Financing the energy transition across borders

Despite the mounting urgency, many cities are not yet using or even aware of the kind of innovative financial tools at their disposal to implement renewable energy projects, which include citizen financing, green bonds, and energy performance contracts.

These and more are already being successfully implemented across Europe; however, differences in legislation and regulatory frameworks often deter cities looking to replicate their success. While replication in a new context does come with challenges, success stories are popping up proving that these solutions can be effectively transferred and adapted across national borders. How? Through the power of mentorship.

The power of mentorship

“Having an experienced mentor to guide you in the process is invaluable,” says Tereza McLaughlin Váňová, Project Leader and Manager at SEMMO.

Tereza McLaughlin Váňová, Project Leader & Manager at SEMMO
Having an experienced mentor to guide you in the process is invaluable.
— Tereza McLaughlin Váňová, Project Leader & Manager at SEMMO

“It’s always better if someone who has already been through it can guide you compared to just finding information online.”

Established five years ago, SEMMO is a network connecting municipal energy managers across the Czech Republic to promote sustainable energy practices within municipalities including Prague. With 28 members, SEMMO is involved in numerous national and international projects aimed at enhancing energy efficiency and raising awareness. They are significantly impacting local and national renewable energy adoption, demonstrating the effectiveness of shared knowledge and collective effort.

McLaughlin Váňová’s extensive background in sustainable energy practices, gained through her collaborations with municipal energy managers and academics, provides her with invaluable insights for cities seeking to innovate their financing methods. As a mentor for Eurocities’ EU-funded project Prospect+, she’s applying the solutions she’s been promoting in Czech cities across borders.

Innovative financing is key to overcoming financial barriers in renewable energy projects. The EU-funded project’s peer-to-peer learning activities are geared to enhance decision-making of public authorities. Insights shared through Prospect+ provide a roadmap for other cities to follow, highlighting the importance of choosing the best financing options. Central to Prospect+ is its mentorship model, where new participants are paired with experienced mentors like McLaughlin Váňová.

“Applicants join at various phases in their projects, some with specific ideas in mind and others exploring different financing options,” explains Váňová. The mutual exchange of knowledge and experiences within this model benefits both mentors and mentees, fostering a rich environment for innovation.

Prague’s renewable energy community

So far, over 150 cities and regions have joined the Prospect+ capacity building programme to learn from their peers about innovative financing schemes to implement sustainable energy projects. A localised approach means cities can implement projects more quickly than their national counterparts. They can adapt to changing circumstances more readily and directly engage with their communities to tailor solutions to specific urban needs.

In the Czech Republic, decentralised energy initiatives are gaining momentum. Despite historical centralisation, examples of resident-driven projects are encouraging others to follow suit.

“We have seen projects involving citizen financing that have even been prepared by Czech entities,” McLaughlin Váňová says, “For instance, there was an idea for green bonds where local authorities would issue bonds, and citizens could buy them to fund specific projects. Once the required amount of money was gathered, the project could be implemented. However, local authorities are often hesitant. They might say, ‘We’ve never done it before,’ and there are various levels of administration to navigate, which can be quite daunting.

“It’s also important to note that people working on these projects often do so on top of their daily responsibilities,” McLaughlin Váňová explains, “They already have a lot on their plates, and adding something extra can be challenging. Therefore, it’s crucial to have local authorities that are open and visionary, willing to embrace new ideas. Having a supportive and proactive local authority makes a huge difference in successfully implementing these innovative financing projects.”

Having a supportive and proactive local authority makes a huge difference...
— Tereza McLaughlin Váňová, Project Leader & Manager at SEMMO

Prague has set ambitious climate targets to lower CO2 emissions by 45% by 2030 and achieve carbon neutrality by 2050, but reaching these goals requires overcoming various challenges, including legislative hurdles and the need for a supportive environment where energy can be shared among communities. The city exemplifies how urban centres can lead the way in innovative financing with its renewable energy community established three years ago.

“It’s an organisation that supports the installation of renewable energy sources on all Prague buildings, both public and private,” McLaughlin Váňová says. “First, we install the sources and then connect the buildings so that all the energy generated on Prague roofs can be utilised within a shared community.”

“Some things never change”

As McLaughlin Váňová points out, securing project proposals and city leadership backing are consistent needs. Sharing strategies and learning from each other’s experiences helps cities adapt and implement successful projects.

While the participants come from different countries, they are facing many of the same challenges and can draw inspiration from cities across Europe. “There are often legislative and institutional differences, but some things never change,” Váňová explains.

There are often legislative and institutional differences, but some things never change.
— Tereza McLaughlin Váňová, Project Leader & Manager at SEMMO

“For example, any project will need a strong proposal and the backing of the city’s leadership. We can advise them on how to speak to the council and explain the value of the project in a convincing way. It’s little things like this that make a huge difference.”

McLaughlin Váňová is speaking from experience when she explains that including details like this can help move project proposals forward and get them approved by the management more quickly.

“It’s crucial to include hard numbers. We advise mentees on how to present these figures clearly when speaking to the council to show exactly how much money can be saved. Everyone likes to know how much money they’re saving.”

“Then, it’s always key to explain the importance of energy efficiency projects to political representatives because the benefits aren’t always visible. Energy savings aren’t something you can take a picture of, which is why they might not seem as appealing to politicians. It’s about making them understand that these savings are real and impactful, even if they aren’t immediately visible.”

The power of collaboration across borders is essential for the future of sustainable energy. McLaughlin Váňová emphasises the need for more cooperation between European, national, and local governments to facilitate innovation: “We want to continue showing the potential in innovative financing despite the challenges and doubts. Linking experienced leaders with those just beginning their journey creates a powerful network of support and inspiration.”

Learning is a two-way street

According to McLaughlin Váňová, the learning in the mentorship programme goes both ways. When implementing innovative financing strategies across different countries, there is always something new to be learned.

“Mentoring cities is incredibly rewarding because I learn just as much from the cities I mentor,” she says. “Being a mentor doesn’t mean we know everything. Each city faces unique challenges and comes up with creative solutions, and this back-and-forth exchange always brings new ideas and insights to me as well.”

Etterbeek, a municipality in the Brussels-Capital Region of Belgium, faced financial challenges in its bid to become 100% carbon neutral by 2050. The misalignment between this ambitious goal and the available budget prompted Project Manager Jean-François Maljean to search for new ways of financing. He turned to crowdlending, an innovative financing solution. Despite legal and procedural hurdles, Etterbeek’s crowdlending scheme for renovating a municipal swimming pool promises local residents a tangible return on their investment, fostering a sense of community involvement and benefit.

In Vilnius, Lithuania, Lina Bubulytė, Foreign Affairs Project Manager, addresses resident hesitancy towards innovative energy projects. Lithuania offers 35% funding for deep renovation projects, and Bubulytė aims to create a pilot project with 100% funding for residents. This approach seeks to build trust and set a precedent for future initiatives.

Both Etterbeek and Vilnius are mentees in Prospect+. “It was so inspiring to be surrounded by like minded peers who are in the same situation trying to find ways to improve their operations and help their communities,” Bubulytė says, “we learned so much from each other’s experiences.”

We want to continue showing the potential in innovative financing despite the challenges and doubts.
— Tereza McLaughlin Váňová, Project Leader & Manager at SEMMO

Prospect+ has launched a community of practice for anyone who would like to learn more about innovative financing instruments and examples of successful projects at their own pace on the online platform. For cities looking to share their expertise, Prospect+ is collecting contributions in an ongoing survey on other-than-subsidies funding options here.

Alyssa Harris Eurocities writer