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Comprehensive national policies key for CEE to take advantage of the energy transition

The European Union Recovery Strategy marks the determination of the Commission to engage all Member States in common efforts to reshape the whole European economy. The pandemic simply amplified the observation, that the emerging challenges to our societies and economies require more focused, decisive policies. The Recovery Strategy and the EU budget proposed for the 2021-2027 perspective can be perceived as a move to capture these efforts into a robust financial framework. This is a clear impulse to encourage both private and public spending required for the energy transition to succeed.

Investing in renewable energy sources (RES) is undisputedly the key response we are capable of providing to the climate change challenge. However, we are already past the stage where this can be narrowed down to adding new power generating capacity to each system. Over the next decade, the renewable effort has to combine replacing reliance on energy sourced from fossil fuels with a mixture of measures focused around renewable energy in the overall power system, including network, transportation, heating and cooling but also building on synergies with water supply, waste management and many other areas.

The EU Member States already had to engage in this game-changing thinking by preparing National Energy and Climate Plans (NECP). Arguably, the CEE countries made insufficient use of this measure. NECPs may be regarded as national pillars of the Recovery Strategy framework. Meaning, they should provide a good enough outlook both for public and private actors to encourage engagement in new projects and reduce the reluctance to take funding risks. Developer and financing providers all across Europe usually express regulatory uncertainty as one of the key problems they face when making investment decisions.

Naturally, each NECP will be different and focuses on country-specific problems. Nevertheless, it all comes down to decision-makers having to deal with the founding task of each Member State – how to best deal with overall resource scarcity to ensure the prosperity of its citizens. The key answer emerging from the fundamental advantage of EU operating as a community of states is through cooperation. In order to succeed CEE States and market players need to engage increasingly in projects that combine efforts of all parties involved in the most effective and efficient way. The critics of CEE NECPs often repeat that what is lacking is the cohesion among different policies proposed by CEE Member States. Where policies today are fragmented, they need to be aligned and supplemented by measures of such quality, that they will attract actual deployment of projects.

By means of an example, the energy transition puts an increasing strain on local authorities. Typically, they manage resources like space and permitting authority but may lack the capacity to take full advantage thereof. Just as developers, they need to invest in creating conditions that will bring incentives only in a longer perspective. Many current obstacles to greater RES deployment could be reduced by providing green financing to trigger the necessary capacity building within the local administration.

What is more, the energy transition opens new opportunities to community projects, especially through public private partnership initiatives. This is where such initial green financing to local authorities would pave the way for more resilient private investment. Coordinated national policies would in turn secure a momentum, that would result in scalable projects attractive to investors managing portfolios of greater value.

Summing up, the CEE retains a great potential to take advantage of the accelerated energy transition policies within the EU Recovery Strategy framework. The key is to concentrate on comprehensive and ambitious national policies, avoiding fragmentation and unnecessary regulatory risk. Resilience and capacity of local authorities to handle energy transition challenges will add great value to the effectiveness of this approach. Just with enough encouragement, private investment will expand to multiply the effects of properly focused public policies.

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