GRANTS AND INSTRUMENTS FOR THE INSTALLATION OF A PELLET HEATING FURNACE

European Member States have various instruments in place to promote the switch to renewable energies. In Germany, the installation of pellet heating or pellet combustion systems is supported by a number of attractive subsidy programmes, including the Federal Subsidy for Efficient Buildings (BEG), the Federal Subsidy for Energy Efficiency in Industry (EEW) and the Federal Subsidy for Efficient Heating Networks (BEW). Additionally, there are tax incentives as part of the tax incentive for energy-efficient building modernization.

HEAT FOR BUILDINGS; HEAT NETWORKS OR PROCESS HEAT?

It is crucial to select the appropriate funding program, depending on whether the planned heat generator.

a building directly or through so-called building networks (a network of up to 16 buildings with a maximum of 100 apartments) – here BEG and tax incentives are relevant,
the generated heat is to be fed into a heating network that covers more than 16 buildings or more than 100 apartments – this is the responsibility of BEW,
primarily for the direct provision of process heat from renewable energy sources – in this case, EEW comes into play.

Overview of funding programs for wood-burning heating systems
Type of heat supply		Inventory	New construction / new facilities
Building heating	Heating system modernization only	BEG Individual Measures (BEG EM) KfW: Direct grants Tax incentives for individual energy-efficient building modernization measures Tax office: Tax return (Equivalent to BEG Individual Measures)	no grant
Building heating	Energy-efficient house (WG) or energy-efficient building (NWG)	BEG Residential Buildings (BEG WG) BEG Non-Residential Buildings (BEG NWG) KfW: Promotional Loans
Network with...	... up to 16 buildings and up to 100 apartments	BEG Individual Measures (BEG WG) BAFA: Direct Grants
	... up to 16 buildings and up to 100 apartments	BEG Residential Buildings (BEG WG) BEG Non-Residential Buildings (BEG NWG) KfW: Promotional Loans
	...more than 16 buildings or more than 100 apartments	Federal program for efficient heat networks (BEW)
Process heat		Federal funding for energy and resource efficiency in the economy (EEW) KfW: Promotional loans, BAFA: Direct grants

BEG: Grants and subsidies for existing buildings and building networks

30 to 70% subsidy for pellet heating

The grants from the federal funding for efficient buildings for individual measures (BEG-EM) are particularly interesting for the exchange of fossil heating technology with a modern pellet firing system. These can be applied for through the “Kreditanstalt für Wiederaufbau” (KfW) before the measure is started. Those who want to partially finance the costs can also do so through BEG-EM funding, as it also provides favorable supplementary loans that can be combined with the grants.

This funding is available for the renovation of buildings that are at least five years old and covers up to 30,000 euros for the first residential unit. Additional amounts can be claimed for each additional residential unit: 15,000 euros for the second to sixth residential unit and 8,000 euros for each additional unit. The application must be submitted before the measure begins.

30% of the basic subsidy is available to all building owners, including private owners, landlords, businesses, municipalities, or contractors for residential and non-residential buildings when installing a new pellet boiler.
20% climate speed bonus: For the exchange of fossil fuel-using heating systems (e.g., gas, oil) for a pellet heating system, owner-occupiers will receive an additional 20% bonus by the end of 2028. Condition: The old heating system is at least 20 years old and is combined with a solar system or heat pump.
$2,500 emissions reduction bonus: For pellet boilers that emit less than 2.5 mg/m³ of dust.
30% income bonus: For owner-occupiers with a taxable household income of up to 40,000 euros per year.

The eligible costs can be drawn once and not annually, but can be used over several years. The maximum subsidy amounts to 70 percent of the costs, plus the emission reduction bonus. The extra subsidies are reserved for owner-occupiers only.

Quelle/Idee: Bundesministerium für Wirtschaft und Klimaschutz (BMWK). Stand: Mai 2024
© Deutsches Pelletinstitut GmbH

No promotional loans for new buildings using biomass

In Germany, no subsidies or promotional loans are granted for the use of biomass as a heating source in new buildings, even though low-interest loans are available for energy-efficient new buildings.

Low-cost supplementary loans to the BEG grant

Those who want to partially finance the costs of a pellet heating system can take out a BEG-EM supplementary loan of up to 120,000 euros per residential unit once the subsidy has been approved. Households with an income of up to 90,000 euros will benefit from additional interest rate reductions.

Craftsman bonus without technical requirements

Those who do not meet the minimum technical requirements can use the craftsman bonus, which subsidizes 20% of the craftsman's labor costs, up to a maximum of 6,000 euros per year. This corresponds to a tax reduction of up to 1,200 euros per year.

20% tax bonus to promote pellet heating.

Instead of BEG-EM funding, homeowners who own self-occupied homes that are at least 10 years old can also claim a tax bonus for the renovation, which is applied for through the income tax return at the tax office once the work is completed. Up to 40,000 euros can be deducted from taxes. The tax bonus is spread over three years.

TECHNICAL MINIMUM REQUIREMENTS FOR BIOMASS HEATERS

To receive funding for a pellet heating system, certain technical requirements must be met. The following summarizes the most important requirements:

The heat generator is intended for the use of natural biomass in accordance with § 3 (1) no. 4, 5, 5a, 8 or 13 of the Ordinance on Small and Medium-Sized Combustion Installations (1st BImSchV)
Emission limit values for carbon monoxide: 200 mg/m³ at rated heat output, 250 mg/m³ at partial load operation (where fuels are used in accordance with Section 3 (1) No. 8 of the First Ordinance on the Protection of the Environment)
Emission limit values for particulate matter: 2.5 mg/m³ (only for emission reduction bonus)
seasonal space heating efficiency (ƞs or ETAs) of at least 81 percent
Buffer storage with a volume of at least 30 liters per kilowatt of heating capacity; also applies to pellet stoves with a water jacket since 2023
automatic feeding
Performance and combustion control, as well as automatic ignition
tested by an ISO 17025 accredited testing institute according to EN 14785 (pellet stoves with water jacket: ISO 17025 accredited testing institute according to EN 14785)
Hydraulic balancing of the entire heating system in existing buildings

For more information, visit the BAFA: BEG list of eligible biomass plants

Eligible costs for pellet heating systems

In addition to the cost of the heat generator, many accompanying measures can also be subsidized, such as work on the boiler room, pellet storage and conveying technology, the installation of heat storage systems, chimneys, hydraulic balancing, and the replacement of radiators or pumps.

Application to KfW and tax office

To apply for a grant for a pellet heating system, the KfW application must be submitted before the measure is implemented. The required documents include the delivery contract, confirmations from specialized tradespeople, and possibly proof of bonuses. The payment of the subsidy has been taking place since October 2024, but for homeowners associations, it will not begin until February 2025.

Tax incentives after renovation

After installing the pellet heating system, a professional contractor's declaration must be issued in order to claim the tax bonus. For the craftsman bonus, it is sufficient to submit the invoices.

Funding rates for wood heating systems in the BEG individual measures
Support		Basic support	with
			Climate Speed Bonus (KB) ¹	Income Bonus (EB)	KB + EB² ²
			for owner-occupiers
without	Emission Reduction Surcharge (EMZ)	30%	50%	60%	70%
with	Emission Reduction Surcharge (EMZ)	30% + 2.500 €	50% + 2.500 €	60% + 2.500 €	70% + 2.500 €

¹ from 2029 onwards, KB decreases by three percentage points every two years, and is eliminated from 2037 onwards ² 2035 and 2036: 68%, eliminated from 2037 onwards

If you want to benefit from the 20 percent climate speed bonus (KB), your pellet system must be combined with at least one of these other energy systems.

Design of supplementary hot water systems (special requirement for wood heating systems for climate speed bonus)
Type of facility	Option 1: per m ²	Option 2: revenue- or performance-related
Solar thermal system	Aperture area: 0.04 m²	Gross heat output of the collector field: GTY_Feld ≥ 20 A_N in kWh
PV system	Module area: 0,25 m²	Rated power: ≥ 0,05 x A_N in kWh
Wärmepumpe	Power: 0,015 kW_el	-

Fostering building networks

The BEG EM also promotes the construction, expansion, and conversion of so-called building networks. A building network supplies at least two and a maximum of 16 buildings with up to 100 apartments. The subsidy rates are also between 30 and 70 percent. An emissions reduction supplement of 2,500 euros can also be added here. The condition is that the connected buildings are existing buildings.

Network promotion
Funding measure		Conveyor	Minimum share of renewable heat	Basic funding	with
					Climate Speed Bonus (KB) ¹	Income Bonus (EB)	KB + EB ²
					for owner-occupiers
Construction, conversion or extension of a building network ³		BAFA	65%	30%	50%	60%	70%
Connection to	Building network during construction, conversion or extension of a building network ³	BAFA	25%
	Building network	KfW	25%
	heating network	KfW	-

¹ ab 2029 sinkt KB alle zwei Jahre um drei Prozentpunkte, entfällt ab 2037 ²2035 und 2036: 68 %, entfällt ab 2037
³ für Kosten für Heizungstechnik und Investitionen im Referenzgebäude ggf. plus Emissionsminderungs-Zuschlag und/oder Effizienz-Bonus

BEW: Support for district heating networks

Heat networks and pellet boiler systems that feed into a heat network that supplies more than 16 buildings or more than 100 apartments are eligible for the Federal Funding for Efficient Heat Networks (BEW). The program is primarily aimed at municipalities, municipal utilities, and heat suppliers. The focus of the funding is on both the planning and construction of new heating networks and the replacement of existing fossil fuel plants with heat generators from renewable energy sources. The funding program is divided into four funding modules:

1. Transformation plans & feasibility studies

Up to 50% funding for planning new construction or retrofitting.

2. Systemic support

Up to 40% funding for the construction or conversion of heating networks with ≥75% renewable energy.

3. Individual measures

Up to 40% funding for individual technologies (e.g., pellet boilers, solar thermal systems, heat pumps), even without a comprehensive plan.

4. Operating cost support

Grants for operating renewable energy facilities in heating networks (up to 10 years).

More information about the program and the application process on the special page of the BAFA.

EEW: Promotion of process heat plants for trade and industry

The federal funding for "Energy and Resource Efficiency in the Economy" (EEW) also offers funding for the installation of a pellet firing system for trade and industry with the module 2 "Promotion of process heat generators". Condition: More than 50 percent of the heat generated is used as process heat and not primarily for traditional space heating and hot water.

The definition of process heat includes not only traditional process heat and steam generation in manufacturing and industry, but also the use of heat in laundries, bakeries, or car washes. Similarly, farms and horticultural businesses can benefit from the funding, which is needed for heating stables, greenhouses, or drying facilities. A pellet system can also be subsidized through the program in the hotel and restaurant industries if the heat is used for preparing food, cleaning, washing, or heating swimming pool water or sauna cabins. It is crucial that the heat provided is used for the corresponding processes for the majority (over 50 percent).

Up to 40% subsidy on total investment costs

The subsidy rates for process heat plants are tiered according to company size and relate to the total investment costs:

40% for small businesses (< 50 employees)

30% for medium-sized companies (< 250 employees; annual turnover up to 50 million euros)

20% for large companies (> 250 employees; annual turnover > 50 million euros)

The maximum funding amount is 20 million euros per project. It may not be combined with other funding (including subsidies under the KWKG and EEG) for the same measure.

Requirements for the pellet boiler system

Emission limit values for particulate matter: 2.5 mg/m³

Testing the use of an exhaust heat exchanger. Mandatory installation for systems above 100 kW
Obligation to measure the generated heat quantities.
Restriction of funding for facilities larger than 7.5 MW: Funding only if direct electrification and the use of hydrogen are technically impossible or uneconomical.The company must demonstrate that it always has sufficient residual and residual wood that is generated on-site or within the company.

Eligible investment projects

First installation of process heat systems
Replacement of conventional heat generators
Replacement of heat generators with renewable energy sources
Complementing existing heat supply systems

Eligible project costs

Heat generators based on renewable energy sources, e.g. pellet systems
Heat storage and fuel storage for the proposed heat generators
necessary construction measures for installation or Construction of the pellet facility (e.g., foundation or enclosure)
Connecting the heat generators to the heat sink(s)
Installation costs
Planning costs and feasibility estimates
Measuring and data recording devices for yield monitoring and fault detection

More information on the BAFA website - Module 2: Process heat from renewable energy sources