Modernisation Fund

The Modernisation Fund is a key financial instrument established by the European Union to support low-carbon energy transitions in ten Eastern EU Member States: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia. Funded by revenues from the EU Emissions Trading System (ETS), the Modernisation Fund accelerates strategic projects that drive the modernisation of energy systems in these countries, fostering sustainability, innovation, and economic growth. The fund is a critical tool to help the EU meet its climate ambitions under the European Green Deal and the Fit for 55 package.

The Modernisation Fund is financed through revenues generated by 2-2.5% of the total ETS allowances allocated for the period 2021–2030. Depending on market conditions and the carbon allowance price, the fund is expected to provide up to €48 billion by 2030. These funds are distributed among eligible Member States, with larger allocations to countries that have higher emissions and greater financial needs – such as the Czech Republic, Poland, Romania. The Modernisation Fund plays a crucial role in ensuring a fair and inclusive energy transition across Europe, particularly for regions with a higher dependency on fossil fuels. This helps balance economic growth with environmental responsibility.

The projects that can be funded through the Modernisation Fund target significant reductions in greenhouse gas emissions, improvements in energy efficiency, and modernisation of the energy infrastructure. This includes generating and using electricity from renewable sources (including wind, solar, hydropower and hydrogen), reducing overall energy use in industry, transport, buildings, agriculture and waste, district heating networks, the modernisation of electricity grids to support the integration of renewable energy and energy storage solutions, the increase of interconnections among Member States and infrastructure for zero-emission mobility. These projects play a vital role in accelerating the EU’s transition to a low-carbon economy.

Project proposals for funding under the Modernisation Fund must go through several key stages:

1. Project proponents must apply for funding through their government, either directly or via dedicated calls for projects.
2. Member States select the investments they wish to submit for the Modernisation Fund support.
3. The EIB confirms if the project is a priority investment.
4. The European Commission and the EIB transfer the financial resources to the beneficiary Member States.
5. The Member State and the project promoter implement the funding agreement to carry out the energy project. This highly structured process ensures that the projects supported under the Modernisation Fund align with the EU’s climate and energy policies.

european economics leverages its expertise in public funding for strategic projects in the energy sector to help clients access State aid through the Modernisation Fund. We assist with all aspects of project development, ensuring applications are designed to maximise funding potential while minimising the risk of rejection. From preparing comprehensive application files – including funding gap calculations – to navigating the evaluation process, we provide end-to-end support to secure the funding. With our proven track record in State aid funding procedures, european economics is your trusted partner in securing Modernisation Fund support for strategic energy projects in Eastern EU countries.