2.1. European Funds for Energy Efficiency
The analysis of the evolution of funding schemes dedicated to the development of energy efficiency and renewable energy projects has recently become a topic of interest for economists [
25,
26,
27,
28]. The analysis of the development of different subsidies and assistance programs for developing energy-related projects in Europe also have a national nature: some examples of country-based analysis can be found in [
29,
30], where the Spanish perspective is presented along with an analysis of the impact of such measures on the country.
The analysis of specific countries would allow further features of the evolution of such assistance programs (e.g., temporality, authority, and tension in financing pathways) to be identified, as highlighted in [
31].
In this paper, the analysis of European funds for energy efficiency is based on information and data reported by official EU websites dedicated to project funding. European funding opportunities are described, referring to the framework of the European energy policy. Data regarding specific projects’ typologies—such as applied research projects financed to enhance European energy efficiency in the urban areas—were collected and re-worked to highlight—through simple descriptive statistics—the main results obtained by the European funding actions.
Descriptive analysis of the results of the various financing programs, however, risks giving an aseptic result that precludes the possibility of fully understanding what it means for a beneficiary to obtain the disbursement of funds for the realization of the project. For this reason, this article delves into the analysis with a case study on a technical assistance project.
2.1.1. Funding Opportunities for Energy Efficiency Projects: An Overview
As briefly illustrated in the Introduction, the European Union, in its targets for future development, aimed at reaching high levels of energy efficiency and improving the use of renewable energies: efforts in these directions are taken together with efforts towards better governance and the “revolution” of energy markets, having at the center of the system active consumers. The process should also lead to job creation and to an increase in Europe’s competitiveness in relevant fields [
6].
To put this strategy in place, the Union established different funding opportunities to which candidates from member states (but not restricted to members) could apply: it is worth pointing out that in the field of energy the Union has begun to work since the very beginning of its constitution, in the forms of association that preceded the actual European Union. However, since the focus of the article concerns energy efficiency in an urban context, we can reduce the analysis to the last 15 years of planning, during which this need has received more attention.
Possible funding opportunities for energy efficiency can be found under the following funds:
the Cohesion Fund, which supports the realization of projects in the trans-European transport networks and in the field of the environment, where projects that support energy efficiency and use of renewable energy are financed. Referring to the urban environment, it can be relevant for its contribution to inter-modality and to strengthening public transport. After the 2014–2020 period, the Fund was renewed for the 2020–2027 period and it has maintained the focus on mobility and related infrastructures [
32];
the Connecting Europe Facility, linked to the above-mentioned Cohesion Fund, interests the urban environment since it finances infrastructures for transport, energy and telecommunications. Even if the project size is expected to be much larger than those developed at a local level, their realization directly impacts on urban performances. The facility can also provide guarantees and project bonds, trying to foster the use of private funds for the development of the projects. The program started in 2014, and financed both studies and works [
33];
European Regional Development Fund—ERDF deserves to be mentioned since it is explicitly focused on the local development of EU areas (regions, in this specific case), thus including small size projects to be developed in the cities. Again, among key priority areas of the Fund we can find the “development of a low carbon economy” [
34];
Currently, the main source to finance research and innovation projects is Horizon Europe, which followed the previous Horizon 2020 program. Horizons came after the development of 7 Framework programs (begun in 1984). Projects developed using funds dedicated to applied research are summarized in the following paragraph [
35].
The development of energy efficiency benefits from different mechanisms designed by the EU. The initiatives are often interconnected and partially overlapping. Concepts synthetized in the “Just Transition” principle [
36] and in the “Smart Finance for Smart Buildings Initiatives” [
37] can find practical realizations through different funding strategies.
The concept of “Just Transition” is used to guarantee that the Transition towards a carbon neutral economy and society will be put in place without creating disparities among citizens, workers and sectors. To ensure this fair result, for the time span 2021–2027, the mechanism will be financed through three different funding schemes: a Just Transition Fund that is expected to have impacts on SMEs; a dedicated Just Transition scheme under InvestEU to foster private investments in the sustainable projects; a public sector loan facility with the European Investment Bank backed by the EU budget, which is expected to have the most relevant impact if we consider the urban ecosystem, as it will be dedicated to the realization of district heating networks and buildings renovation [
38].
The EU is committed to realizing a more effective use of public funds through dedicated chapters included in the European Structural and Investment Funds (ESIF) ([
39]) and the InvestEU fund ([
40]) (that takes over the European Fund for Strategic Investments, ended in December 2020).
Public funds are not sufficient to realize the Energy Transition process, and that’s why private funds shall be called into the market, especially for a wide building renovation action. The strategy of the European Union can be synthetized by the “Smart Finance for Smart Buildings” initiatives. The initiative foresees the use of financial instruments to mobilize investments in the sector.
The European Investment Bank (EIB, [
41]) is one of the most relevant entities for the for operational management of loans. For example, to realize the principles of the smart finance for smart buildings initiatives the Commission develops with the EIB flexible models for guarantees that will help the renovation of buildings by means of commercial banks funding.
The EIB activities in this sense are wide: aiming at reviewing most relevant experiences for local development, it is worth looking at the European Energy Efficiency Fund (EEEF), developed under the European Energy Programme for Recovery ([
42]). The EEEF is an initiative that promotes public-private partnerships for the realization of small-scale energy efficiency and sustainable mobility investments.
Currently (Last access: 27 February 2022) the EEEF registers 15 active projects (2 projects already reached maturity) in nine of the member states: comparing the website infographics and the 2020 annual report [
43] there is a difference in the number of projects, probably due to the suspension of one of the formerly active projects (“Smart Hospitals and Universities”). Investments were realized by cooperating with 43 public authorities since the fund’s inception. Cumulatively, 150 million euros have been invested by the fund, of which 140 are still committed: the presence of the EEEF in the projects may have different forms, e.g., equity or senior debt.
Table 1 reports a synthesis of EEEF projects, and is based on the information presented in the latest annual report. Projects typologies, total investment amount and EEEF participation quotas vary widely from one project to the other, making it difficult to make comparisons or to define a specific strategy of the fund.
2.1.2. Two Examples of Technical Assistance Funds
Providing technical assistance to the realization of energy efficiency projects is another way to foster investment in the sector. Among technical assistance activities, we can include: realization of energy audits; feasibility studies; preliminary studies in general; financial, administrative, legal, engineering consultancy for the project design; support to project management, etc. The EIB manages two relevant technical assistance funds: the EEEF Technical Assistance Facility and the ELENA Fund.
In late 2016 the EEEF opened its first technical assistance call. The aim of the facility is to speed up the realization of energy efficiency projects developed by local public authorities. In [
43], it is estimated that the presence of the facility reduces the time of implementation from 4.5 years to 1.5–2 years.
Table 2 reports the technical assistance projects provided by the EEEF in the years 2017–2019 (first call published at the end of 2016). The technical assistance activity is far livelier than the facilitated funding activity: faster processes and easier
ex ante evaluations, together with lower commitment can make the difference with the funding activity.
Another relevant example of technical assistance fund is the European Local Energy Assistance Fund. The European Local Energy Assistance Fund was established in 2009 to finance the technical expenditure connected with the preparation of energy efficiency investments. Among the expenditures financed by ELENA, we can find energy audits, project management, consultants for tender preparation, etc. ELENA funds are assigned on the basis of the “first come, first served” approach, i.e., projects responding to ELENA parameters are financed following the application order. Investments designed and realized due to the ELENA support shall be higher than a certain threshold (at the time of writing, 30 million euro): the contribution for technical expenditure cannot exceed a certain quota of the investment amount to keep a minimum “leverage effect” of the ELENA contribution with respect to the project.
ELENA has undergone some minor changes over the years, especially regarding the minimum investment size and investment typologies. Initially, the fund made no distinctions among energy efficiency projects: the first project benefitting from ELENA contribution was related to the realization of a smart grid to serve the Greek islands; in the first years of activity of the fund we can recognize the prevalence of projects regarding energy efficiency of street lighting and public lighting measures in general, together with energy efficiency in public buildings; over time, interest in sustainable mobility has increased and a specific chapter has been opened for these projects. At the time of writing, the ELENA fund distinguishes between three different projects’ typologies:
Energy efficiency, where we can find “traditional” ELENA projects (renovation of public buildings, lighting, district heating, etc.);
Sustainable residential, dedicated to private individuals and homeowner associations for renovations and renewable energy projects in residential buildings (including social housing), which is an interesting novelty for the fund and might allow for a wider set of buildings;
Urban transport and mobility.
The fund was particularly active, and since it has a relatively “long” history it is possible to appreciate the presence of concluded projects. One of the negative aspects of the information in the EIB database is that it is not possible to compare the planned projects with the projects actually carried out: for this purpose, this paper presents a specific case study on one of the completed projects. Ongoing projects and completed projects are reported in
Appendix A and
Appendix B (
Table A1 and
Table A2), respectively.
2.1.3. Funding Opportunities for Projects with Innovation and Research Scopes
The source used in the analysis of the research projects is the CORDIS database [
44]. The website gives the opportunity to search for projects and results awarded with European funds under different programs. Considering the scope of this work, the query used to find relevant projects includes the word “urban” and the expression “energy efficiency”.
The first search provides 2489 results coming from the categories “projects”, “projects’ results in brief”, “Synthesis”, “Projects’ final results” and “Projects’ publications”. To reduce double counting, and to focus the analysis only on the projects having as a main objective the increase of energy efficiency in the urban environment, the query was re-run only on the categories “projects”, “projects’ results in brief”: the new list includes 416 records that are more representative of the research effort in the field.
Projects regarding “energy efficiency” linked to the concept of “urban” are 332, financed under different calls and programs—also depending on the time of funding (
Table 3 provides a summary of the 332 projects).
Energy efficiency projects were firstly funded in early 1980 to explore the use of alternative energy sources. The project funded by ENG-ENALT 2C detected through the research in the CORDIS database is “Performance follow-up and user information service in a low-energy village” and was coordinated by Novelerg (France). The project foresaw the construction of 137 one-family houses, by integrating energy-saving concepts in urbanization. The scope of the project was to analyze possible applications for pursuing the energy efficiency targets set at the time. The project also highlighted the relevance of providing information to users to reach sustainable results.
SAVE I and SAVE II programs were specifically designed to increase energy efficiency in different sectors, with SAVE II introducing more efforts on efficiency in the urban environment and in the use of electricity. Similarly, THERMIE promoted innovative energy technologies by financing innovatory and dissemination projects.
Different grant origins might also reveal a project’s approach to the problem: CIP projects, for example, are mainly focused on the use of ICT to improve efficiency in different fields, such as mobility, freight, smart grids, citizens involvement and networks themselves.
Recent programs (the seventh Framework Program and Horizon 2020 in particular) increased the financing of energy efficiency research projects, transponding EU policy indications that became stronger in the promotion of the energy transition process. Programs financed projects under different topics (energy, environment, mobility, ICT, people, etc.), which can be found with a similar pattern in the current Horizon Europe program (2021–2027).
In the next few years, Horizon Europe will collect the vast majority of funding opportunities dedicated to applied research in all the relevant topics identified by the European Union. Progress in energy efficiency, as one of the topics related to the energy transition process, will be developed thanks to this program.
2.2. The European Local Energy Assistance (ELENA) Fund: A Case Study
To better understand the functioning of the ELENA Fund, in this paper I include the results of a case study analysis performed between September 2019 and February 2020 (In February 2020, I was carrying out interviews with relevant actors involved in the development of the project: this activity was interrupted due to the COVID-19 pandemic. The results emerging from the interviews, however, gave a complete and coherent framework of the development of the project).
The methodology followed in this part of the work refers to the single case study analysis [
44]. A case-study approach can be used for explorative research aiming at generating literature and not testing it. Using a grounded theory methodology [
45,
46], it is possible to develop theoretical categories from raw data.
Data used to elaborate the case study come from different sources, and in particular:
Institutional EU websites;
Institutional websites of the actors and stakeholders involved in the project analyzed as the case study;
Web articles and media publications related to the project;
Brochures, project presentations;
Tenders’ documentation (References for some of the materials cannot be made explicit, in order to keep the case study anonymous);
Semi-structured interviews with relevant actors involved in the project (managers, consultants, politicians).
Interviews are anonymous, as requested by the methodology, and this guarantees the anonymity of the project itself.
Table 4 summarizes the interviews carried out for the analysis.
To get access to ELENA funds, applicants present their proposal to the European Investment Bank (EIB), which is the institution in charge of managing the fund. Following the application form provided by the EIB itself, the applicant describes the investment he/she will put in place: project typology (public lighting renovation, green transports, buildings renovation, green energy production, etc.), expected reduction in greenhouse gases, expected investment amount, total amount of technical expenditure and contribution request.
When the project analyzed as a case study was submitted to the fund, ELENA covered up to 90% of the technical expenditure required to implement the project: the leverage (investment over technical expenditure) had to be at least 20%.
The EIB assigns the fund after an arranged revision process, which helps to align the content of the proposal to the fund scope (Due to past professional experiences, the author has direct experience of the ELENA application phase: on the contrary, the author has no direct experience of the development of the technical assistance itself).
After the technical phase has finished, the EIB publishes a summary of the project containing the indication of the use of ELENA funding, essential elements of the investment program and lessons learnt.
The case study project analyzed in this work was developed in the northeastern part of Italy. At the time of interviews, the project was still ongoing. The application for funding was made by a private company that followed a specific assignment received by a local foundation. The case study was partially described also in [
6], with a different research purpose.
The application process for the specific project lasted for about 18 months, as reported by the consultants interviewed in late 2019: in the very first phase, a “roadshow” to invite local municipalities was carried out.
Investment targets were defined following two main directives: the first one regarded the territory on which the final investment was to be developed, i.e., the territory on which the promoting foundation was operating; the second directive concerned investment typology, i.e., public lighting and building renovation. Investment typology was defined following lessons learnt during other ELENA experiences, and especially on the very first ELENA developed in Italy (qualified as pilot project). The consultants had good knowledge of the Italian pilot as they were selected to carry out part of the technical assistance for the financial aspects. Considering the time of submission and comparing it with the subsequent evolution of the fund, it is useful to remember that the ELENA fund was not yet divided into three chapters: there was the single category for energy efficiency project.
After the roadshows, and after having collected major adhesions to the projects, the promoters of the proposal decided to divide the public bodies involved in the elaboration of the proposal into two groups:
The four main public bodies (two municipalities and two provinces) formed the governance of the initiative. It is worth mentioning that the project was developed before the reform that changed the role of Italian provinces in 2014: during the development, provinces still had a quite relevant local role;
The other group of participants was, instead, made up by small municipalities scattered on the territory. For reasons of efficiency, they were asked to delegate the four major entities to develop the proposal. The number of municipalities involved in the program was high (about 40) with a limited dimension.
After the roadshow and the municipality engagement process, the project proposal was presented to the EIB, which managed the application process. After the presentation of the first draft, the project proposal was modified and discussed with EIB for about six months. During the consultation process, the governance of the project defined the main beneficiary of the ELENA fund. This choice was due to a specific request formulated by BEI, which asked for a single public body to be the reference point for the project.
BEI responded positively to the fund request and, after a couple of months, the project started with the signature of the partnership agreement. The ELENA fund dedicated to the project was about 2 million euro, with an expected investment of about 60 million euro.
The first expenditure financed by the project was the recruitment of a team of experts, who were hired on a temporary basis by the beneficiary. The team was made up of a project manager, a financial expert, a technical expert and a legal expert. After the selection of the internal team, the beneficiary selected an external team (with economic, legal and technical expertise) through a competitive procedure: the tender was opened to companies or to an aggregation of companies.
The internal team and the consultants had to work together to organize the three tenders planned by the project (a tender for the auditing process, a tender for works in the sector of the public lighting and a tender for building renovation).
Despite the agreement between the beneficiary and all the other legal entities involved in the project, the commitment of some relevant actors was not reliable, and at the first kick-off meeting a big part of the expected investment was canceled from the program.
To keep the project alive, the project team had to re-organize the investment program and to spend a lot of effort to include new municipalities in the project: this was necessary to meet the investment target and the minimum leverage request by the ELENA fund.
The case study shows a lot of dissimilarities between the project presented in the application phase and the investment achievable in the development phase. The differences were mainly concerned with beneficiaries, territory involved, investment typology (a promised district-heating line was canceled from the project immediately after project start) and project timetable.