More than funding: how innovative financing empowers local and regional authorities

At a recent Committee of Regions ENVE Stakeholder Consultation, Diana Prsancova, representing FEDARENE, spoke about the role of local and regional authorities in mobilising public and private resources to ensure an effective follow-up on the Clean Transition Dialogues. The discussion highlighted the importance of energy agencies and the key role they play in de-risking investments and ensuring that investment projects meet local needs.

Public Funds Alone Aren’t Enough

The transition to climate neutrality by 2050 requires substantial investment. By 2030, an estimated €1.85 billion investment gap in energy efficiency alone underscores the need to move beyond public funding. While mobilising private investment is crucial, local and regional authorities often continue to rely on grants and subsidies. Why?

Authorities face several barriers: a lack of awareness about financing options, limited expertise in handling them, legal and administrative complexities, a shortage of skilled personnel, and hesitation in adopting alternative financing models. These obstacles hinder progress, making it essential to develop strategies that build confidence and competence in innovative financing.

Energy Agencies as Enablers

This is where local and regional energy agencies step in. As independent, non-profit organisations with a public mandate, energy agencies bridge the gap between policy ambition and practical implementation. They provide essential technical expertise, tailor financing models to local needs, and act as intermediaries to de-risk investments. Their deep-rooted local presence fosters trust between public authorities and private investors, facilitating much-needed financial partnerships.

Public-Private Partnerships (PPPs) serve as a prime example. These agreements span decades, involve complex contracts, and demand meticulous planning. Energy agencies play an essential role in ensuring their success. Take the Energy and Climate Agency of Podravje (ENERGAP) in Slovenia, which has led Energy Performance Contracting (EPC) projects, attracting €350,000 in investment for streetlighting renovations. Another successful approach involves integrating energy efficiency services with additional revenue streams, as demonstrated by the SmartEPC project led by the North-West Croatia Regional Energy and Climate Agency (REGEA).

Peer-Learning Initiatives and Capacity Building

The transition to climate neutrality requires not just financing but also robust governance, capacity-building, and a fundamental shift in mindset. Peer-learning initiatives such as ManagEnergy, PROSPECT+, and the European City Facility have proven invaluable in this regard.

ManagEnergy, for example, has empowered energy agencies to stimulate over €750 million in investments through knowledge transfer and technical training. The energy agency KSSENA from Slovenia leveraged insights from ManagEnergy Masterclasses and Expert Missions to develop an energy renovation program using EPC and the ELENA facility, mobilizing €4 million for deep renovation of public buildings. Similarly, in Spain, the Extremadura Energy Agency coordinated the HousEEnvest project, addressing financing gaps in residential building renovations and establishing a regional guarantee fund that attracted €35 million in investment.

At the 2024 World Sustainable Energy Days in Wels, Austria, ManagEnergy and PROSPECT+ showcased real-life best practices in innovative financing, covering energy communities, revolving funds, and intracting mechanisms. These initiatives are instrumental in equipping public authorities with the tools to unlock private investments.

Real-World Impact Across Europe

Across Europe, energy agencies are delivering tangible results:

• City of Zagreb (with REGEA’s support) launched a large-scale public building retrofit programme, leveraging over €150 million through the LIFE CROSS project and ELENA’s ZA-GREEN initiative. The city is now negotiating a European Investment Bank (EIB) Framework Loan exceeding €170 million to further its sustainability efforts.
• Auvergne-Rhône-Alpes Energy and Environment Agency in France secured €30 million for eco-mobility solutions in remote communities through energy-saving certificates, aligning financial incentives with social inclusion.
• One-Stop Shops (OSS), such as the Porto Energy Hub with a support of Porto Energy Agency and Ireland’s SuperHomes, are streamlining the retrofit process by facilitating private investment and citizen engagement, making sustainable home renovations more accessible.

Scaling Up for a Sustainable Future

The success stories from energy agencies across Europe highlight a clear path forward: with the right support, local and regional authorities can leverage innovative financing to drive the clean energy transition. However, achieving large-scale impact requires continued investment in capacity-building programmes and a stronger recognition of the critical role energy agencies play in mobilising investment.

We have the tools, the expertise, and the success stories to inspire action. Now, we must scale up our efforts to meet our climate ambitions. The future of our energy transition depends on it.