European Green Deal: New financing mechanism to boost renewable energy – European Commission

The European Commission has published today the rules for a new EU Renewable Energy Financing Mechanism, to apply from the start of 2021. This Mechanism will make it easier for Member States to work together to finance and deploy renewable energy projects – either as a host or as a contributing country. The energy generated will count towards the renewable energy targets of all participating countries and feed into the European Green Deal ambition of reaching carbon neutrality by 2050.

Commissioner for Energy, Kadri Simson, said:

To reduce Europe’s greenhouse gas emissions by at least by 55% by 2030, we need to significantly increase the share of renewable energy. This mechanism provides an additional tool to facilitate investment in clean energy projects. It will encourage cooperation between Member States and give a practical boost to our green recovery efforts in the coming years. It can help stimulate Europe’s economies by getting large-scale projects off the ground and by supporting local SMEs and creating jobs.

As foreseen under the Energy Union Governance Regulation, this Mechanism will be managed by the Commission, bringing together investors and project developers through regular public tenders. It enables “contributing Member States” to pay voluntary financial contributions into the scheme, which will be used for renewable energy projects in interested Member States (“host Member States”).

“Contributing” Member States invest in renewable energy projects in another country. This allows them to support projects that are more cost-efficient than deploying the same technology domestically, and invest in technologies which are not practically possible at home – for example offshore wind parks for land-locked Member States, or solar energy for countries with less hours of sun.

For “Host” Member States, the collectively-financed renewable energy projects are then deployed on their territory. This benefits them in terms of national energy supply, modernisation of the energy system, local investment and jobs, and improved air quality and energy security.

The renewable energy generated will count towards the renewable energy targets for both the host and the contributing Member States – with the split based on the share of investment. It offers an opportunity for Member States that are struggling to meet their climate targets to catch up, and to contribute to meeting the overall EU targets. This Mechanism also has lower transaction costs compared to other existing cooperation mechanisms.


Member States are already committed to meeting national binding targets for the share of their energy coming from renewables by 2020. Through their national energy and climate plans, they also commit to meeting a voluntary share of renewable energy by 2030, and, between 2020 and 2030, to follow a national trajectory leading up to that point.

Currently, Member States primarily meet this figure based on the amount of renewables deployed on their territory through national measures. However, there is also an option for using cooperation mechanisms with other Member States, such as statistical transfers, joint projects and joint support schemes (as set up under the revised Renewable Energy Directive).

This new mechanism enables “contributing Member States” to pay voluntary financial contributions into the scheme, which will be used to tender support for new renewable energy projects in all Member States willing to host such projects (“hosting Member States”).

By Maria Ordonez
Maria Ordonez Profile Picture