Brussels has today given the green light to the Federal Government’s new support programme aimed at making district heating systems carbon-neutral and building new climate-neutral networks. The European Commission approved the Federal Funding for Efficient Heating Networks (BEW) under State aid law. This means that federal funding can be provided from mid-September.

Vice-Chancellor and Federal Minister for Economic Affairs and Climate Action, Robert Habeck, said:

"This is very good news. Green district heating networks are key to climate-neutral heat supply and crucial for reducing our dependence on fossil fuel imports. In the future, many private households and businesses will be able to efficiently supply themselves with sustainable heat from renewable energy or industrial waste heat. In cities and densely populated areas, in particular, the best way to get away from oil and gas heating is to use district heating which is becoming more and more climate-neutral. Many municipalities stand ready to convert their heat supply. They can get started now that Brussels has given the green light for the aid programme."

At present, the heat supply in Germany is mainly based on fossil fuels. Nearly half of German households still heat their homes with fossil natural gas, and another quarter with heating oil. Heating networks therefore play an important role in the transition towards climate-neutral heat supply. They can harness ambient heat through the use of large-scale heat pumps, integrate renewable heat (for example from solar and geothermal energy) and industrial waste heat, and distribute it to private households. Mainly in cities, but also in rural areas where the population density permits economical operation of such heating networks, connecting buildings to a heating network is the best solution when oil and gas heating systems are replaced.

"The purpose of the Federal Funding for Efficient Heating Networks is to set incentives and provide predictable financial support for the long-term energy transition", Minister Habeck said. The funding is especially aimed at energy utilities, municipalities, municipal utilities and registered associations/cooperatives, which can receive grants for investments in heating networks through this new support programme. In the future, a municipality or a cooperative, for example, can apply for grants when it plans to build a local heating network in a new development area, or when a municipal utility wants to convert a district heating network previously operated by coal-fired cogeneration to operate on renewable energy and waste heat. In addition to the funding programme, the conversion of the heat supply is supported by comprehensive municipal heat planning which serves as central coordination instrument for efficient local heat use.

The Federal Funding for Efficient Heating Networks provides targeted financial incentives for heating network operators to invest in new heating networks and to convert existing networks so that their operation is increasingly based on renewable energy and waste heat. This involves gradually replacing coal- and gas-fired heating and cogeneration plants with renewable heat generation facilities.

The support measures in detail

The targeted funding provided by the German government will serve to promote the construction of new heating networks with at least 75 per cent heat feed-in from renewable energy and waste heat, as well as the expansion, optimisation, and decarbonisation of existing district heating networks.
As a first step, funding will be provided for a project phase that focuses on feasibility studies for new heating networks and transformation plans for the conversion of existing networks to use renewable energy and waste heat.

In a second step, the bulk of the funding will be used to support investments and, in some cases, even operating costs when the measures described in the feasibility studies and transformation plans are implemented.

The maximum support for investment costs is 40 per cent of the investment made in power generation facilities and infrastructure. The subjects of funding include systems for heat supply from renewable energy (solar thermal energy, large heat pumps for the use of environmental heat, deep geothermal energy, biomass), the integration of unavoidable waste heat, as well as infrastructure measures for heat distribution and optimisation of network operation.

Additional funding support for operating costs can be granted over a 10-year period for heat generation from electricity-based heat pumps and solar thermal systems. For individual measures that can be implemented quickly, i.e. solar thermal systems, heat pumps, biomass boilers, heat storage systems, pipelines and district heating substations, financial support for investment costs may also be granted in accordance with simplified requirements, i.e. no feasibility study or transformation plan is required.
Funding is scheduled to be provided from mid-September.

A total of around €3 billion will be available until 2026. After the funding guideline comes into force, applications for funding can be submitted to the Federal Office for Economic Affairs and Export Control (BAFA).

Further information

According to initial estimates, the use of heat from solar thermal systems (up 9 per cent) and heat pumps (up 8 per cent) increased in the first semester of 2022 compared to 2021.

The use of wood (down 6 per cent) and biogas (down 6 per cent) has declined. Overall, the use of renewable heat was just under 116 TWh in the first half of 2022, about 4 per cent less than in 2021 due to weather conditions. The share of fossil fuels also declined due to the mild winter. As a result of the rising cost of oil and gas, renewables are expected to account for a higher share of total final energy consumption for heat generation in 2022.

The six-month figures of the Working Group on Energy Balances are available here.