L R AS Published on Monday 9 December 2019 - n° 301 - Categories:funding
What will be the consequence of the EIB's abandonment of fossil fuel financing?
The European Investment Bank is one of the main lenders to the energy sector in Europe with €15 billion distributed per year. However, for every euro invested by the EIB in a project or company, about seven others are invested by the private sector. This represents about €120 billion ($133 billion) of public and private investment in the energy sector that results from the EIB's choices, compared to global investments in renewable energy in 2018 of $300 billion.
By the end of 2020, all EIB investments, whether in schools, transport or telecommunications, will be aligned with the Paris Agreement. The bank will place greater emphasis on infrastructure and technologies to connect more wind and solar power to the grid.
According to the EIB, offshore wind should play a central role in Europe's energy sector. There are 20 gigawatts of wind at sea installed compared to 600 gigawatts of wind on land. Each offshore project uses a different foundation and a larger turbine. For the time being, the EIB will continue to act as a market accelerator for what it sees as a technology in the start-up phase. EU targets for offshore wind are 100 gigawatts by 2030.
Possible investment targets include cross-border projects (such as the creation of a grid connection covering the Baltic Sea) and floating wind power.
A new era is opening up for the energy sector: the EIB is working to develop new mechanisms that would allow it to take more risk, such as demonstration projects like WindFloat, or power purchase agreements: Currently, the EIB is evaluating purchase contract formulas and is looking for a way to reduce the risks on both sides of the contract. Standardisation and a mechanism that could bring together smaller users are two ideas under consideration. Work is ongoing.
Above all, a new era is dawning for the overall structure of the European energy sector, which emphasises collaboration between the public and private sectors. Twenty years ago, the sector was totally centralised and managed by the state. It has been liberalised, but there is a need for central planning: the state must set the objectives and the private sector must achieve them.
GreenTech Media of 6 December
