Beyond the Flagship: How Can SMEs Finance the Twin Transition?

(Four Financing Models for Industrial Decarbonization)

In my previous articles, I examined how Schneider Electric’s factory in Molins de Rei, Barcelona, achieved Zero CO₂ status and why most SMEs cannot replicate the model. The barriers are structural:

• No access to EU recovery funds
• No utility partnership
• No internal technical expertise
• No tolerance for long payback periods

But identifying barriers is not enough. The next question is: What would it actually take for SMEs to decarbonize? This article explores four financing models that could make the twin transition accessible to smaller firms.

Understanding the Financing Gap

Before exploring solutions, let me clarify the problem. Schneider’s project was financed through a hybrid capital structure:

Source	Type	Accessibility for SMEs
NextGenerationEU	Grant	Low
Iberdrola partnership	Microgrid-as-a-service	Low
Internal corporate investment	Equity/debt	Low

SMEs cannot easily assemble this mix. Each source has barriers:

• EU grants: Complex application, co-financing requirements, long timelines
• Utility partnerships: Utilities prioritize larger customers
• Internal investment: SMEs lack balance sheet capacity for long payback periods

The result is a financing gap: the models that work for large corporates do not work for SMEs.

Model -1: Shared Infrastructure & Utility Partnership

The Idea: Instead of each factory investing in its own renewable energy infrastructure, multiple SMEs share a collective system.

How It Works: Imagine an industrial park with 10 SMEs. Together, they:

1. Install a shared solar array and battery storage
2. Contract with a utility for microgrid-as-a-service
3. Pay a service fee proportional to their energy use

The utility owns and operates the infrastructure. The SMEs avoid upfront capital costs.

Why It Could Work:

Benefit	Explanation
Economies of scale	Shared infrastructure reduces per-firm costs
Risk distribution	Capital and operational risks spread across multiple actors
Technical simplification	Utility manages complexity; SMEs focus on production

Barriers:

• Requires coordination and trust among firms
• Needs a utility willing to serve smaller customers
• Governance structures must be established

Example: Industrial symbiosis projects in Denmark and the Netherlands have demonstrated that shared energy infrastructure can work for clusters of SMEs.

Model – 2: Blended Finance & Public-Private Mechanism

The Idea: Public funds can de-risk private investment, making decarbonization projects viable for SMEs.

How It Works: Options include:

• Guarantee funds that reduce lender risk for SME decarbonization loans
• Green bonds issued at municipal or regional level, with proceeds directed to SME projects
• Pay-for-performance models where public funds cover part of the upfront cost, and SMEs repay based on verified savings

Why It Could Work:

Benefit	Explanation
De-risking	Public funds absorb some risk, making private lenders more willing
Scale	Pooled funds can support multiple projects simultaneously
Alignment	Public goals (emissions reduction) align with private goals (cost savings)

Barriers:

1. Administrative complexity: SMEs often lack capacity to apply for and manage public funds
2. Requires intermediary organizations to aggregate demand
3. Political will and budget allocation

Example: The UK’s Green Deal Finance Initiative attempted to provide upfront financing for energy efficiency, repaid through energy bills. While the program was discontinued, it offers lessons for future design.

Model – 3: Aggregated Procurement Cooperatives

The Idea: Individual SMEs cannot negotiate power purchase agreements with utilities. But a cooperative of 50 SMEs could.

How It Works: SMEs form a cooperative or join an existing industry association. The cooperative:

1. Aggregates energy demand from members
2. Negotiates power purchase agreements (PPAs) with renewable energy providers
3. Distributes costs and benefits proportionally

Why It Could Work:

Benefit	Explanation
Bargaining power	Combined demand gives SMEs leverage
Lower prices	Aggregated procurement reduces per-unit costs
Simplified access	Cooperative handles negotiation and administration

Barriers:

• Requires intermediary organizations to coordinate
• Members must agree on terms and governance
• Utilities must be willing to negotiate with cooperatives

Example: In Germany, energy cooperatives (Energiegenossenschaften) have enabled communities and SMEs to jointly invest in renewable energy projects.

Model – 4: Technical Assistance and Capacity Building

The Idea: SMEs lack internal expertise. Shared technical assistance can fill the gap.

How It Works: Regional development agencies, universities, or industry associations provide:

1. A pool of energy auditors available at subsidized rates
2. Digital tools licensed collectively and shared across firms
3. Training programs for existing staff on energy management

Why It Could Work:

Benefit	Explanation
Access to expertise	SMEs gain skills they cannot develop internally
Cost sharing	Expenses spread across multiple firms
Knowledge transfer	Training builds long-term capacity

Barriers:

• Funding must come from somewhere – public budgets, industry levies, or EU structural funds.
• Requires coordination among multiple stakeholders
• May take time to build trust and participation

Example: The Barcelona Circular hub provides training and technical assistance to industrial SMEs on Industry 4.0 and circular economy models.

The Common Thread: Collective Action

None of these models are easy. Each requires coordination, trust, and investment. But they point in a clear direction: the twin transition for SMEs requires collective action, not individual effort.

Schneider could go it alone. Most SMEs cannot. Policy must recognize this difference.

What Comes Next

This article is the third in a series on the twin transition in practice. In the final article, I will connect this case study to broader questions of corporate social responsibility and capital structure and outline a research agenda for the future.

Let’s Continue the Conversation

I am a researcher at the University of Girona, studying corporate social responsibility and its impact on capital structure. This case study is part of a broader project on the twin transition and its implications for firms of different sizes.

If you work in industrial decarbonization, SME sustainability, or energy policy, I would value your perspective.

• Have you seen these financing models work in practice?
• What barriers remain?
• Are there examples from your region or sector?

Feel free to connect with me on LinkedIn or send me a message. Let’s continue the conversation.