EU renewable energy financing mechanism

The European Commission has established a new EU financing mechanism to support renewable energy projects, as foreseen under Article 33 of the Governance Regulation (EU) 2018/1999 of the Clean Energy for all European package. It becomes operational from January 2021.

Closer cooperation on renewable projects

The main objective is to enable Member States to work more closely together to achieve their individual and collective renewable energy targets, covering gaps that may have been identified. As a result, it will 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.

The financing mechanism will make it easier for regions to get projects off the ground at a time when their local economy is under pressure.

EU countries are already committed to meeting binding targets for the share of their energy coming from renewables – with the cumulative EU target of 20% by 2020. Through their national energy and climate plans (NECPs) for 2021 to 2030, they outline their intended pathway for meeting a 32% share of renewable energy by 2030, and, between 2020 and 2030, follow a national trajectory leading up to that point. 

Currently, they primarily meet this figure based on the amount of renewables generated on their territory through national measures. However, there is second option for using cooperation mechanisms with others, such as statistical transfers or joint projects. The new financing mechanism opens a third possibility: Member States can collectively benefit from renewables projects funded in a different EU country through tenders using this EU-wide financing mechanism.

"Contributing" and "Host" Member States

As outlined in the implementing rules (EU) 2020/1294 2020, 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. 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
  • host countries receive 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 and reduced dependency on imports

However, there is no direct link or negotiation between the contributing and hosting countries, as required under the current system of cooperation mechanisms. The Commission runs the process and allocates the statistics. 

To provide incentives for both host and contributing countries, the rules foresee that the statistical benefits of these projects should be split between the participants, reflecting their participation.