CALL FOR EVIDENCE

FOR AN INITIATIVE (without an impact assessment)

Title of the initiative

Unlocking private investment in energy efficiency – guidance to Member States and market actors

Lead DG – responsible unit

ENER.B2

Likely Type of initiative

Commission Recommendation with detailed annex

Indicative Timing

Q3 2024

Additional Information

Energy Efficiency Financing (Europa.eu)

A. Political context, problem definition and subsidiarity check

Political context

Energy efficiency is instrumental to achieve the full decarbonisation of the EU by 2050, while enhancing the competitiveness of the European economy and strengthening energy security and affordability. As part of the Fit-for-55 package and REPowerEU Plan, Directive (EU) 2023/1791 on energy efficiency (EED recast) was adopted in September 2023 and published in the Official Journal in September 2023. It entered into force on 10 October 2023. The EED recast is the cornerstone of the European energy efficiency policy, setting the rules, obligations and policy tools to achieve the EU´s 2030 energy efficiency targets.

Increasing investments in energy efficiency via dedicated policy and financing measures is fundamental to support Member States to deliver on the 2030 energy efficiency targets and on the energy savings pillar of the REPowerEU Plan. Supporting the mobilisation of investments in energy efficiency will enable the achievement of climate neutrality by 2050 in a cost-efficient way, while ensuring the competitiveness and sustainability of the EU economy, as well as strengthening EU security of supply and enhancing energy market resilience.

In the recently adopted EED recast, Article 30 strengthens the legal and policy framework to mobilise investments in energy efficiency. Article 30 aims to increase the cost-effectiveness of public budget support and the mobilisation of private investments in energy efficiency measures. As public financing alone, including EU funding, will not suffice to meet the required investment needs towards 2030 and energy savings goals in REPowerEU, much of the financial support will need to be mobilised from the private sector. Article 30 thus recognises the need to deploy adequate financial and technical support for energy efficiency measures, develop targeted policy measures enabling the mobilisation of private investments in energy efficiency, and promote innovative financing mechanisms and private financial products for energy efficiency. Moreover, it lays the foundation for further work to incentivise investment in energy efficiency, placing an emphasis on cooperation between the European Commission, Member States and financial institutions.

Problem the initiative aims to tackle

The Impact Assessment accompanying the Commission’s proposal for the EED recast (SWD(2021) 623 final) indicates that energy efficiency faces one of the largest investment gaps in Europe, and estimated at EUR 165 billion per year the amount of additional investments needed by 2030 to achieve the energy efficiency targets. With more ambitious targets agreed under the EED recast, this figure would need to be revised upwards. For energy efficiency in buildings specifically, the Impact Assessment accompanying the Commission’s proposal for the Energy Performance of Buildings Directive recast (SWD (2021) 453 final) indicates that above EUR 100 billion of additional investments per year are needed to achieve EU policy objectives in term of building renovations.

Against this backdrop, there is a need to increase the volume of private investments into energy efficiency as the public available funds both at European and at national levels are not – and are not expected to be – sufficient. To leverage more private investment towards energy efficiency measures, existing market barriers (economic, financial / behavioural, and operational / contextual and technology / measurement and verification / regulatory and administrative, etc.) need to be removed, while adequate and innovative financing solutions need to be developed.

As part of Article 30 of the EED recast, paragraph 10 requires the European Commission to provide guidance to Member States and market actors on unlocking private investments by 31 December 2024. According to Article 30, paragraph 10, the Guidance shall have the purpose of helping Member States and market actors to develop and implement their energy efficiency investments, including in the various Union programmes, and shall propose adequate financial mechanisms and innovative financing solutions, with a combination of grants, financial instruments and project development assistance, to scale up existing initiatives and use the Union programmes as a catalyst to leverage and trigger private financing.

In addition, paragraph 3 of Article 30 of the EED requires the Commission Guidance to unlocking private investments to address as well possible measures that Member States could implement to facilitate the implementation of innovative financing schemes – on-tax, on-bill and third-party financing – as well as measures to promote energy efficiency lending products.

Therefore, the Commission Guidance to Member States and market actors on how to unlock private investments in energy efficiency intends to support the mobilisation of investments in energy efficiency and the achievement of the 2030 energy efficiency targets and related objectives.

Basis for EU action (legal basis and subsidiarity check)

Legal basis

Energy Efficiency Directive (EU) 2023/1791, Article 30 (10)

Practical need for EU action

The initiative implements a legal requirement for the European Commission in line with Article 30(10) EED recast (2023/1791) to provide guidance to Member States and market actors on unlocking private investments in energy efficiency by 31 December 2024. 

B. What does the initiative aim to achieve and how

The Guidance shall support Member States and market actors to develop and implement their energy efficiency investments, including in the various Union programmes. It will propose adequate financial mechanisms and innovative financing solutions, with a combination of grants, financial instruments and project development assistance, to scale up existing initiatives and use Union programmes as a catalyst to leverage private financing.

Addressing identified barriers to access and activate private financing for energy efficiency is key to further enhance energy efficiency financing. The main barriers include:

-Economic and financial (lack of financial resources, lack of incentives, perceived risks, long payback periods, high transaction costs);

-Behavioural and operational (limited awareness on benefits, limited monitoring and verification measures, high administrative costs, lack of capacity and skills and financial literacy);

-Contextual and technological (lack of standardised solutions, limited supply chain, lack of customisation);

-Regulatory (existing administrative barriers to the roll-out of innovative and blended financing solutions).

The Guidance will be provided in the form of a Commission Recommendation with comprehensive detailed guidelines in the annex. The Commission Recommendation and detailed guidelines in the annex will:

-Introduce the current overview in term of energy efficiency financing.

-Present the barriers and drivers to unlock private investments,

-Describe the relevant financial mechanisms and innovative financing solutions to leverage private investments, including existing best practices and models across Member States.

-Provide concrete guidelines to Member States on policy and financing measures to make the most cost-effective use of available public financial support to deploy financial instruments and innovative financing schemes,

-Identify existing best practices and toolkits for market actors to scale-up energy efficiency project development, financing solutions and investments;

-Provide specific guidance to develop and implement energy efficiency and integrated renewables projects addressing the public, business and residential sectors.

The general objective of the Guidance will be to support the establishment of an enabling framework to scale-up the market for energy efficiency investments to contribute to deliver on the 2030 EU energy efficiency targets. In line with the EED recast, as part of the Guidance, specific focus is expected to be dedicated to increasing the deployment of financial instruments, including debt financing and public guarantees, as well as to increase focus on financial support for actions by SMEs and in heating and cooling refurbishment. In addition, given the truly relevant contribution of building renovations to deliver both the energy efficiency targets and the decarbonisation objectives and the strengthened ambition put forward by the recast Energy Performance of Building Directive, the Guidance will also provide recommendations on implementation of innovative financing tools and financial instruments specifically addressing building renovations. Finally, guidance will be provided on financing solutions to address energy poverty , in particular in the framework of the Social Climate Fund.

The specific objective of the Guidance will be to provide concrete recommendations to Member States and market actors to overcome the identified barriers, by deploying impactful policy, regulatory and financing measures.

Likely impacts

Following the adoption of the Guidance, Member States and market actors will deploy measures to remove barriers and further facilitate the uptake of financial instruments and innovative financing solutions able to unlock private investments in energy efficiency, with the objective to achieve the strengthened 2030 EU energy efficiency targets.

The recommendations will not be legally binding. The impact of the measures described in the Guidance will depend on their appropriateness to address the specific challenges and barriers encountered by Member States and market actors, and national authorities’ willingness to scale-up energy efficiency financing solutions able to trigger private investments.

Future monitoring

Not applicable.

C. Better regulation

Impact assessment

Commission recommendations, which set out a general policy approach and do not commit to actions, do not require an impact assessment. Any potential future legislative proposal following up on this Guidance will be subject to the regular requirements of the Commission's ‘better regulation’ policy in terms of the need to conduct an impact assessment.

Consultation strategy

The aim of the consultation is to collect relevant data, feedback on existing barriers and recommendations to unlock private investments in energy efficiency from the stakeholders and market actors active in the area of financing energy efficiency, in particular project promoters and developers, financial institutions, energy service companies, and any other relevant market actor active in the area of financing energy efficiency and the energy transition. The overall objective is for the Guidance to unlock the potential of a sustainable and thriving market for energy efficiency investments. To do so, it will take stock of the existing experiences in financing energy efficiency, assess commonalities, and provide concrete recommendations and a forward-looking strategy to help removing existing barriers.

Targeted stakeholders are inter alia project developers and promoters, Member States’ representatives, regional and local authorities, public and private financial institutions, businesses and business associations, technical assistance facilities and one-stop-shop practitioners, financiers, consumer groups, consumer representatives, civil society organisations, education organisations and research institutions, and any other actors engaged in developing, financing and assisting energy efficiency projects and the mobilisation of private investments in energy efficiency

The Commission invites respondents to provide feedback regarding barriers and drivers to access and activate private financing for energy efficiency, recommendations to overcome the existing barriers and unlock private investments, proposals on how to better facilitate the mobilisation of private investments including via policy, financing and regulators measures, as well as best practice examples in term of financing solutions and measures to remove existing barriers. Respondents are invited to share all reporting data they may consider relevant, including evaluation reports.

In line with the Commission’s 'Better regulation’ policy to develop initiatives informed by the best available knowledge, scientific researchers, as well as academic organisations, learned societies and scientific associations with expertise in financing energy efficiency, are also invited to submit relevant published and pre-print scientific research, analyses and data. Submissions that synthesise the current state of knowledge in relevant field would be particularly relevant.

This ‘call for evidence’ is available in all 24 official EU languages on the Commission’s Have Your Say portal. Replies can be provided in any official EU language within four weeks of its publication. The call will be shared with the Energy Efficiency Directive Committee and announced in DG ENER’s webpage as well. As part of the stakeholder consultation strategy, an online stakeholder workshop will be organised by DG ENER on Thursday 8th of February 2024. A synopsis report will be prepared within eight weeks after the closure of this ‘call for evidence'.