Guaranteeing finance for Europe’s cleantech competitiveness

In this week’s edition of Smart Energy’s Power Playbook, Yusuf Latief discusses the EIB’s recently approved Strategic Roadmap for 2024-2027, to which the Association of European Renewable Energy Research Centers (EUREC) has called for expanded cleantech guarantees.

Last Friday, the EIB’s Board of Governors approved its new Strategic Roadmap for 2024-2027, which hopes to further support the EU build leadership and competitiveness in strategic cleantech sectors.

The EIB has been at the forefront of investment and their roadmap is certainly a move in the right direction, listing guarantees as one of their instruments that can efficiently address the financing gap of cleantech startups.

Considering how Europe’s leadership in the energy sector has been a key talking point among executives for some time now, the Bank's roadmap comes as a green flag, especially as the US and China only continue to demonstrate their prowess in manufacturing and trade.

Take for example European Sustainable Energy Week, where I covered talks around policy implementation and using regulation to guide private sector investment into energy, both of which at the end of the day are meant to improve the continent’s competitiveness.

Filling the finance gap

To place things into perspective, the European Commission needs €620 billion ($662.8 billion) annual investment to meet energy and climate targets. Of this, there is a €92 billion ($98.3 billion) gap specifically for batteries, heat pumps, wind, solar PV, electrolysers and carbon capture and storage.

This gap is expected to more than double when also considering future needs for grid technologies, long-duration energy storage, innovative renewables, green steel and cement.

And it is here where the EIB’s strategic roadmap comes into play, outlining eight key interrelated priorities and new programmes to contribute to closing this gap.

But is it enough?

For EUREC, perhaps. In a letter from the association, EUREC cites the effectiveness of the EIB’s guarantees that have already been tapped for electricity grids as well as in the wind industry.

These guarantees, states EUREC, should now be expanded for other strategic cleantech sectors to help ramp up manufacturing.

Reads the letter: “Specifically, we call on the EIB to support an expansion of its public guarantee products that can scale up Europe's cleantech manufacturing significantly and reinforce the global competitiveness of EU green industry.”

Have you read:
Three dimensions to finance the EU energy transition
How can we boost Europe’s competitiveness?

How can guarantees help Europe's energy competitiveness?

EUREC states how European cleantech manufacturers are being forced to turn down orders for lack of bank guarantees, which greatly limits the growth of these clean industries in Europe.

“Without a guarantee, expensive equity and multiple rounds of venture debt is inefficient and slows down deployment. Meanwhile, this offers an opportunity for non-European competitors to seize market share and undermine Europe’s industrial base,” adds the letter.

The EIB already offers a variety of guarantee instruments, covering the risks of a single or several projects.

Their guarantees unlock additional financing for small- and medium-sized enterprises or mid-caps by covering a portion of possible losses from a portfolio of loans. In some cases, the Bank also guarantees possible losses from a project to unlock additional investments.

The EIB has already taken a strong position in Europe’s roadmap to net zero, channelling €108 billion ($115.5 billion) into the Union's energy sector. The gap, however, remains.

And if they can further foot the bill for potential loss, then surely this should be investigated.

Reads the letter: “By shifting risk from commercial banks to the EIB’s balance sheet and the European budget, via InvestEU, European banks can offer new guarantee lines for cleantech projects and promote bank lending to emerging cleantech manufacturing.

“We, the undersigned organisations, call on the European Commission and European Investment Bank to work towards expanding the use and scope of public guarantees towards increased working capital and long-tenure lending for strategic cleantech manufacturing sectors.”

As someone involved in project financing and development, what are some of the methods you think should be more of a focus for alleviating risk and filling the investment gap?

Reach out and let me know.

Yusuf Laties
Content Producer
Smart Energy International

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