Heat pump installations tumble in Germany following subsidy cut

Applications for heat pump subsidies in Germany dropped by roughly half in the first six months of 2023 following a subsidy cut, newspaper Der Spiegel reported. According to figures from the economy and climate action ministry (BMWK), some 48,800 heat pump support applications were registered between January and June, compared to nearly 97,800 in the first half of 2022. Applications peaked in August 2022, just before the government lowered the upper subsidy limit. Economic incentives for heat pumps were further eroded since then as gas prices fell dramatically from their energy crisis peaks. In addition, many potential buyers are irritated by protracted negotiations over Germany’s building energy law, which has stirred controversy in the government coalition, the article added. Moreover, municipal plans for decarbonising heating, which are often a prerequisite for house owners to find out which technologies are applicable in their building, in some regions might take until 2028.

The government has announced it will cover up to 70 percent of the costs of new and sustainable heating systems from 2024, which might let people wait with their applications, according to the article. However, the new system also caps the maximum eligible support amount to some 21,000 euros for a whole house, 3,000 euros less than under the former scheme. Basic support for heat pumps disbursed by the Federal Office of Exports and Export Control (BAFA) was reduced on average by ten percentage points in August 2022, from covering 35 percent to 25 percent of the purchasing costs. At the same time, support rates for applications that are expected to be particularly effective has been increased. Heat pumps are regarded as a key technology for decarbonising Germany’s heating sector and the government has said it aims to install up to 500,000 new units per year by 2024.