Energy transition

Energy is central to the European Union's transition to climate neutrality by 2050, in line with the European Green Deal. Responsible for more than 75% of greenhouse gas emissions in the EU, the energy sector is undergoing a profound transformation towards a net-zero economy.

Russia’s war of aggression against Ukraine has also recalled Europe’s critical dependency on fossil fuel sources and the heavy economic toll it takes in case of shortages, in particular on vulnerable groups and sectors highly dependent on energy.

As part of its response, the EU adopted the REPowerEU plan to: (i) reduce EU’s dependency on fossil fuels through energy savings; (ii) diversify supplies; and (iii) quickly substitute fossil fuels with renewable and low-carbon alternatives.

More recently, the European Commission proposed to include clean and bio technologies (including for energy production and consumption) among the critical technologies on which to build the EU’s industrial sovereignty and longer-term competitiveness, as part of the strategic technologies for Europe platform (STEP)[1].

The EU relies on a comprehensive legislative and policy framework that sets targets for the use of renewable energy, energy efficiency and the decarbonisation of the building stock. Reaching these objectives requires the mobilisation from all actors. Member states have been called to develop final updated National Energy and Climate Plans (NECPs) by June 2024[2] to outline their respective contributions. It is estimated that an additional investment of EUR 620 billion annually compared to current levels is needed for the EU energy transition[3].

In this context, Cohesion policy plays a key role and is all geared towards achieving a socially just energy transition. For the period 2021-2027, 33% of allocations to programmes from the European Regional Development Fund (ERDF) and 56% from the Cohesion Fund will be made available for investments into climate action, including to support energy conservation (particularly in buildings), sustainable urban mobility and adaptation to climate change in Member states, regions, cities and towns. More than 15% of these funds will be directed to save energy, promote renewable energy, enhance smart grids and up- and reskill people for the green and digital transition. In addition, the Just Transition Fund, as a new instrument created to make sure that no region is left behind, will invest another EUR 25 billion in skills and economic diversification, the support to renewable energy sectors and the decarbonisation of carbon-intensive industries in coal regions and other territories most affected by the negative impact of the climate transition. Altogether, a Cohesion policy envelope of EUR 110 billion represents an unprecedented opportunity to secure a sustainable path towards a climate-neutral Europe[4].  

Addressing air pollution, the security and affordability of energy supply and availability of carbon-free public transport, buildings and services in urban areas in a holistic manner requires innovative, integrated and socially inclusive solutions. It is essential to embed the energy transition into integrated approaches beyond traditional sectors (energy, transport and waste management) in order to address wider societal goals such as active mobility, affordable housing, energy poverty, circular economy, public health, and/or the fostering of jobs and skills for the green transition.

Under the topic ‘Energy transition’, the European Urban Initiative (EUI) aims at supporting the testing of transferable and scalable innovative solutions in real-life settings for economically viable, smarter and more integrated local energy networks, zero carbon and demand driven while empowering citizens and stakeholders to accelerate the transition.

The topic ‘Energy transition’ contributes to and has interconnections with a number of EU policies and initiatives such as the EU Green Deal, REPowerEU Plan, EU Strategy on Adaptation to Climate Change, EU’s Strategic Energy Technology Plan, EU Zero Pollution Action Plan, New European Bauhaus Initiative, EU Renovation Wave Strategy, Affordable Housing Initiative, New European Mobility Framework, EU Missions on Climate-Neutral and Smart Cities and Adaptation to Climate Change, European Partnership Driving Urban Transitions of Horizon Europe, EU Covenant of Mayors for Climate and Energy, and Intelligent Cities Challenge.

It also builds on the achievements from the Urban agenda for the EU thematic partnership on ‘Energy transition’ and the actions developed for better regulation, funding and knowledge in the area[5].

The European Commission aims at reaching a balanced portfolio of projects meeting the highest quality standards while reflecting the geographical, spatial and demographic diversities of European cities. Project proposals are expected to be highly experimental, consequently not likely to be funded by traditional or mainstream sources of funding.

Urban action is paramount to achieve climate neutrality. More than 75% of the EU population lives in urban areas and this figure is expected to rise to almost 85% by 2050. As a result, cities are responsible for most of EU’s energy demand, most often produced outside of their borders, and account for the highest levels of greenhouse gas emissions.

At the same time, as hubs of economic activity, community engagement and innovation, cities are well-placed to take lead in the deployment of solutions that the energy transition requires and to steer partnerships with on-the-ground scientific expertise, stakeholders from across the energy spectrum, businesses and citizens to trigger coordinated actions and consumers’ behaviour changes.       

Leveraging their fiscal and regulatory power at local level, cities can guide developments for land use and spatial planning in a way that increases energy efficiency in all urban sectors from sustainable transport (e.g. car free zones, congestion fees) to local renewable-energy production (e.g. green bonds). They are also directly empowered by the EU legislation, such as the recently revised Energy Performance of Buildings Directive[6] and the Energy Efficiency Directive[7] which foresees municipalities from 45 000 inhabitants and above to develop local cooling and heating plans.   

Cities can also make a real difference as local service providers when operating, maintaining or making strategic decisions on investments in municipality-own assets. As such, they have the upper hand on ways forwards for the reduction of greenhouse gas emissions deriving from public transport fleets, waste and wastewater management, heating/cooling systems from municipal building (including housing) stocks. They can mainstream new practices through green and innovative public procurement, energy audits or public-private partnerships.

Urban authorities are well positioned to mobilise pertinent local industrial and economic actors. Sustainable energy systems have to be developed at appropriate scale to serve multiple consumers and buildings at a neighbourhood or district level. District energy management has an important part to play in creating smart integrated energy systems that minimise primary energy demand. Districts represent a right scale for innovation[8] and for citizens to be engaged and to take direct control of parts of the energy supply chain (local markets). Small and medium-sized cities in particular could benefit from less constrained (centralised) energy distribution networks than bigger agglomerations, to excel in such innovative and participatory approaches. 

On the other hand, moving towards more decentralised and dynamic energy systems and technologies, requires increasingly cities and surrounding municipalities to plan together how the energy demand will evolve and how it will be met over time in a given locality. Joining forces helps to reaching the critical mass required for certain types of investments, to ensure more efficient use of resources and realise economies of scale, diversify supply sources and/or better integrate into larger energy networks. Working across administrative boundaries and acting at the level of functional urban areas is also highly relevant for financing and achieving cleaner mobility in a commuting zone and in the urban-rural interplay.    

Beyond, urban authorities must get used to a more marketing-like approach to be able to pitch solid energy plans and projects to a wide range of stakeholders, including citizens, local companies, researchers, banks, and private investors. Innovative financing schemes, formula to attract private financing will be key considerations to strengthen the replicability and upscaling potential of investments. Initiatives such as the EU City Facility[9] or the Smart Cities Marketplace[10] provide concrete hands-on support and advise on how cities should get organised to the respect.

In view of the above, project proposals on the ‘Energy transition’ topic should not be elaborated in isolation from medium to long term action aimed at tackling in a holistic way the socio-economic and environmental challenges of the energy transition and are expected to be embedded into existing strategic and systematic approaches towards greening and/or climate neutrality and resilience of a city. Such approaches[11] may, for example, include Sustainable Urban Development Strategies of Cohesion policy[12], Sustainable Energy and Climate Action Plans (SECAPs) developed under the EU Covenant of Mayors for Climate and Energy[13], Sustainable Urban Mobility Plans (SUMPs), Local Green Deals of the Intelligent City Challenge[14] or Climate City Contracts prepared by the cities involved in or adhered to the EU Mission on Climate-Neutral and Smart Cities[15]. Such an embedding in relevant urban strategies and plans will be weighted in project proposals’ strategic assessment[16].

Without being prescriptive in terms of response expected, that may vary significantly from one city to the other in view of their size, inner characteristics and challenges, applicants are invited to consider the themes and issues listed below when preparing their project proposals. Testing measures linked to more than one of these themes and issues, in an integrated manner, is also possible and highly recommended for the topic of this call. 

• Minimizing the energy demand in cities through:
  • retrofitting of public buildings and of the housing sector, and other energy measures encouraging real estate companies, businesses and/or individuals to make such types of investments, with a particular focus on deprived neighbourhoods and/or vulnerable households, to tackle energy poverty and the costs of the accelerated energy transition.
  • decarbonisation of urban public transport as an alternative to passenger cars, using the combined potential of electrification (in particular sourced by renewable energy), of connectivity, automation or smart fleets, road traffic and energy management. Emerging solutions in the field of micromobility and Mobility as a Service (MaaS), new technologies and logistic hubs aimed at accelerating the modal shift to cleaner and more affordable mobility modes (walking, cycling), with additional benefits in terms of health, congestion, accidents, noise and growing transport urban poverty could also be explored, same as coordinated decarbonisation measures and incentives at functional urban area’s level to allow commuters from outside city’s administrative boundaries to contribute to, and benefit from, the shift to cleaner mobility modes.  
• Diversifying local energy sources, by maximising endogenous potential for the production and use of renewable energy (wind, water, ocean, solar, geothermal, biomass) or of local secondary energy sources, including through the recovery and use of diverse range of waste and/or secondary heat sources available in the city and its surroundings, removing the barriers of circularity and resource efficiency.
• Deploying smart and integrated local energy systems, by fostering innovative approaches to energy storage and supply to reduce reliance on external sources, and/or increasing the interaction between buildings and transport energy systems through smart (power or thermal) grids, or by further testing and expanding the model of Positive Energy Districts (PED)[17].  
• Maximizing multi-stakeholder and citizens’ engagement by developing incentives and/or innovative supporting schemes and/or business models to develop energy communities[18] and any other formula of the kind to enable various customers to become energy ‘prosumers’, i.e. both consumers and producers of energy on the local market. Digital solutions (smart apps, data sharing) to accelerate co-participation and behaviour changes could also be considered.
• Boosting jobs and skills for the energy transition by identifying and addressing existing gaps in local labour markets in terms of qualified staff for clean transport and energy sectors and/or exploring the potential for new sustainable products, innovative jobs and upgraded knowledge and skills that the transition can enable. In particular, social innovation, leading to the employability of the most vulnerable and/or flourishing of proximity services, start-ups (including micro-enterprises) based on repair, reuse and/or commercialisation of high-quality recycling of products could be considered.

• Specific objective 2.1 for a greener Europe by “promoting energy efficiency and reducing greenhouse gas emissions”,
• Specific objective 2.2 for a greener Europe by “promoting renewable energy in accordance with Directive (EU) 2018/2001, including the sustainability criteria set out therein”
• Specific objective 2.3 for a greener Europe by “developing smart energy systems, grids and storage outside the Trans-European Energy Network (TEN-E)”
• Specific objective 2.6 for a greener Europe by “promoting the transition to a circular and resource efficient economy”
• Specific objective 2.8 for a greener Europe by “promoting sustainable multimodal urban mobility, as part of transition to a net zero carbon economy”
• Specific objective 5.1 for a Europe closer to citizens by “fostering the integrated and inclusive social, economic and environmental development, culture, natural heritage, sustainable tourism and security in urban areas”.

Project proposals will be assessed, among other criteria, on their ability to achieve credible results and on the soundness of their methodology to measure these results.

In the context of the topic ‘Energy transition’ in particular, urban authorities are invited to define a set of indicators capturing, in an integrated way, the interrelated co-benefits (e.g. air quality, climate resilience, employment, inclusiveness) that their project proposals would generate.

In their applications, urban authorities may refer to any of the indicators listed below, whenever relevant for their project ideas. The list is not prescriptive or exhaustive. It includes indicators that do not correlate explicitly with the subject matter of the topic on energy transition but which can be of help to express tangible results and are thus worth considering. Such indicators should be complemented by indicators relevant to the specific project.

Urban authorities remain free to define their own project specific indicators, while considering those listed, in order to reflect in the clearest and most convincing way the changes, which their project has the potential to accomplish.

Output indicators

• New products and services created (measurement unit: new products/services).
• Infrastructure supported (new, renovated, reconverted or modernised) (measurement unit: supported infrastructures).
• New equipment created and/or supported (measurement unit: new equipment).
• People supported (trained, upskilled, accompanied or assisted) (measurement unit: persons).
• Enterprises cooperating with research organisations (measurement unit: enterprises working with research organisations).
• Enterprises supported (of which: micro, small, medium, large) (measurement unit: enterprises).
• Population covered by projects in the framework of integrated actions for socio-economic inclusion of marginalise communities, low-income households and disadvantaged groups (measurement unit: persons).
• Public buildings with improved energy performance (measurement unit: square meters).
• Dwellings with improved energy performance (measurement unit: dwellings).
• Additional production capacity for renewable energy (of which, e.g. electricity, thermal) (measurement unit: MW).
• District heating and cooling network lines newly constructed or improved (measurement unit: km).
• Renewable energy communities supported (measurement unit: renewable energy communities).
• Solutions for electricity storage (measurement unit: MWh).
• Systems for monitoring air pollution installed (measurement unit: number of systems[19]).
• Digital management systems for smart energy systems (measurement unit: system components).
• Stakeholders involved in the preparation and co-implementation of the project (measurement unit: participations of stakeholders).
• Citizens involved in the preparation and co-implementation of the project (measurement unit: persons).

Result indicators

• Jobs created in supported entities (measurement unit: annual FTEs).
• Users of new and upgraded digital services, products and processes (measurement unit: users/year).
• SMEs introducing product, process, marketing or organisational innovation (measurement unit: enterprises).
• Trademark and design applications (measurement unit: trademark and design applications).
• Annual final energy consumption reduced (measurement unit: percentage of the reduction in comparison to the previous year).
• Total renewable energy produced (of which, e.g. electricity, thermal) (measurement unit: MWh/year).
• Estimated greenhouse emissions (measurement unit: tonnes of CO2eq/year).
• Improvement of air quality (measurement unit: fine particulate matter (PM2.5) concentrations).
• Users connected to smart energy systems (measurement unit: end users/year)
• Annual users of new or modernised public transport (measurement unit: end users/year).
• Increase of population using options for active mobility (measurement unit: percentage of the local population).
• Level of participation achieved in the engagement with local communities (information, consultation, co-creation, co-decision) (measurement unit: percentage of the local population engaged).