Key findings of the 9th set of WG meetings

The following pilot topics were discussed in the WGs: 

• WG1: Guarantee scheme for PPAs for energy production
• WG2: Blended finance with technical assistance component for transmission & distribution
•  WG3: Equity scheme for energy storage
• WG4: Financial instrument component of the Heat pump Accelerator for heating & cooling
• WG5: De-risking pilot scheme for services and prosumers

Working Group 1: Energy Production

In the beginning of the meeting the EIB presented the best practices they have identified in the field of multi-buyers PPAs for smaller corporates. More specifically, the presentation focused on the identified need for an “on demand” guarantee for cPPA offtakers capped to a share of the total outstanding value of the cPPA, and on a possible digital platform to raise awareness and visibility, and reduce fragmentation in the market. The platform could support financial intermediaries with eligibility checks, facilitate access to PPA for corporate buyers and aggregate demand for smaller ones.

WG members then continued the discussion to define the key features and characteristics of the pilot guarantee scheme for PPAs, started in the previous WG1 meeting. The discussion first dealt with whether the guarantee should be set up at EU or national level. Both options raised interesting arguments on the need to balance having a standardised and centralised product that also reflects different national markets. When it comes to the resources to fund the pilot, WG members noted that some EU programmes could be used to finance the set up the online platform mentioned by the EIB and potential technical assistance services attached to it, but further assessment would be needed.

The WG meetings concluded with a presentation on Europe’s Climate tech Funding Gap, by the World Fund, and on the need to step-up climate financing from the current annual €19 billion to €1 trillion annually.

Working Group 2: Transmission & Distribution

The objective of the meeting was to continue the discussion started in the previous meeting. A summary was provided on the aspects that were covered up to this point by the WG. Specifically, the summary covered the policy and specific objective of the scheme, the market failures that it aims to address, the identification of smaller and medium DSOs and TSOs as target beneficiaries of the scheme, digitalisation and strengthening of the network as eligible project/activities, and the validated governance model (similar to AFIF’s). Subsequently, the ID-E team engaged the group on follow up topics. The Working Group discussed the selection of the appropriate financial instruments for each of the selected eligible projects/activities, noting that the grant component is key to keep the scheme attractive, but that the loan component should be provided at market terms to avoid distortions. While not fully discarded, equity was not indicated as the ideal type of financing, mostly due to also legal constraints in accessing private financing that public TSOs and DSOs have. Then, the scope of the technical assistance component was dealt with, mostly focusing on project design and access to finance.

Lastly, a representative from Eurelectric presented their whitepaper “Power System of the Future: Keys to delivering capacity on the distribution grid”. In particular, the presentation covered insights from the transformative shift from a centralised to a decentralised generation model that the energy system is undergoing, highlighting the critical role of the distribution grid. The aim is to contribute to the targeted revision of the electricity market design (EMD) to meet the EU's Fit for 55 and REPowerEU objectives. The presenter provided an as-is analysis of the market and an insightful projection for the future. Finally, the presentation covered five main “quick win” areas to make the grid fit for a decarbonised EU concerning planning and investments, grid permits, flexibility, digitalisation of the grid, its governance and processes and innovation.

Working Group 3: Energy Storage

The meeting started with a discussion on the outcomes of the previous WG meeting on the design of a possible pilot equity scheme for investments in energy storage and, more specifically, long-duration energy storage (LDES). 

WG members discussed who should be the beneficiaries of the pilot, if the pilot should target only start-ups or also be open to larger corporates. While both are active in the development of LDES solutions, WG members noted that start-ups would be better suited for an equity fund, as larger corporates would revert to equity only in limited cases through a dedicated vehicle. 

In terms of investment scope, the WG agreed that LDES-only would be a too narrow focus that would entail a too high risk and with a very limited market. There was consensus on focusing on energy storage more broadly, with LDES specifically mentioned in the investment strategy.

A significant part of the discussion revolved around whether the pilot should be set up as a fund-of-fund, potentially at EU level, or as a direct equity fund, possibly at national level. Arguments were raised in favour of both options, noting that a fund-of-fund is better suited to provide financing to some riskier projects, as it can diversify across all the EU based on market opportunities. As for a direct fund, some WG members noted that national and regional entities are unlikely to invest in a fund that invests outside their geographies, sometimes even for limits set by the legal mandate, and would be more keen on a solution that is managed by NPBIs, who also know the national market better. WG members are invited to provide more inputs on this in the WG Report.

Working Group 4: Heating & Cooling

The WG discussion was a continuation of the previous meeting in October about the possible instruments that could be set as a reference for the financial component of the upcoming EU Heat Pumps Accelerator. The session started with a recap of the previous discussion on the needs and scope of the financial instrument and it was followed by an intervention of DG ENER to set the scene for the discussion ahead.

Most of the debate was around Thermondo’s business model and their experience in Heat Pump-as-a-Service and Heat Pump Contracting: for a monthly fee, Thermondo offers homeowners the heat pump, all installation work as well as regular maintenance and possible repairs. In addition, they handle all the subsidy (35% today) and financing processes, thus securing the best price for switching to the heat pump. That means no upfront costs for customers. 

The second presentation was about the Efficiency as a Service (EaaS) initiative, an innovative servitisation business model that makes high-tech efficient solutions more competitive than cheaper, less efficient systems through a pay-per-use model. The EaaS project aims to develop and deploy the servitisation model and a financial structure to enable the transition and accelerate the market adoption of energy efficient solutions by SMEs.

Following these two cases, the debate was more about the general characteristics that the instruments described in the heat pumps accelerator should have, namely the most suitable financial instruments (such public guarantees to de-risk ESCOs and utilities) to support heat pump deployment and the most suitable national and EU programmes to provide heat pumps financing.

Working Group 5: Services & Prosumers

As the objective of the meeting was the continuation of the discussion started in the previous meeting, the ID-E team started with a recap of the aspects of the de-risking pilot scheme that have already been discussed. Specifically, the summary covered the policy and specific objective of the scheme, the market failures that it aims to address (i.e., counterparty risk and financial institutions’ limited capacity to assess energy services projects’ business models), and the set of selected de-risking financial instruments. The financial flow of the proposed scheme was presented, starting from the Implementing Partners (IPs, e.g., NPBIs), to the direct beneficiaries (i.e., financial institutions), to the indirect beneficiaries (i.e., project owners) whose aim is to find financing for the eligible projects/activities. Additionally, the validated pilot scheme governance model for the scheme was illustrated in the meeting.

The discussion mediated by the ID-E team focused on the need of the actors envisaged in the governance model (IPs, direct and indirect beneficiaries) and the most appropriate form of financial support to fulfil them. There was an overall agreement on the pilot scheme consisting of a guarantee from the IP to financial intermediaries (e.g., commercial banks), in order for them to provide financing (mostly loans) at better conditions to project promoters. A grant component and a technical assistance facility could be included. 

This meeting featured two spotlight sessions. The first was provided by Greenvolt and focused on their distributed generation model. This envisages three possible roads to markets depending on whether the client wants to make the investment or if the energy generated is shared with other consumers. The presentation concluded with an insightful presentation of Greenvolt Next Portugal & Greenvolt Comunidades client portfolio and data insights. The second spotlight session was held by ENPAL on their offering of non-traditional ways for financing solar and heat pump installation. Specifically their presentation provided a deep dive in ENPAL’s business model summarising their experience as an ESCO.