EBRD approves new Energy Sector Strategy 2024-28
By Nigina Mirbabaeva
15 Dec 2023
The EBRD approves a new five-year Energy Sector Strategy
Scaling up renewables is the key priority
Focus on accelerating an inclusive and just transition away from fossil fuels
The Board of Directors of the European Bank for Reconstruction and Development (EBRD) has approved a new Energy Sector Strategy, setting out the Bank’s strategic directions in this area until 2028.
The Energy Sector Strategy 2024-28 prioritises the urgent need to accelerate the decarbonisation of energy through scaling up renewables, enhancing grids and storage, promoting zero-carbon fuels and phasing out unabated fossil fuels. The strategy also emphasises the need to deliver resilient, efficient and inclusive energy systems that are adapted to climate change, increase energy efficiency and promote an inclusive and just transition.
The Bank will actively support the phasing out of unabated fossil fuels. In keeping with the EBRD’s commitment to aligning its activities with the goals of the Paris Agreement, the strategy signals that the Bank is limiting its involvement in the fossil-fuel sector to increasingly rare instances.
The strategy recognises that this transition presents major challenges for many EBRD economies, particularly those with high energy and carbon intensities. The scale of the investment required to achieve the global net-zero target is among these challenges. For the EBRD regions alone, an estimated investment of US$ 180 billion per year will be needed from now until 2030, of which US$ 130 billion per year will be required in the power sector alone.
Nandita Parshad, EBRD Managing Director for Sustainable Infrastructure, said: “Addressing the climate crisis requires an unprecedented transformation of our energy systems, and this transformation needs to be taking place now and at a scale. A key pillar of this transformation is the scaling-up of renewable energy investments by several multiples. This is the central focus of our new strategy – to grow renewable energy from megawatts to gigawatts and promote cleaner, smarter and more resilient energy systems that deliver economic and social development in the EBRD regions.”
Executive summary
• The central theme of the European Bank for Reconstruction and Development’s (EBRD) Energy Sector Strategy is to accelerate the vital energy transition in the economies where the Bank operates, while ensuring that the transition drives economic growth and social development.
• This new Energy Sector Strategy is consistent with the EBRD’s commitment to aligning its activities with the goals of the Paris Agreement and the Bank’s Strategic and Capital Framework (SCF) (which prioritises supporting the transition to a green, low-carbon economy, promoting equality of opportunity and accelerating the digital transition) and to achieving an annual green finance ratio of at least 50% by 2025.
• Three key factors shape the strategic directions of the Energy Sector Strategy: the climate emergency, energy security and innovation. Both the climate emergency and energy security require an accelerated green energy transition: emissions must peak this decade and fall to net zero by mid-century. To achieve this, the world needs to electrify its economies and accelerate the provision of clean electricity. Innovation is key to unlocking decarbonisation solutions.
• The accelerated green energy transition presents major challenges for many EBRD economies, particularly those with high energy and carbon intensity and those which are heavily dependent on fossil fuels. Many of the economies in which the EBRD operates have limited access to long-term, low-cost capital and lack an attractive investment climate with a robust regulatory framework. Investments in modernised networks and interconnections are insufficient, hindering the integration of renewables. In addition, many countries in the EBRD regions lack competitive energy markets and have gaps in their institutional capacity to deliver the green energy transition.
• These factors and challenges in the EBRD regions have led to two strategic directions for the Energy Sector Strategy:
o accelerating the decarbonisation of energy
o delivering resilient, efficient and inclusive energy systems.
• These strategic directions entail a series of actions:
o Scaling-up renewables – turning megawatts of renewable energy installed into gigawatts to accelerate electrification and decarbonisation, while building greater energy security and diversity.
o Upgrading power networks, storage solutions and regional interconnections
– to ensure resilient and secure energy systems that successfully integrate
intermittent renewables.
o Promoting zero-carbon fuels – investing in innovative technologies and
harnessing renewables to decarbonise other sectors especially those that are hard to abate.
o Phasing out unabated fossil fuels – the Bank will actively support the transition away from fossil fuels and limit its investments in new fossil-fuel projects to increasingly rare instances.
o Promoting well-functioning markets and resilient assets – to ensure efficient, secure energy systems adapted to impacts of climate change.
o Enhancing energy efficiency and productivity – allowing for more efficient and cost-effective decarbonisation and more efficient use of energy, resources and materials.
o Delivering an inclusive and just energy transition – to ensure that the
transition leaves no one behind.
• These actions would be delivered through a holistic approach at the Bank, country and sector level via financing instruments, policy dialogue, the mobilisation of private-sector capital, increased coordination and complementarity among development partners, and, where needed, blended financing.
• The energy sector lies at the heart of the green transition; it is where the greatest challenges lie, but also extraordinary opportunities to move to a world of abundant, reliable, low-cost and sustainable energy. This Energy Sector Strategy creates a platform for the EBRD to support the economies in which the Bank operates in meeting those challenges and capitalising on opportunities in 2024-28.
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