Overview of a German Federal Funding for Efficient District Heating Networks

At the beginning of the new year, we would like to make an exception and not present a scientific paper. In this issue of our newsletter, we instead focus on the draft "Bundesförderung für effiziente Wärmenetze” (federal funding for efficient district heating networks) or BEW for short. This is a German funding program for district heating networks. Many of you are certainly familiar with the previous federal funding for efficient district heating networks (“Wärmenetzsysteme 4.0”), which will be integrated into the new funding scheme. Like the “Wärmenetzsysteme 4.0”, the BEW is intended to encourage investment in innovative and low-emission energy system solutions and thus contribute to achieving greenhouse gas neutrality in heat supply by 2045. The planned funding will support the important role of existing and new district heating and cooling systems with a very high share of renewable energies for the success of Germany's climate protection targets. To this end, some important aspects have been modified compared to the “Wärmenetzsysteme 4.0” program, especially for existing networks.

The BEW is divided into three funding modules:

• Module 1: Transformation plans and feasibility studies - In addition to feasibility studies for new heating and cooling networks, the BEW also funds transformation plans for existing district heating networks.
• Module 2: Systemic funding - With a previous feasibility study or transformation plan, systemic investments and operating costs of heating and cooling networks can be funded.
• Module 3: Individual measures - In addition to systemic funding, investments for individual measures (e.g. integration of a new renewable heat source) can also be funded.

We would like to succinctly summarize the requirements and opportunity of the BEW funding guideline in our newsletter. We have taken the draft of 18.08.2021 as a basis, which can be found at the AGFW at https://www.agfw.de/fileadmin/AGFW_News_Mediadateien/Energiewende_Politik/20210818_BEW-RL_Entwurf2.pdf. Companies, municipalities, municipal enterprises as well as registered associations and cooperatives are eligible to apply. Contractors may also be eligible to apply if special conditions apply.

BEW Module 1: Transformation plans and feasibility studies

The first module funds transformation plans for existing heating and cooling network systems, as well as feasibility studies for the new construction of district heating networks. Networks eligible for funding must include at least 17 buildings or 100 housing units. This must be specified before the feasibility studies begin.

Transformation plans must outline the temporal, technical and economic conversion of existing district heating networks until 2045. The goal is to show how the existing district heating network can be operated with renewable heat sources by 2045. The complete transformation plan contains an analysis of the existing heat network system's current state. From this current state analysis, scenarios are developed for the specific transformation of the network. These include, for example, the identification of potential renewable energy sources and waste heat, as well as demand scenarios (e.g., refurbishment, retrofitting, and expansion) up to the year 2045. Building on these scenarios, the heat generator portfolio, including the integration of storage systems, must be presented. The share of biomass in the annual heat is limited depending on the network length. In particular, the phase-out of fossil fuels in heat generation by 2045 needs to be investigated. The complete transformation plan also includes the necessary hydraulic parameters (temperature, pressure, volume flows, etc.) of the district heating network and measures for network optimization (e.g. measures in the buildings and for temperature reduction). All results must be documented in a detailed description of the transformation plan.

Feasibility studies can be funded for new heating and cooling network systems. New heating and cooling networks must meet a renewable energy share of at least 75%, and in addition the pathways for the years 2030, 2045 and 2040 must also be specified to make sure that a renewable share of 100% is met by 2045. The feasibility studies have a similar structure to the transformation path studies. They include an analysis of the area to be supplied (renewable energy demands and potentials), the heat generator portfolios, the network design, and optimization of the heat network parameters. In addition to the documentation of the results including a time and resource plan, the description of concrete measures for citizen involvement is also required. This is intended to ensure a high level of acceptance and thus fast implementation of the project.

Transformation plans and feasibility studies are funded in the BEW with up to 50 %, while the maximum funding amount is € 600,000. Eligible costs include not only the preparation of the transformation plan or feasibility study with the contents outlined above, but also planning services based on the HOAI. Planning phases 2-4 (preliminary, draft and approval planning) can be considered eligible for the evaluation for concrete measures.

BEW Module 2: Systemic funding (Investment and operating cost funding)

The prerequisite for systemic funding is a transformation plan (for existing district heating networks) or a feasibility study (for new district heating networks) that meets the required minimum content of the BEW. This means that older studies can also be used as the basis for systemic support, provided they meet all the requirements.

The BEW defines a systemic funding as all measures for generation plants, heat distribution up to the transfer to the buildings, if they contribute to decarbonization and efficiency increase. This includes all necessary planning, investments in eligible heat sources, infrastructure, as well as digitalization measures. For systemic funding, eligible measures are defined. These are divided into heat sources and infrastructure.

Eligible heat sources are renewable heat sources on the one hand and industrial, commercial or other waste heat on the other. Renewable heat sources include solar thermal (including photovoltaic thermal collectors), heat pumps using environmental heat (e.g., ambient air, wastewater, deep and near-surface geothermal energy, ...) deep geothermal energy for direct use, biomass plants, and direct electric heat generators, provided they are used in a grid-serving way. It is important to note that fuel cells as well as plants for the conversion of hydrogen to heat are not eligible in the BEW, but these can be part of the transformation plan without negatively affecting the eligibility of other measures. The provision of heat from fossil fuels is also not eligible.

The entire infrastructure required for a heating or cooling network is eligible for BEW funding. This includes the pipelines, fittings, and substations, as well as heat storages, high-efficiency pumps, pressure control, and measurement and control technology.

In addition to the heat sources and the infrastructure, support is provided for surrounding measures (e.g. heating plants and collateralization for new installations of eligible heat sources) and planning services for phases 5-8 of the HOAI.

Networks that are eligible for systemic funding must meet several requirements. In addition to the size of the thermal network, these requirements relate to the maximum amounts of heat fed in from biomass, as well as fossil-fired CHP plants. The network's supply temperature is limited to a maximum of 95 °C.

A major innovation of the BEW is the subsidization of operating costs of solar thermal plants as well as of electric heat pumps. Solar thermal systems are subsidized at a rate of 2 ct/kWh (with the thermal output in kWh as a reference). The funding of operating costs for electric heat pumps is a maximum of 90 % of the verified electricity costs in the first ten years of operation. However, the BEW specifies a calculation rule that limits the funding depending on the EEG rate, as well as the annual performance. This limitation is set at a maximum amount of 7 ct/kWh for heat pumps run on electricity purchased from the public grid or closed distribution grids and 3 ct/kWh for electricity purchased from renewable energy plants without grid transmission. For the approval of the operating cost subsidy, the heat pump must achieve at least an annual coefficient of performance of 1.25.

Investment funding for new and existing district heating networks is provided for up to 40% of eligible measures' costs. Funding is capped at 50 million €. Above this limit, individual approval from the EU Commission is required. The approved time for implementing the measures is 48 months and can be extended once by up to 24 months. The subsidized networks must be operated for a period of at least ten years (from full commissioning). During this period, compliance with the minimum requirements (share of renewable energies, maximum shares of biomass and CHP, etc.) is set out in annual reports. The operating cost funding is limited to the period of ten years.

BEW Module 3: Individual measures

As a third option, individual measures are also funded in the BEW. No feasibility study or transformation plan is required for this. Measures that can be implemented quickly are funded, such as the integration of renewable energy sources (solar thermal, heat pumps, biomass, direct-electric heat generators) and infrastructure measures (heat storage, piping for the integration of waste heat or renewable energies, and substations). Here, the funding rate is 40 % of the eligible measures' costs. A maximum of 50 million € in funding is approved (several individual measures are added together), and the approved time for implementation is 24 months, with a possible one-year extension.

Further information on federal funding for efficient district heating networks (BEW)

We hope that we have been able to provide a good and concise overview of the important funding tool BEW with our first newsletter in 2022. If you want to know whether one of your projects can be funded with the help of the BEW and which organizational requirements have to be met, please contact us and we will be happy to support you.

The draft of the BEW is available here (German only): https://www.agfw.de/fileadmin/AGFW_News_Mediadateien/Energiewende_Politik/20210818_BEW-RL_Entwurf2.pdf. Several associations and organizations have already commented on the draft, including the AGFW and the Institute for Energy and Environmental Research in Heidelberg.

Our next issue will be published on February 02, 2022. For the next issue, we will again focus on a scientific article.