Local authorities lack funds for local energy transition

18.07.2025

Source: E & M powernews

In a new study, the German Energy Agency (Dena) shows how municipalities could manage the energy transition - and calls for structural support from the federal and state governments.

Local authorities are key players in the energy transition in Germany: they renovate public buildings, promote renewable energies and shape the local heating transition. But in many places, implementation is failing due to unclear responsibilities, tight budgets and a lack of personnel. This is shown by a new study by the German Energy Agency (Dena) entitled "Local authorities as the central implementation body for a successful energy transition".

Dena obtained three expert opinions and formulated overarching recommendations for federal policy. The 490-page study focuses on four levels of action: legal framework conditions, financial resources, administrative structures and operational implementation options.

Nicole Pillen, Head of Urban Energy Transition at Dena, demands: "In order to tackle the tasks of the energy transition, municipalities urgently need more legal, financial and personnel scope for action." In particular, stronger energy services such as energy-saving contracting could help, for example in the energy-efficient refurbishment of public buildings.

Lack of fit between the federal government and local authorities

The study sees a central problem in the divergence between federal policy requirements and local implementation practice. While more and more tasks are arising at municipal level, there is also a lack of planning security and resources. To close these gaps, Dena recommends, among other things, a structured dialog between the federal and state governments. A coordinating office could integrate the perspective of the municipalities more closely and institutionalize the exchange between the levels.

Another proposal is a "municipal feasibility check". In future, this should ensure that new legal requirements are compatible with the actual capacities of the municipalities. If necessary, additional support services or reductions in bureaucracy should be examined.

Creating scope for innovation

The study also advocates a municipal innovation bonus and an experimentation clause. These should create targeted incentives to test new solutions locally. This would allow administrations to expand their scope for action and react more quickly to local requirements.

In addition, Dena recommends the targeted expansion of funding programs - for example to establish regional energy and value creation agencies or to finance additional specialists. According to Dena, tasks such as communication and coordination should also be given greater support in order to ensure the resilience and ability to act of local authorities in the long term.

The study also mentions the establishment of a nationwide "Local Energy" platform as a further instrument. Municipal utilities, energy cooperatives and other municipal initiatives could exchange good practice examples and business models there. So far, there has been no structured channel for this knowledge transfer.

Three expert reports as the basis for country profiles

The analysis is based on three scientific reports. The Competence Center for Public Economy, Infrastructure and Services of General Interest (KOWID) at the University of Leipzig examined municipal administrative and decision-making structures. The Institut Wohnen und Umwelt (IWU) in Darmstadt analyzed processes in building planning and refurbishment. The law firm Günther Partnerschaft from Hamburg looked at the legal requirements that local authorities must observe when implementing energy and climate targets.

As a service, Dena also provides a state profile for each federal state. These contain the most important requirements, tasks and starting points for municipal energy projects - supplemented by a nationwide overview. The "Contracting Competence Center - Implementing energy efficiency measures with guaranteed savings" was founded by Dena in 2010 on behalf of the Federal Ministry for Economic Affairs and Energy (BMWE).

The Dena study on the energy transition in municipalities is available for download as a PDF.

Author: Susanne Harmsen