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BB200612, News in Brief

EIB reviews financing targets for the energy sector

22.01.2007

In Luxemburg on 26 October, the European Investment Bank has completed a review of its financing targets for energy projects that help to implement the relevant EU policies. The Bank will focus on five target areas : large projects; energy efficiency; renewable energies; R&D for energy and cooperation on energy outside the EU.

The European Investment Bank said in a 28 pages report on 26 October that it will focus on five target areas: large projects; energy efficiency; renewable energies; R&D for energy and cooperation on energy outside the EU. The reprioritization of energy in the bank 's activities reflects EU energy policy goals. In recent years, two main factors have put energy back on the key priority list of the EU: the policy in relation to climate change and the renewed tensions in the oil and gas market. This situation has pushed the financial arm of the EU to reprioritise its energy policy targets. According to the new strategy for the EIB Group, the bank 's role in the EU should evolve from a universal provider of funds to become a flexible partner acting with more tailor-made products adapted to local market circumstances and to the needs of the counterparts. In partner countries the objective is to better serve the development objectives of the Union with a more coherent and staff-intensive approach that would put more emphasis on country and sector intervention strategies and involve more risk-taking, coupled with greater availability of subsidies and closer cooperation with all actors.

1. Financing for large energy projects will focus on those with the highest EU priority. Support will go in particular to projects enhancing the security of energy supply and the internal market, including notably priority Trans-European Networks.

2. The energy efficiency target areas include financing energy efficiency investment programmes, combined heat and power as well as district heating. In addition, it will explore with promoters possibilities to develop the energy efficiency potential of their projects financed by the bank.

3. In renewable energy, the EIB aims at the existing financing targets (average annual financing is above €500 million). Additionally, emphasis will be on developing the less mature renewable markets, both within and outside in the EU, on the underdeveloped renewables (particularly biomass), and on new technologies.

4. Research and development for energy will increase under the existing (Innovation 2010 Initiative - i2i) policy for a knowledge-based economy. New risk-sharing financial instruments will be developed for this type of projects. The EIB Group will seek complementarity between the EU 's 7th Framework Programme for Research and its i2i, and it will support the European Technology Platforms as well as the research infrastructure for energy.

5. In partner and neighbouring countries, efforts will go towards a pan-European Energy Community with neighbouring countries to better integrate energy markets. The EIB will also support new energy import routes and projects enhancing energy supply. In developing countries, the EIB will seek to increase access to modern sources of energy and to further sustainable energy solutions, favouring in particular the emergence of low-carbon economies.

EIB energy lending as percentage of its total lending in the EU declined from 23% in the 1980s to 9% in the period 2000-2005. The outcome reflects the pattern of energy investment in the EU. The EIB financed about 5% of the investments by the energy sector in the EU, at an annual average of some €3.3 billions in the past five years. Outside the EU, financing of energy projects represents a larger part of EIB financing in those countries.

The Bank’s target for renewable energy was adapted in 2004 with the aim of stepping up the Bank’s support for the European Union’s climate change policies. The earlier target was “to double the share of renewable energy projects in overall EIB energy sector financing between 2002 and 2007 (from 7 to 15%)”. The new target was made even more ambitious when the Bank pledged to increase its lending for renewable energy from 15% of new electricity generation capacity to 50% by 2010. This is in line with the EU’s target of increasing renewable energy’s share of electricity generation in the EU to 22% by the end of the decade.

In the period 2000-04, EIB lending for renewable energy projects relative to total electricity generation lending in the EU amounted to 32% compared with the target of 50% by 2010; the figure was 36% in 2004.

EWEA welcomes the new EIB prioritisation of its energy policy targets as it reflects more the EU energy policy goals, climate change mitigation, security of supply and competitiveness. The recent figure from EIB corporate responsibility reports shows that in 2005, loans for renewable energy projects totaled EUR 593 million, or 64% of lending for new electricity generation, which is significantly higher than the average for previous years of around 35%, and this is encouraging.

Recently, the Bank has enlarged the scope of the economic analysis of renewable energy projects to include objectives other than CO 2 reduction (rural development, job creation…). In addition, the bank is now funding renewable projects directly notably trough grouping together several small projects. For the future, the bank will have to make sure that it has the adequate procedures to verify that the principles of its energy policy are implemented in practice and this not only to comply with the bank’s own Renewable energy target but as well with the extremely challenging grid infrastructure investments needed.

Background

The EIB (European Investment Bank) is the financing institution of the European Union. The members of the EIB are the EU Member States, who have all subscribed to the bank 's capital. The EIB mission is to further the objectives of the European Union by providing long-term finance for specific capital projects in keeping with strict banking practice and therefore the bank adapts its activity to developments in European policies. EIB loans offer generally better conditions than loans on the free capital market. Project promoters can find basic information about requirements and arrangements necessary for obtaining an EIB loan in the so-called “Guide to Procurement”.

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