About

The Modernisation Fund is a programme from the European Union to support 13 Member States to meet energy targets by helping to modernise energy systems and improve energy efficiency.

Partners

The Modernisation Fund operates under the responsibility of the beneficiary Member States in close cooperation with the European Commission and the European Investment Bank.

What is targeted

The Modernisation Fund is a key part of the European Green Deal Investment Plan.
It will target investments in:

Which countries can benefit

The Modernisation Fund supports the modernisation of energy systems and the improvement of energy efficiency in 13 lower-income EU Member States. Established in 2018 for the 2021-2030 period, it aims to help the beneficiary Member States achieve their climate targets and the objectives of the European Green Deal

The beneficiary Member States are Bulgaria, Czechia, Estonia, Greece, Croatia, Latvia, Lithuania, Hungary, Poland, Portugal, Romania, Slovenia and Slovakia.  

The Modernisation Fund primarily supports investments in 6 priority areas 

• generation and use of energy from renewable sources, including renewable hydrogen 
• heating and cooling from renewable sources 
• the reduction of overall energy use through energy efficiency, including in industry, transport, buildings, agriculture and waste 
• energy storage and modernisation of energy networks, including demand-side management, district heating, grids for electricity transmission and the increase of interconnections between Member States 
• support for low-income households, including in rural and remote areas, to address energy poverty and to modernise their heating systems and infrastructure for zero-emission mobility 
• just transition in carbon-dependent regions to support redeployment, reskilling and upskilling of workers, education, job-seeking initiatives and start-ups. 

A maximum of 20% of the Modernisation Fund can also be used to support non-priority investments. Proposals that do not correspond to a priority area are subject to a technical and financial assessment by the EIB. 

How is the Modernisation Fund financed?

The Modernisation Fund is financed by revenues from the auctioning of emission allowances under the EU Emissions Trading System (EU ETS)

1. Revenues from the auctioning of 2% of the total quantity of the EU ETS allowances auctioned between 2021 and 2030
2. Revenues from the auctioning of 2.5% of the total quantity of EU ETS allowances auctioned between 2024 and 2030
3. Revenues from the auctioning of EU ETS allowances that Member States have decided to transfer to the Modernisation Fund. Those transfers come from the allowances distributed for the purposes of solidarity, growth and interconnections or the allowances allocated for free to electricity generators.

The total revenues of the Modernisation Fund amount to €57 billion from 2021 to 2030, assuming a carbon price of €75/tCO₂.

Financing an investment from the Modernisation Fund

The Modernisation Fund operates under the responsibility of the beneficiary Member States, who work in close cooperation with the European Investment Bank (EIB)

and the Commission. Together, they compose the Investment Committee for the Modernisation Fund (Investment Committee). Their roles are defined in the EU ETS Directive.

Key steps in the approval process

• Beneficiary Member States can submit investment proposals to the EIB and the Investment Committee at any time of the year. Interested projects cannot submit direct applications for the Modernisation Fund. 
• If the proposed investment falls into a priority area and meets the requirements set out in the EU ETS Directive, the EIB confirms the investment proposal 
• If the proposed investment does not fall into a priority area, it is subject to a technical and financial assessment by the EIB. The Investment Committee then decides, based on the EIB’s assessment, whether to recommend the non-priority investment or not.  
• Once the EIB confirms a proposed investment or the Investment Committee recommends a non-priority investment, the Commission takes a disbursement decision. There are two disbursement decisions per year. 
• Once the disbursement decision is adopted, the EIB transfers resources to the Member States who submitted successful investment proposals. 

More information: Modernisation Fund: How it works 

Governance of the Modernisation Fund

The Modernisation Fund is implemented by the beneficiary Member States, the EIB and the European Commission.  

Beneficiary Member States 

The beneficiary Member States 

• select the investments they would like to support, submitting them and providing the information needed for their assessment 
• implement the projects funded by the Modernisation Fund by paying off the support to the project proponents or scheme managing authority(ies) 
• participate in the Investment Committee 
• monitor and submitg annual reports on the implementation of the Modernisation Fund’s investments 
• audit the project proponents or scheme managing authorities and submitting the audit results to the EIB and the Commission 
• take appropriate measures to ensure that the financial interests of the Modernisation Fund are protected. 

European Investment Bank 

The EIB 

• manages revenues from auctioned allowances and submits them to approved investments of the beneficiary Member States 
• confirms whether an investment is a priority or non-priority 
• conducts financial and technical assessment of non-priority investments, which includes verifying the expected emission reductions 
• acts as the secretariat of the Investment Committee. 

More information: Modernisation Fund: What can be financed 

Investment Committee 

The Investments Committee counts 18 members: one per beneficiary Member State, three representatives of non-beneficiary Member States (Germany, Netherlands, and Sweden) elected by all non-beneficiary Member States, one Commission representative (chair) and one EIB representative.  

The Investment Committee assesses the non-priority proposals and makes its recommendations on financing. The Investment Committee meets twice a year to assess non-priority investment proposals and discuss any other business relevant for the operation of the Modernisation Fund. 

More information: Modernisation Fund: Investment Committee 

European Commission 

The Commission 

• adopts disbursement decisions 
• chairs the Investment Committee 
• ensures compliance with the EU ETS Directive and the Implementing Regulation on the operation of the Modernisation Fund. 

Type of support and synergies with other instruments

The Modernisation Fund allows beneficiary Member States to decide on the form of support they can use (grants, premium, guarantee instruments, loans or capital injections). 

Co-financing from private and public entities is possible as long as State aid rules are complied with and another EU or national instrument does not fund the same costs.