Financing energy transition in cities
Energy Cities’ members share a vision of the low energy city with a high quality of life for all. They voluntarily commit to ambitious energy and climate objectives and design local sustainable energy policies, strategies and action plans that guide their energy transition.
However, financing of these actions remains a great challenge for all of them. Project investment costs are too high to be supported by the municipal budget only.
For illustration, here are estimated investment costs of the cities’ sustainable energy measures that they wish to implement in the near future:
- City of Heidelberg, Germany (150,000 inhabitants) - energy renovation of the private residential buildings: EUR 30-60 million (200 – 400 EUR/capita).
- Grenoble-Alpes Metropole, France (447,000 inhabitants) – sustainable urban public transport: EUR 60-150 million (134 – 335 EUR / capita).
- Province of Liège, Belgium (1,083,000 inhabitants) – energy renovation of public buildings: EUR 60-150 million (55-110 EUR/capita).
- City of Frederikshavn, Denmark (23,000 inhabitants) – implementation of the full sustainable energy action plan aiming at 100% renewable energy by 2030: EUR 110-376 million (4,800-16,350 EUR/capita).
- City of Litomerice, The Czech Republic (25,500 inhabitants) – energy renovation of public lighting: EUR 1-5 million (40-200 EUR/capita). Local district heating and cooling based on geothermal energy: EUR 60-150 million (2,400-6,000 EUR/capita).
Cities can benefit from the European funds and programmes to finance some of their projects. However, these funds remain limited and the competition is tough, especially for small and medium cities who often lack capacities to prepare high-quality project proposals.
They can also mobilise private financial sources from private investors, financing institutions, local stakeholders and citizens and invent new financing mechanisms, business models, organisational structures and partnerships to make their projects happen.
Indeed, without strong commitment of local businesses, citizens and other stakeholders to the local energy and climate objectives, it will be impossible for local authorities to reach their goals. In 2015, the European Commission’s Joint Research Centre analysed 3,421 Sustainable Energy Action Plans submitted by the Covenant of Mayors Signatories who are voluntarily committed to achieve and go beyond the EU energy and climate objectives.
It turned out that in average, the biggest energy consumers are residential buildings (33%), transport (31%) as well as tertiary buildings, equipment and facilities (18%). Residential and tertiary buildings together consume more than a half of final energy while public buildings, equipment and public lighting which are under direct responsibility of local authorities represent only about 3%.
Therefore, the big role of cities is to lead by example, motivate, coordinate and facilitate the voluntary action of the players on their territory. For this, they need to dedicate a great deal of their human capacities to financial and social engineering. There is no way around this - without dedicated staff, there is nobody who will rethink the financing solutions and implement new and innovative approaches for the local authorities.
As to inspire the cities, Energy Cities developed the ‘30 Proposals for energy transition’. Six proposals relate to the rethinking of financing solutions:
- Keep money spent on energy near to home
- Collect local savings and invest them in sustainable local energy projects
- Integrate future energy prices in the economic calculations made prior to investment decisions
- Dedicate human capacities in financial engineering
- Set up financial structures dedicated to the energy transition
- Channel spending towards local economies by means of a local currency
We encourage the cities to check the dedicate page for more information.