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05.08.2022 | KPMG Law Insights

BEG reform: changes to the funding conditions

On July 26, 2022, Federal Minister of Economics Robert Habeck presented the long-awaited reform of the federal subsidy for efficient buildings (BEG). The focus here is on energy-efficient refurbishment and simplifying the application process by clarifying responsibilities. However, some of the changes also entail significant reductions in subsidy rates.

Background

According to a press release from the Federal Ministry of Economics and Climate Protection (BMWK) dated July 26, 2022, on the reform of building subsidies, the federal government wants to make subsidies for energy efficiency in buildings simpler, clearer and more reliable, and focus them on the greatest effect for energy savings and climate protection. The reform should be seen in particular against the backdrop of the tense energy supply situation and high prices resulting from Russia’s war of aggression on Ukraine and the worsening climate crisis. This increases the urgency of rapidly replacing fossil technologies in the building sector as well and placing a greater focus on renewable energies and energy efficiency, explained Federal Economics Minister Habeck. In this respect, care must be taken to ensure that as many as possible are eligible for the refurbishment subsidy. In order for this to succeed, the funding allocated to the Climate and Transformation Fund in the budget and economic plan for redevelopment should increase compared to previous years. With the reform of the BEG, annual approvals of 13 to 14 billion euros would remain possible, of which about 12 to 13 billion euros would be for refurbishments. Other reform goals include greater reliability of subsidies and simplifications in the application process.

Changes in BEG funding

Even though the BMWK is focusing on the realignment of the refurbishment subsidy and the reform is to be implemented in two steps, the basic system of the BEG remains unchanged: In a first step, changes to the subprograms for residential buildings (BEG WG) and non-residential buildings (BEG NWG) have already been implemented as of July 28, 2022; the second step is the conversion of the funding conditions in the area of individual measures (BEG EM) as of August 15, 2022. The main changes are:

  • The loan option with the Kreditanstalt für Wiederaufbau (KfW) for individual measures was abolished in the course of implementing the BEG realignment, so that from now on the Federal Office of Economics and Export Control (BAFA) will be responsible for grants for BEG EM and KfW for systemic measures (BEG WG and BEG NWG).
  • New construction subsidies are largely being switched to low-interest loans. Therefore, the repayment subsidies in new construction will be reduced to 5 percent. Exception: For municipal applicants, new buildings are additionally funded in the grant variant.
  • In order to continue to provide access to funding for all applicant groups, it is reportedly necessary to reduce the funding rates. The subsidy rates in systemic rehabilitation and in BEG EM will therefore be reduced by 5 to 10 percentage points.
  • The promotion of all gas-consuming plants and the associated environmental measures will be removed.
  • An expanded fossil-fuel heating exchange program (known as the heating exchange bonus) will be introduced in addition to the regular subsidy rate.

For applications received by KfW up to and including July 27, 2022, the old funding conditions still apply. The changes to the individual measures are subject to a transitional period up to and including August 14, 2022, so that applications submitted up to that date will still be assessed under the previously applicable provisions.

All changes to the BEG reform can be found in detail in the announcement of changes published in the Federal Gazette on July 27, 2022.

Outlook

In the July 26, 2022 press release, the BMWK also let it be known that starting in 2023, building subsidies for new construction would be realigned. The reform is being drawn up by the Federal Ministry of Construction in close cooperation with the Federal Ministry of Economics. In the coalition agreement, the parties of the “traffic light” coalition have already formulated the goal of creating an ambitious, holistically oriented climate policy subsidy for new buildings.

In addition, according to another BMWK press release dated August 2, 2022, the state aid review of the federal subsidy for efficient heating networks (BEW) was also completed. This is a federal government funding program for the construction of new heating networks with at least 75 percent heat feed-in from renewable energies and/or waste heat and for the conversion of district heating to greenhouse gas neutrality. Funding is provided for feasibility studies for new heat networks or the modification of existing ones and – in a second step – for investment in new generation facilities and network infrastructure as well as the implementation of transformation plans. An operating cost subsidy is provided for heat generation from electricity-based heat pumps and solar thermal systems over a period of 10 years. Funding for this program, which is also substantial at €3 billion, will start as early as mid-September 2022. Applications must be submitted to BAFA.

We will be happy to answer any questions you may have on the topics of the realignment of the BEG and BEW and will keep you informed of further developments in this regard.

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