Smart Energy Finances: EIB’s €30 billion equity supercharge for REPowerEU
Leading this week’s edition of Smart Energy Finances is a staggering equity decision from the EIB Group.
They will pour into REPowerEU €30 billion ($29.9 billion) in loans and equity, which is expected to mobilise up to €115 billion ($114.6 billion) by 2027 in renewables, energy efficiency, grids and storage, EV charging infrastructure, and breakthrough technologies, such as low-carbon hydrogen.
Also on the radar are findings from the World Bank’s latest Commodity Markets Outlook, which forecasts that energy prices will drop by 11% in 2023, and an interesting strategic investment from Volvo Cars into an APAC virtual power plant startup.
EIB Group supercharges REPowerEu with €30bn in loans and equity financing
The European Investment Bank Group (EIB Group) will support the REPowerEU Plan with an additional €30 billion ($29.9 billion) in loans and equity financing over the next five years.
The package of new, targeted financing approved by the EIB’s board of directors is expected to mobilise up to €115 billion ($114.6 billion) of new investment by 2027.
The additional funds from the EIB Group (European Investment Bank, European Investment Fund) will be directed to renewables, energy efficiency, grids and storage, electric-vehicle (EV) charging infrastructure, and breakthrough technologies, such as low-carbon hydrogen.
In addition to raising expected energy-lending volumes for the next five years to unprecedented levels, the EIB’s board of directors also adopted a series of technical and policy measures aimed at accelerating the pace and maximising the impact of the new investment.
Key elements include higher upfront disbursements, longer tenors that will make EIB loans to the energy sector more attractive and a co-financing ceiling of up to 75% for projects contributing to the REPowerEU objectives, up from the typical 50% EIB limit per project.
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The board of directors has also introduced a temporary and exceptional extension of the exemptions to the EIB Group’s Paris Alignment for Counterparties (PATH) framework. The existing exemption under the EIB Group’s PATH framework for projects with high innovative content will be extended to include all renewable energy projects and EV charging infrastructure inside the EU.
This will allow EIB Group financing of a greater number of clean energy projects with a wider range of clients and utility companies contributing to the EU`s climate objectives and energy security. The extension will run until 2027, subject to a Climate Bank Roadmap review foreseen in 2025. Over this period the EIB will continue to engage with all its clients to support them in developing decarbonisation plans.
Put together, the package of additional financing, policy and technical flexibility, as well as dedicated support for high-risk investments, like pilot facilities, is hoped to help supercharge Europe’s transition to a more sustainable and secure future.
World Bank: Energy prices to drop by 11% in 2023
According to the World Bank’s latest Commodity Markets Outlook global energy prices are forecasted to drop by 11% in 2023.
This will result from a sharp global growth slowdown and concerns about an impending global recession. Commodity prices are expected to ease in the next two years, but they will remain considerably above their average over the past five.
Specifically, energy prices are expected to fall by 11% in 2023 and 12% in 2024. The outlook, however, is subject to numerous risks both in the short- and medium-term.
Energy markets face an array of supply concerns as worries about the availability of energy during the upcoming winter intensify in Europe.
Prices will likely remain volatile as the energy transition unfolds and demand moves from fossil fuels to renewables, which will benefit some metal producers.
Concerns about energy shortages, particularly in Europe, will require careful policy coordination among key importers to ensure the burden of high energy prices, or future energy disruptions, is equitably shared.
Recent government policy announcements to increase renewable installation and reduce overall energy consumption may feed through into lower energy prices, but this will take time, and a worsening supply outlook in the winter of 2023 is possible.
Furthermore, the current high inflation and high interest rate environment will make financing investment in new energy production (both fossil fuels and renewables) more challenging, even if recent declines in metal prices provide some reduction in project costs.
Volvo’s APAC investment into a VPP start-up
Volvo Cars has made a strategic investment in Shanghai Dianxiang Info Tech Company (PowerShare), an AI (Artificial Intelligence) and cloud-based energy management start-up, through the Volvo Cars Tech Fund, its venture capital arm.
PowerShare is a digital energy and intelligent power management company with operations in several Asian countries. They provide cloud-based energy management solutions, with over 100 AI algorithms in the field of battery performance, Virtual Power Plant (VPP) and smart charging technology.
This is the fund’s first investment in an APAC-based company since it was established in 2018 to invest in high-potential technology start-ups around the globe.
One of PowerShare’s core offerings is its VPP cloud solution, which can help foster more sustainable energy solutions.
Based on AI, IoT (Internet of Things) and big data, VPP’s can carry out electricity trading to match energy production with energy demand from the grid. The system can overcome challenges caused by extreme weather and other external factors that disrupt green energy power supplies,
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The Volvo Cars Tech Fund focuses its investments on technology trends that are transforming the auto industry, such as AI, electrification, autonomous driving, sustainability and digital commerce.
PowerShare has developed a range of advanced technologies that can be useful to Volvo Cars’ innovation and production lifecycles and Volvo Cars plan to explore VPP use cases with PowerShare to utilise the bi-directional charging function of its next-generation vehicles.
The announcement from Volvo came nearly two weeks after the launch of their first bidirectional EV, signalling their entry into advanced grid tech through their range of EVs and investment strategies.
Volvo has stated their belief that PowerShare’s VPP and battery technologies will help pave the way for one of the industry’s most ambitious electrification plans.
But what do you think?
For this and more news on the finance and investment scene of our energy transition make sure to follow our weekly column, Smart Energy Finance.
Cheers,
Yusuf Latief
Content Producer, Smart Energy International
