Modernization Fund – an additional €2.7 billion for cleaner energy systems

The European Commission has disbursed an additional €2.7 billion to support 39 investment projects in eight member states. The Modernization Fund, financed by revenues from the EU Emissions Trading System (EU ETS), has provided €15.45 billion in investment to support clean energy transition projects since its launch in 2021. It helps implement investments in renewable energy generation and use, energy efficiency, energy storage, modernization of energy grids, including pipelines and district heating networks, and equitable transition in coal-dependent regions.

Modernization fund – 2024 summary.

The support, announced at the end of December, complements investments of nearly €2.97 billion for 38 other projects initiated in June 2024, bringing the total disbursements from the modernization fund in 2024 to €5.67 billion, covering 77 projects in 11 countries. This year alone, disbursements were made to Bulgaria (65 million euros), Croatia (52 million euros), the Czech Republic (1.283 billion euros), Estonia (84 million euros), Hungary (202 million euros), Latvia (27 million euros), Lithuania (185 million euros), Poland (1.733 billion euros), Romania (1.956 billion euros), Slovenia (309 million euros) and Slovakia (153 million euros). We wrote about previous projects implemented from the Modernization Fund in a previous article: Modernization Fund – support for clean energy projects.

All 77 projects supported from 2024 onward focus on electricity generation from renewable energy sources, grid modernization, energy efficiency and replacing coal generation with lower carbon-intensive fuels.

Projects implemented from 2024 include activities such as:

• Strengthening the electricity transmission grid to support the integration of renewable energy sources in Bulgaria;
• Photovoltaic power generation and energy storage by water service providers in Croatia;
• Reducing_CO2 emissions during heat production in the Czech Republic;
• Improving energy efficiency and promoting the use of renewable energy in public buildings in Estonia;
• Modernization and development of renewable energy-based district heating systems in Hungary;
• Use of renewable energy sources in multi-apartment buildings, public buildings and energy communities in Latvia;
• Modernization of multi-apartment buildings in Lithuania, ensuring the achievement of at least Class B energy efficiency in renovated buildings and energy savings of at least 40 percent;
• Development of electricity storage systems in Poland to improve the stability of the national electricity grid;
• Installation of at least 1,500 MWh of battery energy storage systems at existing renewable energy generation plants in Romania;
• Increasing energy efficiency and reducing greenhouse gas emissions in lower-income households in Slovakia;
• Investment in renewable electricity generation and energy storage capacity in Slovenia.

Modernization fund – further calls for applications

According to information posted on the European Commission’s website, the deadline for submitting investment applications for potential support from the modernization fund in the next disbursement cycle is February 18, 2025 for priority applications and January 21, 2025 for non-priority applications. The first group consists of investments aimed at modernizing energy systems, reducing greenhouse gas emissions in energy, industry and transportation, and improving energy efficiency as listed in the EU ETS Directive. All other initiatives eligible for the modernization fund are considered non-priority and subject to additional scrutiny.

Modernization fund as a key tool for EU green financing

The Modernization Fund, financed by revenues from EU ETS emissions allowance auctions, currently aims to support 13 EU countries in their transition to climate neutrality. The revised EU ETS has expanded the scope of the fund, which can provide financial support to additional beneficiaries Greece, Portugal and Slovenia from January 1, 2024.

The Modernization Fund complements other European instruments, such as the Cohesion Policy and the Equitable Transformation Fund. It has mobilized significant resources that can help eligible countries invest in line with the REPowerEU plan and the Ready for 55 package. The Modernization Fund operates under the responsibility of its beneficiaries and in close cooperation with the European Commission and the European Investment Bank (EIB).