States  and  private  financial  institutions. JRC points out that public finance should be used mainly to remove the policy and financial risks by establishing the appropriate de-risking financial instruments such as guarantees, to boost innovation as  well  as  to build the  technical  capacity  needed  to  develop,  implement  and  monitor  energy efficiency policies and measures.

According to the authors, the policy  risks  could  be  removed  by 

  • encouraging  the  use  of  energy  performance  contracting to remove  the  perceived  technical  risk  by  investors, 
  • unlocking  the  utility  data  to  establish  more accurate baselines,
  • developing instruments that allows for bundling small projects,
  • upgrading skills,
  • boosting  innovation;  and  
  • assessing  energy  saving  by  third  independent  parties.

Financial  risks  could  be  mitigated  by  developing  risk  sharing  facilities to  provide  loans  guarantees thus reduce the  perceived  financial  risk through governmental guarantee  of first-loss  risks.

The full report is available on the JRC's website.