Renewable energy potential on Greek islands

More than 1.6 million people live on more than 200 Greek islands. This population rises sharply during the summer tourist season, creating a huge jump in electricity demand. Most of the islands still depend on fossil fuel imports for their energy supply, electricity generation, transport and heating. Fossil fuels are a major source of CO₂ emissions, but they are also expensive. The cost of electricity generation on the islands can be up to ten times higher than electricity supplied by power lines on the mainland. This is a big financial burden for the islanders.

There are several ways to create renewable energy on the islands, such as solar, wind and geothermal parks. This green energy can bring big benefits for society and the economy. It would significantly reduce the carbon footprint on the islands. To advance projects like this and comply with European Union objectives, Greece’s energy transition policies have evolved rapidly. Greece hopes to increase renewable energy generation in electricity to 35% by 2030 and 60% by 2030.

In 2017, Greece was included in a European initiative, “Clean Energy for EU islands.” This programme puts a special focus on the energy transition of islands by providing incentives for projects such as heat pumps, solar heaters, rooftop solar panels, energy efficiency measures for private buildings, electric vehicle chargers for homes, the use of electrified public transport and micro-mobility such as bicycles or electric scooters. It also includes battery storage, upgrading hybrid power stations, developing smart marinas, adding electric vehicle charging stations, building geothermal power plants, and establishing energy plants that use biowaste.

“The energy sector is one of the biggest sources of greenhouse gas emissions in the European Union and needs to undergo a deep transformation towards a more sustainable energy system,” says Stefano Capuzzi, an energy expert at the European Investment Bank. New investments are needed to help the renewable energy transition on the Greek islands. In 2018, a revision of the European Union emissions trading system directive enabled Greece to sell up to 25 million so-called allowances for the decarbonisation of the electricity supply on the Greek islands. Each allowance, which is sold at an auction, gives the buyer the right to emit one tonne of carbon dioxide. The directive assigns some roles to the European Investment Bank, such as confirming projects and managing the finances. In November 2024, Greece, the European Commission and the European Investment Bank signed an agreement to launch this initiative, called the Greek Island Decarbonisation Fund. The sales of the allowances will finance up to 60% of the projects, worth about €2 billion at current carbon prices. The scheme will diversify energy supplies by supporting renewable energy, power grid connections and onshore power supplies for ships.

Significant preparation is required to develop a pipeline of big investments, especially in smaller, more remote and poorly connected areas, where the needs are the largest. The advisory assignment funded through the InvestEU Advisory Hub put in place resources to support the plans once the projects are confirmed. The aim is to ensure that Greece can implement the projects.

“We strive to provide strategic and targeted technical advisory to help Greece,” says Alexandros Zacharof, a senior advisor at the European Investment Bank. “The goal is to help them roll out these investments and plan ahead.”

Grants can cover up to 60% of the investment projects. The scheme is expected to mobilise more than €4 billion in investments in the next six years across nine island groups in Greece. “EIB financing will play a significant role, building on the advisory support, to create a greener and more sustainable economy,” says EIB Vice-President Ioannis Tsakiris.

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