The European Investment Bank (EIB) and Commerzbank signed a cooperation agreement at last month’s Hannover Messe to enable investments of up to €2bin in electricity grids in Germany and other EU member states.

The cooperation will address key financing bottlenecks for grid expansion and upgrades, which are crucial for integrating renewable energy and reducing energy costs for businesses and households.

To achieve this, the EIB is providing Commerzbank with a guarantee of €250m, which in turn enables Commerzbank to offer more guarantees for component manufacturers. This will help strengthen supply chains for cables, transformers and other equipment, and mobilise grid investments totalling up to €2bn.

“We see every day how large the investment and financing needs for grid infrastructure are,” said Neil Aiken, board member at Commerzbank. “The EIB guarantee strengthens our capacity to address these needs and helps ensure a secure, affordable and sustainable energy supply in Germany and across Europe.”

EIB vice president Nicola Beer added: “With this new partnership, we are creating sorely needed room for manoeuvre in accelerating the expansion of Europe’s electricity grids and making them fit for a climate-neutral energy system. Without efficient grids, wind turbines, solar panels and heat pumps go unused. We would miss the energy transition, literally sitting in gridlock. Our cooperation with Commerzbank will support investments of up to €2bn in new lines, transformers and smart infrastructure, make the energy supply more resilient, and help reduce energy costs for people and businesses in the long term.”

The energy transition is increasingly localised in the electricity grid, especially lower voltage levels, into which much of the electricity from renewable sources will be fed in future. Grid operators anticipate a sharp rise in investment for grid expansion by 2030.

By 2045, it’s estimated that Germany’s grids will need more than half a million additional kilometres of cables and transformers. Investment projections for the German electricity grids by 2045 total around €431bn; that’s around €20bin per year, almost four times the amount in 2022.

At the same time, operating costs are rising due to grid bottlenecks and system interventions. In 2023, more than 27,000GWh of electricity had to be balanced through redispatching, costing around €3.2bn. Bringing these costs down in the long term will take not just physical grid expansion on a massive scale, but also increased digitalisation and intelligent control across the grid.

Operators see digitalisation, smart grids and intelligent metering systems as key to increasing transparency and controllability, and to improving how existing grids are used. Among other things, they expect greater transparency on consumption and feed-in, better integration of new load sources such as heat pumps and e‑mobility, and more efficient maintenance of infrastructure.

The cooperation will take place under an EIB Grid Package that supports financing for electricity grids and storage by strengthening European supply chains for grid equipment. For that, the EIB is providing Commerzbank with a portfolio guarantee of up to €250m, covering up to 50% of the risk arising from performance and advance payment guarantees for equipment manufacturers.

These guarantees are standard in grid construction to protect operators and development firms against the risk of supplier failure to complete projects in accordance with contracts, or to deliver against advance payments. As Europe’s market for grid components is dominated by a handful of large OEMs and only a few banks offer such guarantees, institutions are increasingly running up against regulatory risk and concentration limits.

The EIB (www.eib.org) guarantee lets Commerzbank (www.commerzbank.de) partly share out its risk exposure to OEMs, free up regulatory capital and provide more guarantees. This increases financing capacity for new lines, substations, transformers and cable connections for faster implementation of expansion projects.

“With the new EIB Grid Package, we are transferring the successful risk‑sharing model from our wind package to the electricity grid,” Beer said. “We are helping banks like Commerzbank meet the swiftly rising demand for guarantees in the grid sector.”

The EIB Grid Package builds on an existing initiative for the wind energy value chain, under which the EIB and partner institutions such as Commerzbank are already providing risk mitigation for wind turbine manufacturers.