Energy executives have welcomed a draft of a €500 billion special fund for infrastructure and climate neutrality, set up by the German government. Monies, if distributed effectively, will help the country reach net-zero emissions by 2045.

The draft, however, falls short on clear definitions of terms for funding which makes it difficult for investors to gauge the economic viability of new projects. “The draft did not spell out what is meant by infrastructure investments in Germany’s federal states which have the power to decide how parts of the fund are spent.

Need for clearer targets

“At the federal level, terms like ‘energy infrastructure’ and ‘digitalisation’ remained too vague to ensure investments are targeted,” criticised Simone Peter, head of Renewable Energy Federation (BEE).

Germany’s new coalition government, made up of the Conservative Parties CDU/CSU and the Social Democrats, has instated a debt-financed special fund worth €500 billion for infrastructure projects. One fifth of that package was designated for investments in climate and energy infrastructure transformation projects.

To make sure funds are spent on-target, the government needs to set clear guidelines and supervise the planned infrastructure investments. Policies are aimed to ease the build-up of new key industries like renewable electricity and heat generation, electric mobility and industries around hydrogen and green gas.

Calls for investor guarantees

Guarantees for private investors are called for speed up the expansion of Germany’s district heating grid, while hydrogen co-firing could help decarbonise combined heat and power (CHP) plants.

“To make all cogs work together for a heating transition, the legal framework, support programmes and continuity must be brought into alignment,” Kerstin Andreae, head of the industry association BDEW noted. The industry wants federal states to use their shares of the special fund to hand out guarantees to leverage private capital in new CHPs as well as gas and heating networks.

A stronger link between heat planning and urban development planning is vital to implement the heat transition at the municipal level.