A private fund that plans to build power projects on sites such as hospitals and data centres to reduce energy wastage has secured backing from the European Union’s investment arm.
The European Investment Fund (EIF) said it had invested 125 million euros in the ‘Green Energy Solutions Fund’, which is run by Sustainable Development Capital (SDCL).
The investment helped the fund hit its fundraising target of 650 million euros (USD 707 million) last month.
“We see a big market failure. Energy efficiency is an area where there are tremendous needs,” EIF Deputy Chief Executive Roger Havenith told Reuters, describing the investment as EIF’s first in a fund focused on energy efficiency.
Havenith said the investment would help advance EU policy priorities of tackling climate change, and the fund had agreed to deploy 66% of its capital inside the bloc’s 27 member states.
“We step into funds where we see a particular added value and where we are not crowding out private investors,” he said.
The EIF spends about 13-15 billion euros annually and targets individual funds of up to around 1 billion euros in size, with an average investment of 85 million euros.
While global efforts to cut carbon emissions have prioritised renewable energy, SDCL CEO Jonathan Maxwell said “as important a problem is that so much energy is lost.”
The “big dirty secret,” he said, is that 70% can be wasted in the journey from molecule to extraction, conversion, generation and distribution.
Global efforts to green the electricity grid and replace fossil fuels will fail to reduce emissions fast enough unless energy wastage is slashed simultaneously, he said.
M&G Investments and the Ireland Strategic Investment Fund also invested in the fund and Maxwell said “very attractive” market incentives under the U.S. Inflation Reduction Act and various EU schemes would boost returns.
Typical projects will be building a solar power or waste-to-heat plant. The fund will also help retrofit buildings.
Renewable energy projects, particularly offshore wind, have had a rough year with supply chains blockages, inflationary pressures and permitting delays squeezing margins. Investors have been dumping cleaner energy stocks.
The European Investment Bank (EIB), which is the majority shareholder in the EIF, has previously invested in an SDCL-run British energy efficiency fund. (USD 1 = 0.9192 euros)
