European Green Deal: €4.11 billion from the Modernisation Fund to accelerate the clean energy transition in 8 Member States

This article is brought to you in association with the European Commission.

In its second year of operation, the Modernisation Fund has disbursed a total of €4.11 billion in support of 61 projects in eight beneficiary countries. These projects will help modernise energy systems, reduce greenhouse gas emissions in energy, industry, transport and agriculture, and improve energy efficiency. Supporting these investments will help those Member States to meet their 2030 climate and energy targets and accelerate the EU’s green transition.

Disbursements were made this year to Croatia (€119.8 million), Czechia (€1.34 billion), Estonia (€62.4 million), Hungary (€74.3 million), Lithuania (€85 million), Poland (€643.2 million), Romania (€1.39 billion), and Slovakia (€399.5 million). In June, €2.4 billion was already disbursed to support 45 investment proposals, and this is now complemented by a €1.71 billion disbursement today to back 16 more investment proposals.

This year, the 61 investment proposals selected under the Modernisation Fund focus on electricity generation from renewables, modernisation of energy networks and energy efficiency in the energy sector, in industry, in buildings, and in transport, and the replacement of coal generation with lower carbon intensity fuel. Examples of the proposals that have received funding are:

• the production of electricity from renewable energy sources and battery storage to support electricity grid operation in Croatia;
• the modernisation of public lighting systems within municipalities, conversion of coal to biomass and gas in district heating and ETS installations, and increase of energy efficiency in Czechia;
• low-emission energy-efficient public transport in Estonia;
• optimisation, digitalisation and automation of manufacturing processes to reduce electricity consumption and material use in Hungary;
• renovation of public buildings, increasing energy efficiency and development of renewable hydrogen production capacity in Lithuania;
• building heating plants based on renewable energy sources and improvement of energy efficiency in industry in Poland;
• building 8 photovoltaic parks and two combined cycle gas turbine plants, replacing lignite with renewables and gas for power generation, and modernisation of electricity networks in Romania;
• the rehabilitation and extension of district heating and cooling networks, and decarbonisation projects in the industrial sector in Slovakia.

The deadline for beneficiary Member States to submit investment proposals for potential Modernisation Fund support in the next disbursement cycle is 19 January 2023 for non-priority proposals, and 16 February 2023 for priority proposals.

Background

Funded by revenues from the auction of emission allowances from the EU’s Emissions Trading System, the Modernisation Fund aims to support ten EU countries with lower incomes in their transition to climate neutrality. The beneficiary countries are Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Slovakia.

Today’s disbursements continue the important spending from the Modernisation Fund as per previous investment cycles. In the provisional deal reached on the strengthened EU Emissions Trading System on 18 December the Modernisation Fund will increase its size, providing financial assistance to three additional Member States with their transition (Portugal, Greece and Slovenia).

The Modernisation Fund supports investments in the generation and use of energy from renewable sources, energy efficiency, energy storage, modernisation of energy networks, including district heating, pipelines and grids, and just transition in carbon-dependent regions.

In 2021, the Fund made available €898.43 million to eight beneficiary countries. The Fund complements other European instruments such as cohesion policy and the Just Transition Fund. It mobilises significant resources, which can help  beneficiary Member States support investments in line with the REPowerEU Plan and Fit For 55 package. The Fund operates under the responsibility of its beneficiary countries in close cooperation with the European Commission and the European Investment Bank.

The EIB’s investment proposal assessment activities in the Modernisation Fund are ring-fenced from the standard EIB financing and technical assistance operations to avoid any potential conflict of interest in carrying out the activities mandated in accordance with the ETS Directive and the Commission Implementing Regulation of 9 July 2020.

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