Germany gives major boost to PtL projects in Budget adjustment

opinion

by Fayaz Hussain

January 26, 2024

Germany’s budget for 2024 (especially its funding for green projects) has taken a rollercoaster ride, twisting and turning in response to a court ruling that declared it unconstitutional in November 2023.

In response to the ruling, on January 10th, 2024, the Federal Ministry of Finance presented the new adjustment bill for the 2024 federal budget with a major boost in funding for sustainable fuels compared with initial targets.

“According to the changes, which were made to the budget by the Federal Ministry of Finance, the renewable fuels development is now to receive more funding than the ministry had initially planned. The ministry had proposed cutting the budget by €44.2m to just under €40m,” said Sarah Joanna Haas, Senior Associate, Arneke Sibeth Dabelstein, while speaking to SAF Investor. Arneke Sibeth Dabelstein specialises in aviation industry.

“The budget holders are now adding a further €30m, which would leave almost €70m available in 2024 for the funding for generation plants for electricity-based fuels and advanced biofuels as well as propulsion technologies for aviation,” she added.

This windfall will primarily benefit the power-to-liquid (PtL) fuels technology. Germany is set to become one of the leading PtL-based e-kerosene producers in Europe. With a projected production capacity of roughly 300,000 tons by 2030, Germany is reaping the rewards of its proactive approach to incentivising e-kerosene production.

The country adopted the PtL-roadmap in 2021 to use at least 0.5% of e-kerosene in German airports by 2026, rising to 1% in 2028 and 2% in 2030.

“Although the future of the roadmap is still uncertain at the moment … due to legal compatibility issues with ReFuelEU, it has certainly played a role in the eruption of e-fuels projects in Germany in 2021-2022,” according to a study carried out by Transport & Environment. (A snapshot of e-kerosene projects announced in Germany is attached at the end of the newsletter.)

However, this renewable joyride comes with a bittersweet aftertaste. Appropriations for the years 2025 to 2038 are being slashed by a staggering €2bn, raising concerns about future support for green initiatives.

“Commitment appropriations for the years 2025 to 2038 will be reduced by a total of €2bn from 2029, no more commitment appropriations will initially be entered. The remaining funds will be used to finance commitments already entered into and the implementation of the programmes. However, €30m are to be cut from the ‘Climate-neutral flying. The Parliament and Federal Council will decide in early February upon the final budgeting,” said Haas.

The November 2023 court ruling had also triggered a temporary freeze on applications and approvals in the Climate and Transformation Fund (KTF), a major pot of money for green projects. However, the freeze has now been lifted by the Federal Ministry for Economic Affairs and Climate Protection, allowing programmes to resume the application and approval process.

The increased funding for renewable fuels aligns with Germany’s ambitious climate goals, particularly its Green Hydrogen Strategy that heavily emphasises PtL technology. This focus reflects the growing urgency of diversifying energy sources and reducing dependence on fossil fuels in Germany’s aviation sector.

The cut in long-term commitments, however, raises concerns about the government’s commitment to sustained green investment. Critics argue it jeopardises long-term planning and could hamper the transition to a carbon-neutral aviation sector and the overall economy.