What the coalition agreement entails for municipal utilities, energy suppliers, and municipal enterprises

Acceleration of planning and approval processes

Planning, construction, environmental, procurement, and administrative procedural law is to undergo a fundamental revision, and uniform procedural law for infrastructure projects is to be created.

To this end, a series of measures are planned that are supposed to lead to faster planning and approval processes: In addition to the launch of a European initiative, plans at a national level provide, for example for identical, expanded, and full-scale replacement construction in infrastructure projects to be exempt from the requirement for a plan approval procedure. In the case of critical or essential infrastructure, the early start of measures in the ongoing planning process is to be permitted as well. In addition, there are plans to completely digitalize planning and approval procedures with the federal states.

Accelerating and reducing the bureaucracy involved in planning and approval procedures is also necessary for a successful energy transition. To this end, the establishment of expert pools, the extension of deemed consent, and expanded grandfathering for replacement facilities is to be examined. In addition, simplifications from the acceleration areas and other approaches (e.g., population approach in species protection, preclusion, principle of production of evidence /onus of rebuttal) are to be examined for infrastructure projects related to the energy transition.

Learn more about the changes in public procurement law

Reporting requirements and sustainability

According to the current proposal by the EU Commission, a reduced scope and simplified reporting requirements are planned for sustainability reporting (CSRD). In particular, the thresholds for company size criteria are to be raised, with the result that initial application is to be postponed (see: EU “Omnibus” Package: Less effort for sustainability reporting?; Omnibus I: EU Parliament votes in favor of “stop-the-clock” regulation).

The coalition agreement stipulates that municipal companies, as part of public services, should fall under the definition of SMEs, which would remove the obligation for sustainability reporting (see: Sustainability reporting for municipal companies: Change in the scope of application is emerging).

(Energy) infrastructure and municipal heat planning

As part of energy policy, all potential renewable energies and technologies such as wastewater heat, heat recovery, and airborne wind energy/high-altitude wind power should be utilized. Supply networks and energy storage facilities are to be expanded in a targeted and system-friendly manner to achieve greater flexibility and more efficient network operation. 

The expansion and modernization of the grids is to be advanced in a cost-efficient manner and in line with the expansion of renewable energies. The measures are to be based on realistic requirements and coordinated with each other. Efficiency potential in the grid is to be leveraged, among other things, through freer design, superstructures at grid connection points, digitalization of the grids, an accelerated rollout of smart meters in the distribution grid, and dynamic electricity tariffs. 

Gas networks are to remain in place where they are necessary for a secure heat supply. In order to achieve a climate-neutral heat supply, the potential of combined heat and power (CHP) are to be exploited consistently and in the long term. The German CHP Act is to be amended this year to allow for greater flexibility and to introduce a capacity mechanism.

Furthermore, the feed-in of technically unavoidable waste heat into district heating networks is to be facilitated.

The construction of local and district heating networks is to be supported by legal regulations and an increase in the existing federal subsidy for efficient heating networks (“BEW”). In addition, the coalition aims to swiftly revise the Regulation on General Conditions for the Supply of District Heating (AVB-FernwärmeV) and the Heat Supply Ordinance (WärmeLV), taking into account the interests of consumers and supply companies in a balanced manner. Price supervision of heating prices is to be strengthened and transparency is to be created through an unbureaucratic arbitration board (see: Coalition agreement 2025: Intended changes to district heating).

Furthermore, local authorities and energy suppliers are to be given planning security and an attractive investment framework in the area of heat planning.

The amendment to the Building Energy Act (“Heating Act”) is to be abolished. A new version of the Building Energy Act is to be more technology-neutral, flexible, and simpler. Furthermore, the integration of the Building

Energy Act with municipal heat planning is to be simplified as well.

A package of measures is to be introduced to provide companies and consumers with permanent relief of at least 5 ct/kWh in energy prices. As an immediate measure, the electricity tax is to be reduced to the European minimum for all, and levies and grid fees are to be reduced. Among other things, a permanent cap on grid fees and an extension of electricity price compensation to other sectors are planned.

Financing

To modernize the country, a special infrastructure fund of 500 billion euros is to be set up in order to finance infrastructure projects such as hospitals, schools, bridges, and railways. An amount of 100 billion euros is earmarked for the states and municipalities, while a further 100 billion euros is to be gradually allocated to the Climate and Transformation Fund.

In order to enable the rapid implementation of investments, planning, approval, procurement, and awarding of contracts for infrastructure projects from the special fund are to be accelerated.

In the area of heating, investments for infrastructure providers are to be strengthened through a mix of additional public and private capital, and municipal housing associations are to be supported through measures to relieve equity capital. For municipalities, the financial volume of urban development funding will be gradually doubled.

An investment fund for energy infrastructure is to be set up to allocate equity and debt capital for investments, and the nationwide expansion of public charging infrastructure is to be promoted and supported as well.

In the area of transportation, financing cycles are to be introduced and a three-pillar model consisting of budget funds, user financing, and private capital (public-private partnerships) is to be applied. The financing of local public transportation is to be placed on a new legal footing and modernized.

States, municipalities, and associations are also to receive at least 1 billion euros in support for the modernization and renovation of sports facilities. In addition to sports halls, such funding shall also cover swimming pools and sports fields. A particular focus is to be placed on creating accessibility, energy efficiency, and improving inter-municipal cooperation.

To resolve the issue of existing municipal debt, the federal government plans to contribute half of the costs, amounting to 250 million euros per year, of measures taken by the states to relieve their municipalities by assuming excessive cash loans. In addition, the central role of municipalities in the implementation of state tasks is recognized, and it is to be ensured that municipal tasks are adequately funded and that new obligations are accompanied by appropriate financial support.

More on the topic of financing. 

Tax framework

In addition to the planned reduction in corporate income tax by 1 % from January 1, 2028 (see: Germany’s Coalition Agreement and Tax Law – A Document to Fiscal Pragmatism), the plan to adjust the tax framework for interconnected companies (Querverbund) stands out in particular. An adjustment of the legal requirements is urgently needed to maintain the current status quo, particularly in light of the very restrictive case law of the Federal Fiscal Court’s Fifth Senate.

Conclusion 

The coalition agreement opens up significant opportunities for municipalities, municipal enterprises, and public utilities, but also presents new challenges. Their role as key players in the municipal energy transition and in upcoming infrastructure investments will be strengthened by simplified procedures, subsidies, and special funds, among other things. It remains to be seen which of the proposed measures and approaches will be implemented and how this implementation will take shape in concrete terms.