European Commission approves revised Combined Heat and Power Act (2020 CHP Act)

On 3 June 2021, the European Commission approved the revised version of Germany’s Combined Heat and Power Act, which entered into force in August 2020. This means that the 2020 CHP Act can now be applied across the entire scope of the approval.

In approving the 2020 CHP Act, the European Commission has confirmed another important legal basis for Germany’s pathway towards a climate-neutral energy sector. The 2020 Combined Heat and Power Act serves to sensibly support the Federal Republic of Germany in its exit from coal. The new legislation introduces new rules on funding for CHP technologies.

The approval of the European Commission provides for legal certainty on important new elements being introduced under the revised Act, including the coal-replacement premium, which incentivises an early decommissioning of coal-fired power plants and their replacement with state of the art gas-fired power plants. Other aspects of the revised legislation, including the funding rates, incentives for greater flexibility, and measures including the heat bonus granted for the use of renewables for heat supply have also been confirmed to be in line with the state-aid rules.