July 10, 2026

Source: E & M powernews

The European Court of Justice has ruled that the Combined Heat and Power Act does not constitute state aid. Industry associations are now calling for a swift amendment to the law.

The European Court of Justice (ECJ) has ruled that the German Combined Heat and Power Act (KWKG) does not constitute state aid within the meaning of European state aid law. In doing so, the judges in Luxembourg upheld a 2024 ruling by the General Court of the European Union (GCEU) and rejected the European Commission’s appeal. According to energy and heating industry associations, the ruling eliminates long-standing legal uncertainty and lays the groundwork for a swift amendment to the KWKG.

Speaking on behalf of the German Association of Energy and Water Industries (BDEW), Chief Executive Kerstin Andreae said: “Cogeneration is a highly efficient technology that combines controllable electricity generation with heat supply.” She added that it thus makes an important contribution to security of supply in the electricity and heating sectors. Approximately 56,000 MW of Germany’s power plant capacity features useful heat recovery, accounting for a significant portion of the country’s controllable generation capacity.

Federal Government Must Quickly Extend the KWKG

Now, the federal government must swiftly implement the further development of the KWKG. “A long-term investment framework and planning horizon are necessary to successfully continue the transformation of municipal electricity and heat supply,” Andreae urged. At the same time, CHP effectively complements the Electricity Supply Security and Capacity Act (StromVKG) in building controllable generation capacity and ensuring supply security in the areas of electricity and heat.

The Energy Efficiency Association for Heating, Cooling, and Combined Heat and Power (AGFW) also views the decision as an important signal for policymakers and the industry. Managing Director Frank Mattat explained that there is now no longer any reason to further delay the planned amendment to the law. Companies need reliable framework conditions for their investment decisions.

Legal Certainty at Last

From a legal perspective as well, the association believes the ruling provides clarity. Norman Fricke, Head of Legal & European Affairs at the AGFW, explained that the federal government no longer needs to take into account the European Commission’s state aid regulations when drafting the amendment.
The conversion and expansion of heating networks depend on stable framework conditions. Together with the Association of Municipal Enterprises (VKU), the association has already developed proposals for further developing the law.

The classification of the KWKG under state aid law has been controversial for years. The European Commission had taken the view that the funding came from state resources and was therefore subject to approval. Since the CHP surcharge is levied via the electricity price, it does not constitute state aid, as confirmed by an expert opinion published in 2020 by Prof. Schmidt-Preuß, an expert in energy and European law, and now also by the European Court of Justice.
Municipal utilities want to expand CHP

The municipal corporate group Thüga is also calling for swift political decisions following the ruling. CEO Constantin H. Alsheimer spoke in favor of extending the KWKG until at least 2035. In addition, he said, the subsidy framework must be opened up to climate-friendly fuels, and the remuneration for grid-supporting plants must be adjusted.

According to Thüga, the federal government plans to build up to 35,500 MW of secured capacity by 2035. “Combined heat and power plants could close part of this capacity gap, as they generate both electricity and heat simultaneously, thereby making efficient use of the fuel,” said Alsheimer.

He also called for adjusted subsidy rates so that smaller power plants could be operated economically under the conditions of a future capacity market. Furthermore, expedited permitting procedures should apply not only to large power plants but also to smaller facilities. According to Thüga, approximately 70,000 smaller power plants currently ensure Germany’s energy supply and play a particularly important role at the municipal level.

Re-tender Small Power Plants

On behalf of the Federal Association for Combined Heat and Power (B.KWK), Executive Director Barbara Minderjahn welcomed the ruling. The association is calling on the Federal Ministry for Economic Affairs and Energy (BMWE) to submit a draft bill in a timely manner. In doing so, it must be taken into account that combined heat and power plants will have shorter operating times in the future due to the increasing share of renewable energies.

In addition, the association advocates for the rapid resumption of the CHP tender—which has been suspended since 2026—for plants between 0.5 and 50 MW, as well as expanding the tender segment.

Author: Susanne Harmsen