State support for energy transition in German homes on the rise – state-owned KfW bank

State support granted for energy efficiency and renewable energy measures in private households increased to 14.4 billion euros in 2024, up from 12.3 billion euros in 2023, said Germany's state-owned development bank KfW in a press release. Demand for the funding support for climate-friendly new construction and for efforts to make homes more energy efficient increased in the fourth quarter in particular, said KfW.

Demand for the new heating support programme launched at the end of February 2024 rose sharply in the last quarter of the year, with KfW issuing approvals for around 227,000 grant applications with a total volume of 3.3 billion euros until the end of 2024.

The past two years were marked by fierce public debates about a contentious 2023 law to phase out fossil fuels in Germany’s heating sector, the Building Energy Act. A botched timeline regarding the support measures for households switching to climate-friendly alternatives such as heat pumps caused widespread uncertainty. In 2024, heat pump sales in Germany dropped nearly by half due to uncertainties over the law, municipal heat planning and a lack of public knowledge about support programmes.

Germany is aiming to phase out fossil fuels in heating to help bring down emissions in the buildings sector. While climate-friendly heating technologies are now most common in new buildings, the country’s existing buildings continue to rely heavily on fossil fuels.