EU Fund to facilitate the green transition

The ‘Fit For 55’ package, proposed by the European Commission in July, constitutes the single most ambitious climate policy proposal put forward by the EU. It rests on 12 legislative pillars touching upon the vital sectors of transport, energy, environment, and buildings.[1] This broad yet concrete set of measures aims to substantially reduce the EU’s greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels, with the underlying goal of reaching climate neutrality by 2050 whilst ensuring a fair transition for all.[2]. As set out below, the package of policy initiatives and funding is extensive, comprehensive, and impressive. However, it can only materialize via cooperation with companies that are developing new forms of energy production and storage.

Funding the green transition

The European Commission has made long-term funding streams and tools for the green transition available, to help Member States decarbonise and reach key climate and energy targets. These funds will finance the installation of increased energy capacity based on new, green technologies. An important part of these funds will also address the possible social impact of the green transition: by helping vulnerable households; enabling individuals who lost their jobs to access training programs and return to employment; and helping to create new economic opportunities.

As shown in the chart, this effort is assisted by the Multiannual Financial Framework (MFF), the EU’s budget for the period 2021-2027. Alongside this, to mitigate the economic and social impact of the COVID-19 pandemic and make European economies and societies more sustainable, the EU institutions approved the Next Generation EU (NGEU) recovery instrument earlier this year, set to operate from 2021-2023.

Within the MFF, two notable smaller yet crucial tools for the transition are the Just Transition Mechanism (JTM) and the Cohesion Fund:

  • Within the JTM, the InvestEU "Just Transition" scheme is backed by the Commission and mobilises large public and private investments from various entities, such as the European Investment Bank (EIB). These investments will support European policies in the economic recovery from the current challenges facing Europe. It will provide a budgetary guarantee for a wide range of projects, such as energy infrastructure development but also decarbonisation efforts, economic diversification, and promotion of social welfare. The Just Transition Fund (JTF), one of the three pillars of the JTM, focuses on the social aspects of the transition. For instance, it can help people adapt to the evolving labour market by reskilling workers, attracting new businesses, and consequently making the economy more autonomous. [3] Bulgaria is to receive €1.3 billion from the JTF.

The Territorial Just Transition Plans (TJTPs) developed by every Member State should identify the territories and sectors eligible for funding under the JTF.

The EU’s Recovery and Resilience Facility (RRF) is another important funding component for the green transition and the centrepiece of the NGEU. Member States must submit their National Recovery and Resilience Plans (NRRPs) to the Commission to describe the reforms and investments which the country in question wishes to make with the support of the RRF. These plans must have followed country-specific recommendations. The RRF has set aside up to €10.4 billion for Bulgaria, equivalent to 17% of the country’s GDP.

Bulgaria submitted these plans for approval from the Commission on October 15, 2021. Once approved, NRRP reforms and projects must be fully implemented by the end of August 2026, and by the end of the MFF cycle for TJTPs.

In addition to the above, specific funding streams dedicated to regions most affected by the transition include the Modernisation Fund and the Innovation Fund:

  • The Modernisation Fund will help modernise energy systems in Central and Eastern Europe by supporting investments, ranging from the generation and use of energy from renewable sources to the modernisation of energy networks, including district heating.
  • The Innovation Fund will provide funding for low-carbon technologies, such as Carbon capture and utilisation (CCU), and construction and operation of carbon capture and storage (CCS).

The EU has ensured funding to broaden access to renewable energy and other transition technologies before 2030 for countries like Bulgaria that rely on coal power generation to meet demand. Although the RRF’s approval is pending and the TJTPs need to be finalised, the EU is engaging with Member States and its citizens to support their green transition. Private investors such as AES, will be equally important for Bulgaria’s energy transition reforms. A legal framework that is welcoming to businesses will make it easier to attract private investments.

 

How AES supports Bulgaria in its energy transition

 

AES supports Bulgaria as it transitions to renewables. Over ten years ago, AES established the St. Nikola wind farm near the city of Kavarna, which is Bulgaria’s largest wind farm, providing over 22% of the total wind capacity installed in the country. St. Nikola has saved Bulgaria 323,277 tons of CO₂ emissions in 2019, an increase of 28.5% from the previous year.[5] Today, the plant continues to play a substantial role for the country’s renewable electricity production. In the first half of 2021, the farm produced approximately 1,680 GWh of electricity, contributing to the country’s renewables targets.[6] As Europe’s energy diversification proceeds and whilst the transition to zero carbon takes shape, AES Galabovo, the most modern TPP in the region, maintains security of supply and helps to avoid grid stability problems.

The AES Corporation is a global leader in renewables and the company is leading energy transition efforts around the world by investing in sustainable growth and technological innovations. In Latin America, for instance, AES is investing in wind, solar and energy storage technologies to support the region’s transition to sustainable energy sources. In Chile, AES has been a pioneer in energy storage systems by building and operating 52 MW of battery-based energy storage projects since 2009, providing frequency regulation and stability to the local electric system. AES has also invested in several wind projects in Brazil and recently inaugurated the Bayasol Solar Park in the Dominican Republic, which aims to reach a total generation of 300 MW of new renewable energy within the next two years.[7]

In India, AES inaugurated the very first battery-based energy storage project and is currently working to further support the country to meet its ambitious goal of producing 450 gigawatts from renewable energy sources by 2030. AES, together with Siemens founded Fluence, a global leader in grid scale energy storage, technology, software, and services. So far, the company has 150 energy storage projects in 24 countries. Similarly, AES made a strategic investment in 2020 in 5B, an Australian solar technology innovator, working to democratise solar technologies around the world by making them more accessible, resilient, and faster, guaranteeing 2 times more energy per area thanks to its modular, scalable design and high efficiency.

Overall, through its global experience in managing important technologies such as wind, solar, and energy storage, among others, AES can support Bulgaria in its energy transition. Energy innovators like AES can offer a great deal of expertise to optimise the impact of funding provided to Bulgaria for its green transition. By working together, the public and private sector will accelerate the energy transition

 

[1] https://ec.europa.eu/commission/presscorner/detail/en/IP_21_3541

[2] https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/energy-and-green-deal_en

[3]https://www.novinite.com/articles/209557/Bulgaria+Will+Receive+EUR+1%2C3+Billion+from+EU+Just+Transition+Fund

[4] https://sofiaglobe.com/2021/05/12/ec-approves-75-9m-euro-in-cohesion-funds-for-bulgaria/

[5] https://www.aesbulgaria.com/en/olivier-marquette-president-aes-bulgaria-bulgaria-need-reliable-and-clean-coal-based-production

[6] https://seenews.com/news/aes-bulgarian-units-produce-1680-gwh-in-h1-747016

[7] https://www.linkedin.com/posts/aes_aes-inaugurates-renewable-electricity-generation-activity-6800546029461635072-cWbp/