Rethinking local financing for the energy transition

On 11 March 2025, Prospect+ held its final event, “Rethinking Funding at the Local Level: Moving Beyond Subsidies to Fast-Track the Energy Transition”, in Brussels, moderated by Senior Project Officer Diana Bosfy from FEDARENE.

The central message of the event was clear: public grants and subsidies alone will not be sufficient to deliver the energy transition. Giulia Pizzini, Senior Energy Expert at IEECP, emphasised, “Around 80% of this money needs to come from private capital. It cannot be coming from grants and subsidies.” Cities are under increasing pressure to find alternative financial mechanisms that ensure both progress and long-term sustainability.

Despite their key role in climate action, many municipalities face a major financing gap. In Poland, for example, the estimated cost of the energy transition stands at €350 billion, while available EU funding totals just €47 billion. As Andrzej Urbanik from the European Commission’s DG REGIO pointed out, “The needs are seven times higher than the resources available.”

The need for private capital in the energy transition

Some cities are already experimenting with new models. The Hague, for instance, uses a revolving fund to invest in geothermal heating. However, scaling such initiatives remains difficult. A common issue is the lack of financial expertise at the local level. In smaller municipalities, staff often juggle multiple responsibilities, leaving little room to explore complex financing tools.

Regulatory uncertainty further complicates matters. As Sylwia Słomiak from Eurocities noted, while Energy Performance Contracts work well in some countries, they remain out of reach in others due to national legal frameworks. In Slovenia, local uptake only improved after national ministries issued clear guidelines. “We started with very small projects… After showing the first benefits, we went bigger,” explained Vlasta Krmelj, Mayor of Selnica ob Dravi.

The importance of peer learning and expert support

Support and knowledge-sharing are essential to overcoming these challenges. Peer-learning platforms like Prospect+ allow cities to exchange real-life experiences and build confidence in using innovative financial instruments. Pierluca Merola from the European Commission’s DG ENER underlined the importance of expert assistance, stating, “We cannot expect each public authority to develop the competences to manage an EPC contract or to do the financial engineering that is behind that.”

At the European level, cities call for simplified access to financing, streamlined procedures, and better alignment between local needs and EU programmes. “We have a lot of competence, but we have no direct access to the negotiating table on the European level,” said Andries Gryffroy from the European Committee of the Regions.

As the Prospect+ project shows, with the right tools, guidance, and collaboration, cities can move beyond reliance on subsidies and lead the way in Europe’s energy transition.

Want to learn more? Check out the full article on Eurocities.