The need to transition to renewable energy is no longer debated. Yet despite broad consensus, progress remains frustratingly slow. The core issue remains a chronic lack of adequate funding.
European policymakers continue to place their hopes on private capital to finance the bulk of net-zero, climate-resilient development. But a Finance Watch report found that even under the most optimistic assumptions, capital markets can only cover one-third of the EU’s required investment. The result is a stalled energy transition.
While local, decentralised energy projects have received well-deserved attention, they’re only one piece of the puzzle. Community grids reduce energy loss and empower citizens, but urban areas, and sectors like healthcare and manufacturing depend on connecting to a main grid for robust and reliable delivery.
Treat renewable energy as essential public infrastructure.
Relying on private finance delays progress and increases inequality. Private investments favour high financial returns, directly in contrast to the downward pressure on electricity prices that come with the abundance of renewable energy as the grid expands. Only through external anchoring with ETS schemes has the price of renewable energy increased, despite increased availability. Ironically, this now lies in direct conflict to the interest of both industry and citizens, who desperately need financial relief. Neither is anchoring to ETS a long term solution, as it assumes endless fossil fuel consumption.
Public investment can solve this bottleneck by deploying public funding at scale, including through tools like asset purchase programmes, to support renewable energy as public infrastructure. This would ensure a rapid, just, and accessible transition, and it isn’t a radical idea. In fact, the EU already recognises this need through its concept of Services of General Economic Interest (SGEI), which are defined as: “economic activities which deliver outcomes in the overall public good that would not be supplied (or would be supplied under different conditions in terms of quality, safety, affordability, equal treatment or universal access) by the market without public intervention.”
Renewable energy is critical to Europe’s economy. The war in Ukraine drove up energy prices leading to a cost of living crisis, illustrating the strategic importance of securing energy sovereignty in Europe for the continent’s economic stability. The problem has only been delayed through the import of American LNG, not resolved. The European economy remains fragile as Germany is projected to continue contracting into its third consecutive year. Not only is renewable energy of critical economic interest, it is also a service of general interest to ensure citizens have warm homes and can live a life in dignity.
Looking ahead, Ursula von der Leyen’s proposed €2 trillion budget counts on carbon pricing and ETS markets as new sources of revenue. But without a functioning renewable energy infrastructure, these mechanisms could become punitive rather than productive. Pricing carbon without offering clean, affordable alternatives will hurt citizens and weaken Europe’s competitiveness. Carbon offset mechanisms such as ETS have actually increased emissions worldwide, and actual reductions since 2008 are better attributed to reduced economic activity. It is baffling that the European Commission plans to rely on carbon offsets to achieve climate goals instead of taking more decisive action as we find ourselves in an acceleration towards climate crisis.
The clean energy transition is both a climate imperative and a chance to build a more equitable and resilient society. But to seize this opportunity, Europe must recognise that some things are too important to leave to the market alone.
Contribution by Vienne Chan
Photo credit: JOHANNA MONTOYA
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