European City Facility - European cities as key innovation hubs to unlock finance for energy efficiency

Topic description

Specific Challenge:

Mobilising investment in energy efficiency and renewables is key for Europe's energy transition. The European Commission proposed the Smart Financing for Smart Buildings (SFSB) initiative in the recently published Clean Energy for All Europeans winter package.

For the SFSB to succeed it is essential to boost project aggregation and build a substantial pipeline of energy efficiency investment projects across Europe. Cities and communities are the place where economic, social and environmental transformation actually happens. Cities and communities play a key role in aggregating smaller projects into sizable packages and in mobilising the significant amount of finance needed for the energy transition.

However, despite a tremendous potential, too few cities and communities in Europe succeed in developing and scaling up investment packages. A high degree of organisational, technical and financial innovation is needed to reach significant scale. A key gap is the lack of capacity of public authorities, especially of small and medium-sized municipalities to transform their overall long-term strategies, e.g. Sustainable Energy Action Plans (SEAPs) or similar, into credible investment concepts. Public authorities have limited resources, in particular, to access financial, technical and legal expertise needed to collect additional data, develop an investment programme of scale (e.g. pooling projects and/or bundling with neighbouring constituencies) and design finance strategies which demonstrate sufficient maturity to enable access to different finance routes, i.e. to develop their 'investment concept'.

These concepts would allow a large number of cities and communities to start the process for mobilising the investments in sustainable energy. When relevant, such concepts could be combined with other EU financing streams and services to trigger the expected investment (e.g. EFSI^[1], ESIF^[2], PDA^[3], National Investment Platforms).

Proposals are expected to set up and run a 'European City Facility' which offers financial support and services to cities and municipalities or their groupings:

• The European City Facility should offer financial support to develop innovative investment concepts within a limited period of time, covering, inter-alia: a clear identification of the potential project pipeline, legal analysis, governance analysis, a description of how the investments will be financed and a design of the process to launch the investments.
• Proposals should foresee to provide support to third parties ('support scheme') as described in part K of the General Annexes of the Work Programme. At least 80% of the budget should directly benefit cities, municipalities or their groupings.
• Proposers should demonstrate the ability to run a support scheme at large scale in accordance with Horizon 2020 standards and that they are able to select the most cost-efficient and appropriate city and community applications taking account, inter alia, the scale of the potential investment and the number of inhabitants covered.
• Proposers should be deeply rooted in the ecosystems of municipal sustainable energy planning and the challenge of finance of energy efficiency. Proposers should demonstrate that they are able to mobilise a critical mass of cities/municipalities or their groupings and have a sound and inclusive outreach strategy to cities and communities across Europe.
• Proposals should foresee services to underpin European added value and earmark appropriate resources (maximum 10% of the requested EU contribution) for common actions that will underpin European added value.
• In order to qualify for support through the European City Facility, cities and communities or their groupings should provide proof of political commitment, demonstrate, additionally to existing planning processes and resources, a minimum population covered (single or in groupings of municipalities) and an ambitious scale of potential investment and level of energy savings based on politically approved SEAPs, SECAPs^[4] or plans of similar ambition, describe the investment sectors targeted, the type of financial solutions envisaged, the governance to develop the investment concept, and include a plan for long-term capacity building within the public administration, a plan on how they will engage with representatives of the key segments and citizens and a commitment for monitoring for 2 years.

The Commission considers that proposals requesting a contribution from the EU of around EUR 16 million would allow this specific challenge to be addressed appropriately. Nonetheless, this does not preclude submission and selection of proposals requesting other amounts.

Proposals are expected to demonstrate the impacts listed below, using quantified indicators and targets wherever possible:

• Demonstration and documentation of increased leveraging of finance into energy efficiency investments by public authorities;
• Overall, the action should trigger for every million Euro of Horizon 2020 support sustainable energy investments worth at least EUR 20 million;
• Number of investment concepts delivered, and number of concepts that turned into tangible investments after the provided support;
• Number of public authority staff with increased capacity for developing investible energy efficiency projects;
• Innovation uptake by potential replicators;
• Primary energy savings, renewable energy production and investments in sustainable energy triggered by participating public authorities after the support of the action (respectively in GWh/year and in million EUR of investments).

Additional positive effects can be quantified and reported when relevant and wherever possible:

• Reduction of greenhouse gases emissions (in tCO₂-eq/year) and/or air pollutants (in kg/year) triggered by the project.

[1]European Fund for Strategic Investments

[2]European Structural and Investment Funds

[3]Project Development Assistance, e.g. ELENA-EIB, EASME PDA

[4]Sustainable Energy and Climate Action Plan