Germany wants to facilitate investment in renewables by investment funds

Germany’s finance ministry has submitted a draft bill to reform the law, which aims to make it easier for investment funds to finance renewable energy sources and energy networks in Germany. Until now, they have faced unequal conditions compared with other investors.

The transformation of Germany’s energy system towards one based on renewable energy sources (RES) will require investments worth hundreds of billions of euros. However, difficult market conditions, with the costs of building wind and solar power plants rising and electricity prices falling, are deterring many investors from pursuing numerous projects.

High financing costs for renewable energy projects are also a problem. Germany now wants to ensure an inflow of capital from institutions, particularly investment funds, by leveling the playing field. The draft bill includes plans to create a level playing field for investors by eliminating differences in the tax treatment of investment funds compared with other investors and providing certainty for institutional investors.

“Given the enormous investment needs in infrastructure and renewable energy, it is important to create certainty that can unlock urgently needed public and private funding for the required projects and accelerate the transition to a more sustainable future,” the document states.

German environmental groups criticized the fact that the potential of investment funds to support Germany’s energy transition remains underused in the country. Tax laws and other regulatory obstacles were identified as one factor contributing to the limited presence of these institutional investors in the green energy sector.

The initiative by Finance Minister Christian Lindner, who belongs to the pro-business Free Democratic Party (FDP), was originally due to be presented last year, but the parliament’s finance committee scrapped it. Stakeholders can comment on the proposal until mid-June, and the law could enter into force by 2025.