Where does the funding come from and based on what law?
The Federal Office of Economics and Export Controls (BAFA) and the Kreditanstalt für Wiederaufbau (KfW) have enacted various measures designed to ensure that existing and future building stock is made more environmentally friendly. These provisions are all summarized in the so-called Federal Support for Efficient Buildings (BEG). This includes not only funds for replacing the heating system, but also for renovating the building envelope and various other energy-related measures.
Not only residential buildings, but also non-residential buildings fall under these provisions. This means, for example, that office buildings can also benefit from the subsidies.
The associated law is the GEG, the Building Energy Act. And while we're on the subject of abbreviations, we can separate these two relevant laws from the laws that have nothing to do with heat pumps. That is, from the WEG, the Residential Property Act, and the EEG, the Renewable Energy Act, which is relevant for PV systems.
Which heat pumps will be subsidized in 2023?
BAFA subsidies for heat pumps will be available in 2023 for machines that are used at least partially for heating buildings. If a heat pump is only installed to heat hot water, it is not eligible for subsidies. There are also minimum efficiency requirements for the installed machine. This must achieve an annual performance factor (APC) of 2.7 or higher. That means over the entire year, the machine makes 2.7 units of heat energy from one unit of electricity. (Here you can find more details about the COP - link to COP article, possibly as infobox).
This requirement is not particularly high. Modern heat pumps often achieve a SCOP of 3.5 and higher, even in older buildings. Annual performance factors are typically comparable or even higher. There are also clear minimum requirements for "seasonal space heating efficiency". This is derived almost directly from the SCOP. Thankfully, BAFA compiles a list of all eligible machines at regular intervals. You can find these on the official BAFA site.
Exceptions to the subsidy apply at most to tinkerers. Thus, no plants are promoted which are or were operated in less than four copies and are therefore considered prototypes. Also not supported are already used plants or plants that were mainly assembled from used plant components.
How much subsidy money is available for heat pumps in 2023?
From a minimum investment of 2,000 euros, a minimum of 25% of the system is subsidized. If a groundwater, wastewater or geothermal heat pump is installed, the subsidy share is already 30%. Likewise one comes on 30%, if the installed heat pump uses a natural refrigerant such as propane. If heating was previously done with gas or oil, there is even an additional 10%.
Because the refrigerant bonus and the energy source bonus cannot be cumulated, a subsidy rate cap of 40% applies in any case. This may amount to tens of thousands of euros. But a maximum of 24,000 euros.
The subsidy rate currently applies not only to the machine itself, but also to other necessary supplied components such as storage tanks and electrical cabinets, the installation and commissioning of the plant, and other development costs.
What will change in the promotion of heat pumps in 2024?
Although the 2024 law has not yet been fully drafted, the government has already presented a draft in the first half of the year. In its present form, this did not go through with great drama. However, it should represent a good overview of the future direction of thrust.
The funding rates will probably be increased in 2024. The rate will again be at least 30%. There will probably be an additional bonus for very rapid implementation of heating system replacement. More specifically: Anyone who replaces a heating system that is more than 20 years old and operates with coal, oil or gas before the respective municipality would have provided for this will receive an additional 20 percent subsidy. The cut-off year for larger municipalities is 2026, for smaller municipalities 2028. If the installation takes place later, the speed bonus is reduced with each passing year. This would mean that the subsidy would already be 50%. Households with incomes below 40,000 euros will receive up to 30% additional subsidy. The current refrigerant bonus, as well as source bonus will probably remain in the same form of 5%.
However, the subsidy rates are capped at a maximum of 70%. Also under discussion is a cap on subsidies at around 21,000 euros - especially for geothermal and groundwater heat pumps, the gross costs can also exceed 50,000 euros. So what sounds like significantly higher subsidy rates for 2024 will not benefit all projects equally.
While subsidy rates are increasing across the board, eligible costs are expected to decrease. In other words, homeowners will be able to claim a higher deduction on a smaller amount, but more non-subsidized costs will fall on households.
However, because this information only comes from a preliminary draft, there is no certainty as yet as to whether the BAFA subsidy for heat pumps will really be structured in this way in 2024.
Should you wait until 2024 to replace your heating system?
With the unclear signals from politicians, it is difficult for homeowners as well as all other groups to judge whether waiting until next year to replace them might be financially worthwhile. The fact is, however, that sales of heat pumps have declined as a result of the lack of clarity. This can be explained mainly by the fact that many homeowners prefer to wait for clarity instead of looking for replacements now. Accordingly, we can only present arguments for implementation in 2023 or for waiting until next year.
What is the case for a rapid change?
Due to the high expectations of the subsidy rates for 2024, many households have decided to postpone their heating replacement. Manufacturers who have ramped up their production for 2023 accordingly have relatively large inventories and short delivery times for BAFA-subsidized heat pumps. One could even go so far as to say that delivery times have not been this good since 2020 and may not be similarly good any time soon. If the expected large quantities are requested in 2024, then waiting times of 6 months upwards will probably occur again.
To still find customers in 2023, expect very good offers from the manufacturers of high-quality heat pumps. Together with the still very good subsidy rates of up to 40% for air-to-water heat pumps with natural refrigerants, these discounts make ordering soon very attractive. Depending on the development of energy prices, you can start saving on heating costs even 1-2 heating seasons earlier. This can be well over a thousand euros.
With the expected higher subsidy rates at lower covered costs and a cap on the maximum subsidy amount, it is questionable whether you will actually receive more money from BAFA next year for replacing a heat pump. In exchange, the non-covered portion of the project could increase. Especially for slightly more expensive projects or more additional work, this could sink in more.
What is the argument for waiting?
Even if the funding conditions could still be adjusted, the approximate size will probably be right. Projects that are sure to be implemented quickly will therefore receive a very good funding rate. If, in addition, these projects do not have too high costs, so that they could hardly come close to a possible cap, this is an indication that waiting could be worthwhile. However, because the eligible costs are reduced to an unclear extent, this depends on the composition of the costs.
With the subsidy of up to 70% for families below the described income limit, it is most likely to make sense for this group to wait before replacing the heating system. The bonus of 30% makes several thousand to ten thousand euros.
If the heating system replacement is not particularly urgent and the current heating system is still running well and does not cause extraordinary heating costs, then a possible longer waiting period until your new heat pump is installed is not a problem. Even in this case, in combination with the above arguments, you will not suffer too much from waiting.
How do you receive your BAFA grant?
If you decide to apply for BAFA funding for heat pumps (this year or in the next few years). Then there are some stumbling blocks to avoid.
Only when there is a commitment for the BAFA funding from the office itself is this secured. So wait with your commitment until then. Project entries you make in each case on the website of BAFA and is only valid if you have not yet made a definite commitment to the seller. As part of the application you must enter the costs, these are taken from the offer of the product you have selected and are definitive. Additional costs incurred later are not covered, so get a firm quote.
Furthermore, there are currently additional conditions (which may change next year) for you to receive BAFA funding for your new heat pump. In addition to the requirements described above, the heating system to be replaced must have been in operation for two or more years and the building itself must not be a new construction (age 5+ years required). Special conditions also apply when replacing an old heat pump.
