The European Commission has set forward a new financing mechanism for Member States to reach their clean energy targets by enabling them to finance renewables projects in different European Union countries or hosting RES projects funded by another Member State.
The Mechanism is intended to make it easier for Member States to work together to finance and deploy renewable energy projects – either as a host or as a contributing country. The energy generated will count towards the renewable energy targets of all participating countries and feed into the European Green Deal ambition of reaching carbon neutrality by 2050.
For instance, the Commission’s new financing mechanism would provide an opportunity for land-locked countries to reach their national RES targets by contributing financially to offshore wind projects in another Member State, or to host a solar power project, financed by a country which has fewer hours of sun on its territory.
Commissioner for Energy, Kadri Simson emphasised that the share of renewables must be significantly increased to reduce Europe’s greenhouse gas emissions in the next ten years by at least by 55 per cent, as announced by Commission President Ursula von der Leyen earlier this week in her State of the Union address.
“This mechanism provides an additional tool to facilitate investment in clean energy projects,” said Commissioner Simson. “It will encourage cooperation between Member States and give a practical boost to our green recovery efforts in the coming years.”
The mechanism will be managed by the Commission, bringing together investors and project developers through regular public tenders. “Contributing Member States” could pay voluntary financial contributions into the scheme, which will be used for renewable energy projects in interested “Host Member States.” This allows them to support projects that are more cost-efficient than deploying the same technology domestically and invest in technologies which are not practically possible at home.
“Host Member States” can benefit from the collectively-financed renewable energy projects as well by reducing import dependency, and greenhouse gas emissions, the modernisation of their national energy system, local investment and job creation, improved air quality and environmental security.
The renewable energy resources financed via this mechanism will count towards the climate targets for renewable energy for all Member States participating in the particular project – whether as “Host or Contributing country.”
The Commission’s proposed mechanism is expected to bring lower transaction costs compared to the current model of cooperation mechanisms (such as statistical transfers, joint projects and joint support schemes) set up under the revised Renewable Energy Directive.
Apart from Member States, private investors can also invest in the mechanism in order to broaden their sustainable energy portfolio and benefit from the Union-wide green label.
The Commission expects that the new funding mechanism can help stimulate Europe’s economies by getting large-scale projects off the ground and by supporting local SMEs and creating jobs in the context of the EU’s post-COVID recovery.
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