EIB and Deutsche Bank partner to strengthen wind energy supply chain with €5 billion initiative

By Rishabh Srihari

July 31, 2024, 7:16 pm SGT

3 min read

Wind turbines farm — Photo

The European Investment Bank announced that it is going to extend a €5 billion initiative to support wind-energy equipment manufacturers in Europe by providing a €500 million counter-guarantee to Deutsche Bank AG, headquartered in Germany.

The deal marks the first operation under the December 2023 EIB plan to provide €5 billion to “strengthen the provision of commercial bank guarantees for companies throughout the European wind industry.”

The proposal was included in an EU Wind Power Package that the European Commission submitted in October 2023 to support a robust and competitive wind energy supply chain throughout the Union.

It involves providing additional guarantees to the primary lenders in the sector, such as Deutsche Bank.

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EIB Vice-President Nicola Beer, said, “A quick build-up of wind power is crucial for decarbonising the economy. Together with Deutsche Bank, we are promoting the expansion of renewable energy in Europe and, in that way, bringing the price of sustainable energy down.

She added, “The respective project will also help to safeguard and create jobs in a sustainable and competitive European industry.”

The EIB’s €5 billion initiative includes counter-guarantees aimed at mitigating credit risks for commercial banks working with the wind industry. This scheme improves access to advanced payments and performance guarantees, benefiting both banks and the sector.

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In the initial phase, Deutsche Bank will utilize the EIB’s counter-guarantee to issue banking guarantees for wind-energy manufacturers. This support will facilitate advance payments and performance guarantees for new wind projects.

It will also allow manufacturers to prepay suppliers for components such as turbines, grid connections, cables, and transformer stations.

According to the announcement, the EIB-Deutsche Bank’s €1 billion guarantee facility is expected to collect up to €8 billion in private investments.

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While the wind power sector has been a success story for the EU, it faces ongoing challenges, including uncertain demand, slow project approvals, supply chain bottlenecks, high inflation, and increased international competition.

The EIB-Deutsche Bank contract exemplifies how risk-sharing instruments can address these issues and support green transition financing. By providing counter-guarantees, the initiative unlocks additional funds to meet the rising production demands needed to accelerate wind energy deployment.

Wind energy is crucial for the EU to meet its goal of a 45% renewable-energy share by 2030, which requires expanding wind capacity by 117 gigawatts (GW). The EIB’s €5 billion initiative is set to contribute to 32 GW of this expansion.