The market study will evaluate challenges to access financing for renewable energy projects with a focus on commercial power purchase agreements (cPPAs)
New financial and non-financial instruments shall ease access to financing, promote unsubsidised renewable energy projects, and help small and medium enterprises and corporates to decarbonise
An increasing number of utility and non-utility corporates are aiming to meet part, or all, of their energy demand through renewable energy (RE) sources. Several options exist, but many are exposed to price risk due to market fluctuations and changing regulations across the EU. Buying electricity directly via long-term RE commercial power purchase agreements (RE cPPAs) is one option, but it presents challenges for both providers and users. RE cPPAs are a market-based instrument that can promote the energy transition, but only a small number have been signed to date and the market is still relatively underdeveloped in Europe.
The EIB, with funding from the European Investment Advisory Hub, has contracted Baringa Partners LLP to undertake a comprehensive market study to better understand the drivers and barriers of the RE cPPA market, identify the difficulties RE projects are facing to attract financing based on cPPAs, and propose financial and non-financial instrument(s)/solution(s) to support the uptake of more RE cPPAs.
The research will be carried out in cooperation with technical experts from the EIB and include a consultation with key stakeholders such as corporates, banks, investors, and RE companies across Europe to inform the findings.
The study will be shared with the European Commission (EC) and is aimed to enable better identification of areas that would benefit from support of the EIB as well as other EU financial instruments and support mechanisms to complement and attract private sector finance.
Ilesh Patel, Global Strategy and Markets Lead – Energy & Resources at Baringa Partners, said: “We are delighted to have been appointed by the European Investment Advisory Hub to help unlock the EU’s cPPA market and to drive the EU’s energy transition towards a net-zero future, honouring the Paris Agreement. A growing number of corporates have set specific targets to procure their energy from renewable sources, and cPPAs are one route to meet these green targets. The market will need to be facilitated to make this commitment a reality, and the contribution of all stakeholders is key to grasp this landmark opportunity for Europe. We look forward to assisting with this important initiative”.
The European Investment Advisory Hub is a joint initiative between the EIB and the EC. Both institutions contribute financially to the initiative. It is one of the main elements of the Investment Plan for Europe (IPE). The IPE aims to strengthen the attractiveness of investing in Europe and in the infrastructure of a modern knowledge economy through targeted initiatives to mobilise finance to reach the real economy and improve the investment environment.
The European Investment Bank (EIB) is the long-term lending institution of the European Union, owned by its member states. The EIB is the EU Climate Bank and is the world's largest multilateral provider of climate finance. Its goal is to be a leader in mobilising the finance needed to limit the average global temperature increase to 1.5°C compared to pre-industrial levels to meet the Paris Agreement objectives. On 14 November 2019, the EIB's Board of Directors approved its new climate objectives and the new energy lending policy. The Bank will gradually increase its financing for climate and environmental objectives by up to 50% by 2025, to ensure that the EIB Group mobilises at least EUR 1 trillion in the critical decade between 2021 and 2030 to promote investments helping to meet these objectives. It also announced its intention to align all EIB Group activities with the Paris Agreement. To this end, the EIB will cease financing fossil fuel-based projects from late 2021.
Over the past five years, the EIB has provided around EUR 62 billion to finance energy infrastructure. This included over EUR 53 billion for renewable energy, energy efficiency and electricity grid projects in Europe and around the world.
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