By Jonathan Taylor
European Investment Bank
Energy security is usually seen in a geopolitical context. Take, for example, the 110 km gas pipeline under construction in Klaipėda to connect the port’s liquid natural gas terminal to Lithuania’s gas network. The terminal and the pipeline—both funded by the European Investment Bank—make Lithuania, Latvia and Estonia, less dependent on Russian gas, because they can be supplied by sea. But at the EIB energy security isn’t just geopolitics. Anything that makes you less dependent on an external source of energy supply automatically makes you more secure. That’s why, for us, energy efficiency projects or the development of indigenous renewable energy sources can be an important factor in building energy security.
Since 2011, the EIB has funded around EUR 35 billion of projects contributing to energy security, most of them within the 28 member states of the European Union. All those investments are based on three pillars: growth, security, and sustainability. Security has to be one of these factors, because the EU is highly dependent on imported sources of energy. To reduce that dependence, the EIB prioritises investment in energy efficiency, renewable energy, and energy network projects, as well as energy RDI. In 2015 our projects contributed 3,400 GWh a year of energy savings. Every gigawatt hour saved is a concrete contribution to security of supply.
Backing for new technologies
EIB finance for innovation goes hand in hand with its security of supply policy. The offshore wind industry, for example, could have been wiped out in 2008, when the global financial crisis made investors leery of risk. The EIB stepped in when private investment dried up, financing Belwind, a project to build Europe’s biggest wind farm 46 km off the Belgian coast. The EIB’s EUR 300 million funded half the cost of Belwind, which now produces enough electricity to power 160,000 homes in Belgium.
The move away from big, carbon-intensive power generation to decentralised renewable generation should cut reliance on imported oil and gas. Under the EU 2050 energy roadmap, exposure to fossil fuel price volatility would drop significantly with decarbonisation. The EIB is at the heart of that shift in focus, financing roughly two-thirds of all European offshore wind capacity. In May we made our biggest ever offshore wind investment with a GBP 525 million loan for the GBP 2.7 billion Beatrice Wind Farm off the Scottish coast.
That kind of massive investment gets headlines. But our attention is just as focused on smaller deals that have a significant impact on the lives of Europeans. In Bucharest we funded the energy efficiency renovation of around 65,000 apartments during the last six years. The total investment is EUR 460 million, which will result in yearly energy savings of over 500 GWh. Such projects fulfil another important piece of the security puzzle—they reduce energy expenditure for the residents of those buildings by cutting their bills. After all, you can build all the pipelines you like, but if people cannot afford to buy the energy they need once it arrives from some distant location, then you still lack energy security.
Energy security under the Investment Plan for Europe
Innovative financing is key. To that end the EIB has a new card to play in the form of the Investment Plan for Europe’s guarantee under the European Fund for Strategic Investments (EFSI). In June the EIB signed a EUR 40 million deal to finance three onshore wind facilities in Austria. EFSI allows the EIB to take a bigger position than usual (over 70% of Energiepark Bruck’s expansion costs). Without EFSI, the deal would’ve been too leveraged for EIB participation. Now we’ll be a big part of a project that will bring 39 MW and greater security of supply to two Austrian regions.
EFSI also backed a EUR 100 million loan in December to a semi-private company that renovates old apartment buildings in the Paris region. Énergies POSIT’IF met the criteria for an EFSI loan because it filled a market gap in bank financing for the renovation of condominium housing. Before this deal, Énergies POSIT’IF staff had to negotiate separate loan agreements for every single owner in a massive condominium with commercial banks—which were not terribly interested in making loans to the sector anyway.
Now the company can offer condo owners attractive financing quickly and easily, allowing it to renovate many more apartments in a shorter time. That is important in the Paris region, where three-quarters of the homes are either condominiums or social housing. Paris apartments built in the Sixties and Seventies—before the oil shock prompted energy efficiency regulations—simply leak heat. Énergies POSIT’IF renovations can save those buildings up to 75% of energy use.
The EIB’s role here is not just to hand out cash. The Bank facilitates projects that might otherwise not be funded at all. It helps projects work faster and therefore cut energy bills sooner. We also constantly refine our methodology for calculating the cost-benefit of security of supply projects to be certain they provide a good deal for consumers. The benefit to EU citizens, after all, is the bottom line for us.
The EIB produced this article for publication in an edition of The European Files that's devoted to the issue of energy security.