EIB energy lending policy: Supporting the energy transformatio

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This document informs EIB’s stakeholders - shareholders, borrowers, promoters, partners and civil society organisations - as well as the wider public on: - what types of energy projects are consistent with the Bank’s objectives; - how energy projects will be assessed and prioritised by the Bank and - how the Bank supports EU energy policy. It has been adopted on 14 November 2019, following a comprehensive review, including an extensive public consultation that was launched in January 2019.
Executive Summary
  1. To meet the objectives of the Paris Agreement, energy systems across the world must transform rapidly. This profound challenge requires significant, sustained investment in the energy sector over the coming decades. The European Investment Bank is the EU bank and one of the world’s largest multilateral financiers of climate action. It can help to foster this investment.
  2. The EU continues to lead the world in tackling climate change. In 2019 it adopted a comprehensive legal framework to deliver ambitious climate and energy targets for 2030, including further reducing greenhouse gas emissions, increasing energy efficiency and promoting the use of energy from renewable sources. This framework builds upon all dimensions of the Energy Union, including energy security, a fully integrated internal energy market and research and innovation. In line with the temperature objectives of the Paris Agreement, the EU is pursuing the long-term aim of a climate-neutral economy.
  3. Delivering on these EU targets requires long-term investment, the majority of which will come from the private sector. The Bank’s energy lending policy (ELP) sets out how the Bank, as a public bank, can help support the EU in meeting this challenge. It focuses the Bank’s activities on those areas in which it can provide a high degree of additional value by: (i) overcoming persistent investment gaps, which remain despite existing policies; (ii) focusing on infrastructure needed over the long term, including the important dimension of innovation and scaling up of low-carbon technologies; (iii) supporting new market-based investment in the energy sector, in particular for relatively new types of infrastructure (auctions, demand response, storage).
  4. In practice, the value the Bank can bring depends significantly on the context within which it operates. The Bank therefore intends to strengthen its dialogue with Member States to explore how its lending and advisory services can be most effective in supporting national energy and climate plans. Similarly, outside the Union, in light of the nationally determined contributions, the Bank’s activities will focus on achieving the Sustainable Development Goals and the objectives of the Paris Agreement. In adopting this policy, the Bank’s activities in the energy sector are fully aligned with the Paris Agreement.
  5. The Bank’s activities focus on four separate themes (see Figure 1). Energy efficiency investment, notably in residential buildings, needs to double in the coming decade. Despite numerous policy measures, a persistent investment gap remains. Given the pressing need to accelerate market uptake for energy efficiency, and as an exception to its general rule, the Bank will consider financing up to 75% of eligible capital expenditures. The Bank has been very active in this field for a number of years and, in cooperation with the European Commission, it will establish a new European Initiative for Building Renovation (EIB-R) to support new ways to attract finance for building rehabilitation. This will examine the development of relatively new sources of energy efficiency finance, such as models of mortgage-based lending.
  6. Decarbonising energy supply to meet the 2030 targets requires at least a doubling of today’s EU renewable power generation capacity. In close cooperation with the European Commission and other partners, the Bank will endeavour to support the market integration of renewable electricity projects, as well as increased regional cooperation. In addition, there is a need to support other types of renewables (renewable heating), the production and integration of low- carbon gases (such as hydrogen) and low-carbon fuels. The Bank will reinforce its technical and financial advisory services to project developers and public authorities seeking to scale up investment programmes. Finally, it will look to support the development of a sustainable supply of critical raw materials needed for the transformation.
  7. Investment in innovative low-carbon technology needs to increase. This will reduce the cost of meeting long-term targets, as well as increasing the global competitiveness of European industry. Building on its experience, the Bank will continue to support innovation from the earliest stage in the research laboratory to the demonstration of pre-commercial technologies, in close alignment with the EU Strategic Energy Technology Plan and the new Innovation Fund being established under the Emissions Trading Directive. The Bank will also support initial commercial production lines related to breakthrough technologies.
  8. New investment opportunities in power markets are emerging, often associated with new business models that respond to improvements in market design. Battery storage and demand response are beginning to be deployed, together with small-scale decentralised energy sources. New participants are entering the market, consumers are becoming more active and communities are set to play an increasing role. The Bank will seek to support these new types of energy infrastructure to stimulate their market uptake.
  9. The Bank will continue to support the development of electricity networks, including the interconnection target agreed for 2030 and European projects of common interest. It will look to prioritise investments that increase network flexibility.
  10. It is important to stress at the outset that the Bank appreciates the necessary role that gas will continue to play to decarbonise energy systems. Natural gas will be progressively replaced by low- carbon gases such as biogas, synthetic gas and hydrogen. This transition to low-carbon gas is a significant challenge to the industry. The Bank will therefore focus its support within the gas sector on this issue, ranging from the production of low-carbon gases, transportation and distribution to integration within the power and heat sector. In the case of power generation, the GHG emission threshold is set at a reduced level to focus Bank support towards low-carbon power plants, including renewables and carbon capture and storage, as well as the most efficient combined heat and power projects.