Energy access and fuel poverty

Explanation

The EIB’s energy work has not strongly emphasised energy access given the already widespread energy availability in the European Union (EU), the Bank’s main area of operation. Nonetheless, the EIB has historically been involved in financing some energy access projects outside the EU. This includes the 2015 Energy Access Ventures Fund which invests in renewable energy SME-led projects, including off-grid electrification initiatives like solar home systems and micro-grid infrastructure. In 2017, The EIB launched the Africa Energy Guarantee Facility – a reinsurance vehicle targeting eligible SE4All projects in Sub-Saharan Africa. This facility includes contributions from public and private insurance companies to increase capital availability for the African energy sector. There was also evidence of individual projects in this area, such as financing of off-grid solar in Uganda.

The EIB does not define a minimum standard for energy access. Instead, institutional documents rely on IEA data to estimate investment needs, suggesting alignment with the IEA’s methodology. According to the Bank, the number of new connections is used as a key indicator to measure energy access, and additional metrics can be used where relevant. While the Bank has indicated it will support projects that reinforce Nationally Determined Contributions (NDCs), it is unclear if this includes energy access projects. Additionally, there are no quantified targets for energy access lending, making it difficult to determine the extent to which this priority is being implemented in practice.  

EIB’s 2019 Energy Lending Policy characterises energy access as a “fundamental issue” and prioritises supporting low-carbon, efficient, and reliable power systems. Outside the EU, ensuring access to modern and affordable energy, with a focus on basic energy services, is a key goal. Although mandated by the European Commission through the EU Agenda for Change, the EIB does not directly link its policies to the SEforAll initiative, which is unfortunate.

The Climate Bank Roadmap 2021–2025 and the mid-term review of the EIB Energy Lending Policy  reiterates that increased energy access is a strategic focus of EIB energy lending outside the EU (alongside renewables and electricity grids).  The latter states the Bank supported ten energy access projects totalling EUR 500 million in 2020 and 2021 (approximately a quarter of energy lending outside the EU according to available information), as well as off-grid renewables deployment via investment funds. Extra-EU projects in 2022 resulted in 2.1 million households being served by renewable energy (compared to 3.3 million in 2019, and 2.6 million in 2021). No results indicators are presented for grid connections. These documents again fail to inscribe energy access within a coherent comprehensive strategy with associated targets.  

The establishment of EIB Global in 2022 can and should enable the EIB to further develop its energy access strategy and increase. The EIB Global Impact Report 2022/2023 states that more investments are “urgently needed” and “critical” to expand access to clean electricity. The report establishes that small grid systems can play an important role in reducing the number of people without access to electricity. The EIB should take the opportunity of having established EIB Global to enhance its approach to energy access funding and reporting, particularly in developing sector-based and programmatic approaches in the context of EIB Global, as recommended in the mid-term review of the Climate Bank Roadmap.

Nonetheless, notable energy access projects are being rolled out. In 2022, the Access to Energy Global Authorization project was approved, representing EUR 160 million that the Bank will use to finance subprojects providing access to modern and sustainable energy for currently underserved populations and enterprises. That included a EUR 10 million project signed by EIB Global in 2022 that will fund the installation of solar mini grids in more than 120 villages in rural Madagascar.

Despite the availability of energy supply in the EU, the EU also presents high levels of energy poverty – 10.6% in 2023 or 45 million people, up from 6.9% in 2021. While the EIB has played a role in addressing this, such as through the Smart Finance for Smart Buildings initiative, energy poverty as a policy issue is not directly addressed in the Energy Lending Policy. Considering the European Commission’s work to unveil a Citizens’ Energy Package by end-2025 which will seek to alleviate energy poverty for at-risk communities, the EIB’s role in supporting this EU policy priority through an offer of reliable financial instruments will be key to tackling this issue.

Recommendation: 

• The EIB should update its current energy sectoral strategy to ensure it addresses energy access effectively through EIB Global. This update should include quantifiable, time-bound targets for energy access, supported by a clear definition aligned with the Multi-Tier Framework. Monitoring progress should be granular, distinguishing between direct and inferred access, the quality of access, and new versus improved services. These enhancements will help the EIB optimise its impact on energy access, ensuring transparency and accountability in its operations outside the EU. The EIB should develop its focus on energy poverty as a priority of its energy lending programme. To do so, it should explicitly adopt the definition of energy poverty as outlined in the EU’s Energy Efficiency Directive and further develop its offer of adapted financial instruments to address it.