BERLIN (Reuters) - Most of the funding for Europe's push into green energy needs to come from the private sector, the president of the EU's long-term lending arm said on Monday, adding that the continent's credibility hinged on its ability to manage the shift.
"If we want to switch to renewables in Europe on a permanent basis, the lion's share (of investment) needs to come from the private sector," Werner Hoyer, president of the European Investment Bank (EIB), said at the annual Handelsblatt renewable energy conference.
A fully-fledged debt crisis and tougher capital requirements for financial institutions have curbed investor appetite for the investments that are badly needed for the expansion of renewable energy, most notably in Germany, Europe's top economy.
"Europe's ability to reach its energy and climate targets will decide whether or not it can assert itself in a globalised market," Hoyer added.
Germany's decision to exit nuclear power by 2022 led to massive investment needs for the energy sector, with the Hamburg Institute for International Economics saying Germany will need 335 billion euros ($419 billion) by 2020 to manage the expansion of power networks and green energy.
In 2011, the EIB provided 5.5 billion euros in loans for renewable energy projects, compared with total loans for energy projects of 12.8 billion.
"We are talking about a funding need that goes beyond all imagination," Hoyer said of Germany.
While some sectors, such as solar and onshore wind power, are seeing a strong inflow of investments, other areas, most notably offshore wind power, are still considered too risky.
Allianz, Europe's biggest insurer, has so far invested about 1.3 billion in renewable energy, while Munich Re, the world's largest reinsurer, plans to invest 2.5 billion euros by 2016.
The German government is due to discuss a draft law on August 29 aimed at removing uncertainties over legal liability risks for investments in offshore wind parks, which typically cost more than 1 billion euros.
(Reporting by Christoph Steitz; Editing by Helen Massy-Beresford)