The EBRD as a green pioneer

By Axel  Reiserer

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The first large-scale solar power plant is under construction on a depleted mining area near the former site of the coal-fired Oslomej thermal power plant in North Macedonia.

How the Bank delivers on its green commitments

To be a pioneer one does not always have to invent the wheel. Sometimes one has to prepare the ground on which the wheels can turn. As Thomas Edison famously said: “Genius is one per cent inspiration, ninety-nine per cent perspiration.”

The European Bank for Reconstruction and Development (EBRD) is following Edison’s advice and has been – for many years and in many ways – a pioneer in supporting a sustainable economic transition in the regions where it invests. Established in 1991 after the fall of the Berlin Wall, the EBRD responded early to the fact that many of its countries of operations were among the least energy efficient in the world, with high rates of pollution and enormous losses during generation, transmission and consumption.

A first systematic step to addressing this issue was the Bank’s Sustainable Energy Initiative, which not only scaled up but also mainstreamed the Bank’s engagement in energy efficiency and climate change, making the full range of EBRD financial instruments available to finance sustainable energy projects. When the initiative was launched in 2006, levels of energy efficiency in the EBRD regions were abysmal. In Bulgaria, for example, only 51.9 per cent of primary energy input reached the end consumer, in contrast to the EU average at that time of 70.5 per cent.

Thanks to the success of the initiative (the EBRD invested more than €20 billion in over 1,000 projects, leading to 72 million tonnes of carbon emission reductions) the programme was later transformed and expanded to become the Green Economy Transition approach. This is now the Bank’s strategy for helping to build green, low-carbon and resilient economies in its regions. Through the updated GET approach, the EBRD will increase green financing to more than 50 per cent of its annual business volume by 2025, in line with the strategic priorities of the institution.

Responding to the climate emergency, from the end of 2022 the EBRD will also align all its activities with the goals of the Paris Agreement, aiming to accelerate decarbonisation across EBRD economies and supporting them as they work to reach net-zero emissions by mid-century.

For the EBRD, the way to deliver on these commitments is to finance individual projects, usually with the mobilisation of the private sector (in accordance with the Bank’s Strategic and Capital Framework) and with policy engagement. This is particularly vital in the energy sector. For instance, even the best technological solution will not flourish in the face of a distorted feed-in tariff.

The EBRD has translated its pioneering role in sustainable development into numerous projects. In Albania, it is co-financing the construction of a 12.9 MW floating solar photovoltaic farm with a €9.1 million loan provided to Korporata Elektroenergjitike Shqiptare (KESH), one of the country’s biggest state-owned utilities. The farm, built on the Vau i Dejës hydropower plant reservoir, will be the first floating solar plant of this size in Albania and the wider Western Balkans. In a country where land is in great demand, it represents a breakthrough in innovative green technology, using Albania’s rich solar resources.

In another Albanian project this year, the EBRD launched its first tender for utility-scale onshore wind power plants. This followed the successful award of two EBRD-supported solar tenders in recent years and will make another significant contribution to the country’s renewable energy targets. Albania has committed to reducing CO2 emissions by 11 per cent in the period 2016-30.

In Central Asia, the EBRD played a similar trailblazing role. It supported the authorities in Uzbekistan with the development of a low-carbon road map that aims to help the country achieve a carbon-neutral domestic energy sector by 2050. Rapid progress has been made on all fronts since the road map was drawn up. The first competitive wind power tender has been held successfully and improvements to the business environment have yielded an inflow of investment. In the Navoi region of south-western Uzbekistan, the EBRD is financing a 100 MW solar photovoltaic plant, one of the first two privately owned renewable energy projects in the country.

The intersection of policy engagement and investment is also at play in North Macedonia, where the country’s first large-scale solar power plant is under construction on a depleted mining area near the former site of the coal-fired Oslomej thermal power plant. The new solar plant, co-financed with €5.9 million from the EBRD, will produce nearly 15 GWh of electricity a year and prevent more than 12,000 tonnes of CO2 emissions.

The investment also benefits from the insights of a detailed country analysis of North Macedonia, conducted under the EBRD’s Just Transition initiative. This initiative aims to secure a green transition in the EBRD regions, avoiding social hardship and the creation of stranded assets. In many countries, the coal-mining industry remains a major employer. Therefore, work to achieve net-zero emissions must also include preparation for significant changes in the workforce.

From its early days, the EBRD has also played a leading role in developing and adapting financial tools in support of green goals. When, in March 2021, the Greek energy utility Public Power Corporation became the first issuer of a sustainability-linked bond in an EBRD economy, the Bank lent its support with a key investment.

In Greece, the EBRD also supported the country’s largest renewable energy project, a 204 MW plant in Kozani that is also the largest solar energy project in south-eastern Europe. And the first commercial wind farm in the southern Caucasus, a 20.7 MW plant in the city of Gori, in central Georgia, was financed with the help of a syndicated loan arranged by the EBRD.

However, generating more and more green energy is just one of many fronts in the fight against climate change. Another key contributor to global heating is transport. In this sector, many governments have adopted ambitious goals for e-mobility and the demand for components such as batteries is expected to soar in the years ahead. Here, too, the EBRD is at the forefront: the Bank is supporting, in Poland, a battery gigafactory and a plant producing key components.

As the use of electric cars becomes more widespread, their eventual disposal becomes a more pressing issue. The EBRD is financing the construction in Poland of the first facility in the European Union for recycling both car batteries and other waste-containing metals.

In the transition to a green economy, the EBRD serves as a driving force, combining investment with policy engagement and delivering a comprehensive strategy in hundreds of projects, from the very small to the very large. Harry Boyd-Carpenter, EBRD Managing Director for Green Energy and  Climate Action, sums it up: “The EBRD has a catalytic role. We do make things happen faster, more efficiently and more sustainably. I firmly believe that is the added value that the EBRD brings.”

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