Europe is facing a fairly clear challenge: the energy transition requires investments amounting to hundreds of billions of euros every year, while public budgets have limited capacity. The approach taken so far, where many energy projects have been prepared primarily according to the availability of a suitable grant call, will therefore not be sufficient in the long term. This does not mean the end of grants, but rather a gradual shift in their role and the way they are used. Alongside direct investment support, preferential loans, guarantees, repayable financial instruments and private capital will become increasingly important.
This shift is already evident in the current framework for supporting energy projects in the Czech Republic. Although the Operational Programme Environment, the Modernisation Fund and the National Environment Programme continue to provide available sources of investment support, as the current programmes progress and the end of the programming period approaches, the same availability and intensity of traditional grant schemes cannot be expected in the long term. Instruments that support not only project implementation itself, but also high-quality project preparation, economic assessment and appropriate financing structures are therefore becoming increasingly important.
This trend can be seen, for example, in the activities of the National Development Bank. Through the New ELENA programme, it supports the preparation of energy-efficiency projects for both the public and private sectors, with support for public-sector entities covering up to 90% of the costs associated with preparing an EPC project.
Investment Needs Significantly Exceed the Capacity of Public Funding
The scale of the investment required is well illustrated by current estimates from the European Commission. To meet Europe’s energy transition targets, approximately EUR 660 billion will need to be invested annually between 2026 and 2030. By comparison, between 2011 and 2021, investment in the European energy system averaged approximately EUR 240 billion per year. The pace of investment will therefore need to increase significantly in the coming years. These funds will have to be directed across the entire energy system – towards new energy generation capacity, the modernisation of energy grids and measures aimed at reducing energy consumption.
Buildings represent one of the key areas for investment. They currently account for more than 30% of the energy consumed in Europe, and their modernisation will be essential to achieving European energy and climate targets.
A separate European Commission estimate puts the required investment in energy renovations of buildings, heating and cooling at approximately EUR 242 billion per year until 2030. Building modernisation therefore represents one of the most significant investment challenges that both public and private asset owners will face in the coming years.
EPC as One of the Ways to Deliver Energy Savings
One option for preparing and implementing energy-efficiency projects is Energy Performance Contracting (EPC), i.e. the provision of energy services with guaranteed results. The principle is relatively straightforward: first, the baseline energy consumption of a portfolio of buildings is established and the potential for savings is identified. The selected energy service provider then designs and implements a combination of specific measures – such as the modernisation of heating and cooling systems, control systems, lighting, energy management or other technological improvements – while contractually committing to achieving a defined level of savings.
Following implementation, actual energy consumption is continuously measured and evaluated against the predefined baseline. If the guaranteed savings are not achieved, the provider bears financial responsibility for the shortfall in accordance with the contractual terms.
An EPC project can be described in simplified terms through several consecutive steps:
baseline analysis → design of a package of measures → investment implementation → guaranteed savings → long-term measurement and evaluation of results
The resulting operational savings then help cover the project’s investment costs; depending on the specific structure, financing may also form part of the project. It is precisely this link between the investment and future savings, together with the transfer of part of the risk to the service provider, that distinguishes EPC from a conventional technology supply contract.
EPC makes the most sense where there is sufficient and measurable potential for operational savings. It is therefore not an alternative to a grant or loan, but rather a project delivery model that can be combined with various forms of financing.
A specific and crucial element of EPC is high-quality project preparation – particularly the selection of suitable buildings, establishment of baseline consumption, assessment of savings potential, preparation of tender documentation and definition of the methodology for measuring and evaluating the results achieved.
Support instruments are also available for this stage. The National Development Bank’s New ELENA programme can cover up to 90% of eligible costs associated with EPC project preparation for the public sector. Public support therefore does not have to be directed solely towards the investment itself – it can help create a well-prepared project that can subsequently mobilise a significantly larger volume of investment.
A Well-Prepared Project Will Be More Important Than a Specific Grant Scheme
As the way energy investments are financed evolves, early and systematic project preparation is becoming increasingly important. Energy projects should be prepared sufficiently in advance, with their technical scope, expected energy and economic benefits, and implementation schedule clearly defined. At this stage, the preparation process should also include an analysis of potential financing options, whether through own resources, grant support, preferential loans, EPC or an appropriate combination of several instruments.
For projects with a stronger innovation, demonstration or research component, it is also worth exploring opportunities under European programmes such as LIFE or Horizon Europe. These programmes are not standard sources of financing for conventional energy investments, but they may be relevant for pilot solutions, new technological concepts, innovative business models or projects with the potential for wider replication.
Early preparation allows organisations to work with a much broader range of options than when a project is only considered in response to a specific newly announced grant call. A well-prepared project can be continuously assessed against the conditions of new programmes, its scope or schedule adjusted as necessary, and an appropriate combination of public, repayable and own resources identified.
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