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European Climate Infrastructure and Environment Executive Agency

EU Renewable Energy Financing Mechanism - How does it work?

The EU Renewable Energy Financing Mechanism has a cooperative nature: it allows all countries that take part in it and to share the statistical benefits of the produced renewable energy.

The contributing country voluntarily pays into the mechanism. This payment is then linked to new renewable energy projects built on the territory of the hosting country through competitive tenders. Both contributors and hosts can define their preferred technologies and other project characteristics, but there is no direct link or negotiation between contributing and hosting countries. The process is facilitated by the European Commission. As a result of the tender, new renewable energy projects are set up. The statistics associated with the renewable energy that is produced from a financed project in a host country  are counted mostly to the contributing country’s  own national renewable energy target. The remaining part of the statistics counts for the host country.

Benefits

The benefits of taking part in EU Renewable Energy Financing Mechanism depend on the role of the involved countries:

Contributing countries:

  • get statistical benefits from the renewable energy projects, located where it is more cost effective – land-locked countries can for example benefit from offshore renewable projects
  • ensure compliance with the national contribution towards the EU renewable energy target and the trajectory towards that contribution Article 3 of the Renewable Energy Directive and Article 4(a)(2) of the Regulation on the Governance of the Energy Union;
  • contribute to the clean energy transition of the EU as a whole, get visibility for investment in local renewable energy projects outside of their territory.

Host countries:

  • benefit from additional local investment in renewable energy projects without burden to the national budget;
  • enjoy the benefits in terms of local employment, lower greenhouse gas emissions, improved air quality, modernisation of the energy system and reduced dependency on imports;
  • retain part of the statistical benefits from the renewable energy project.

Project developers and energy producers:

  • get an opportunity to receive a grant funding and national political support to develop their project (investment and operating support, subject to attainment of performance targets);
  • subject to the hosting EU country and the specific call rules, energy producers may retain the guarantees of origin for the energy produced from the renewable energy installation.

Financial support

The financial contributions that enter the financing mechanism scheme will be distributed by the European Commission through competitive tenders for grants.

The grants cover either the installation of a renewable energy production facility with certain capacity (investment support), or the actual production of renewable energy (operating support). The size of the grant is determined by the outcome of the tender procedure, where only the most competitive projects will be selected and receive support, corresponding to their bid in the tender.

The mechanism can support all technologies that are referred to as renewable energy pursuant to the Renewables Directive (EU) 2018/2001 and are applicable across the electricity, heating and cooling and transport sector.