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2026

Germany Plans to Cut Offshore and Grid-Supporting Electrolysis Funding From 2027 Climate Budget

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Fuel Cells Works

Germany Plans to Cut Offshore and Grid-Supporting Electrolysis Funding From 2027 Climate Budget

BDEW warns that removing support for offshore and grid-supporting electrolysers could further delay Germany’s domestic hydrogen ramp-up.

Germany’s draft 2027 Climate and Transformation Fund removes dedicated budget lines for offshore electrolysis and grid-supporting hydrogen production, despite slightly increasing overall hydrogen spending.
Energy industry association BDEW warns that abandoning the programmes could weaken domestic electrolyser deployment while an unstable funding structure makes long-term investment decisions increasingly difficult.

Germany’s proposed 2027 Climate and Transformation Fund would eliminate dedicated funding lines for offshore electrolysis and grid-supporting electrolysers, prompting warnings that Berlin is undermining two technologies intended to connect hydrogen production more closely with renewable power.

The draft KTF economic plan allocates approximately €40.3 billion [US$46.0 billion] in total spending for 2027, including a larger energy-cost relief package, but cuts uncommitted expenditure across several climate programmes. Overall hydrogen spending is expected to rise slightly, yet the absence of specific budget lines for offshore and system-supporting electrolysis has drawn criticism from the German Association of Energy and Water Industries, or BDEW.

The association is calling for both programmes to remain in the federal funding framework and for Germany to establish long-term support combining contracts for difference with appropriate state-backed guarantees. Germany continues to target 10GW of domestic electrolyser capacity by 2030, but implementation remains well behind that ambition, making the removal of specialised funding particularly difficult to reconcile with the country’s stated hydrogen strategy.

BDEW Executive Board Chair Kerstin Andreae said: “First, we welcome the fact that, contrary to some announcements, the Climate and Transformation Fund will not shrink by 10-15 percent, but will actually include more investment spending. However, there are significant cuts to individual projects, which will negatively impact the transformation. Furthermore, the long-term sustainability of the financing structure, which relies on withdrawals from reserves and reallocations of ETS revenues, is questionable, making it difficult for the sector to make reliable investment decisions. A permanently reliable financing perspective is needed.”

The 2027 plan relies on approximately €6.4 billion [US$7.3 billion] taken from reserves and includes an unspecified global spending reduction of roughly €4.4 billion [US$5.0 billion], equal to around 11% of programme expenditure. A further €2.7 billion [US$3.1 billion] in European emissions-trading revenue that would normally support the KTF is expected to be redirected to the federal government’s core budget. Meanwhile, €10 billion [US$11.4 billion] will be transferred into the KTF from Germany’s Special Fund for Infrastructure and Climate Neutrality. The result is more headline spending but less certainty over which projects will actually retain support when the budget is implemented.

Why This Matters

Offshore electrolysis is intended to convert electricity from North Sea wind farms into hydrogen close to where the power is generated. Supporters argue that it could reduce pressure on offshore electricity cables, provide another route for integrating large quantities of wind power and supply hydrogen directly into future offshore pipeline systems.

Grid-supporting electrolysers serve a different but complementary role. They can increase production when renewable electricity is abundant and reduce consumption when the power system is tight, potentially limiting curtailment and helping stabilise the grid.

Removing the dedicated budget lines does not legally prevent either technology from being developed. It does, however, remove a clear route to public support at a time when most early projects still struggle to reach commercial viability without grants, revenue guarantees or long-term contracts.

Hydrogen Funding Rises, but Delivery Mechanism Remains Weak

BDEW welcomed the slight increase in general hydrogen spending but said production support must be backed by a dependable instrument combining contracts for difference with guarantee mechanisms. Such arrangements can cover the gap between the cost of renewable hydrogen and the price industrial buyers are prepared to pay.

Germany has already committed substantial funding to hydrogen imports and cross-border production. In 2026, Berlin backed Danish renewable hydrogen projects through the European Hydrogen Bank’s auction platform, including projects expected to deliver hydrogen into Germany through a future pipeline. The contrast is becoming harder to ignore: Germany is supporting foreign production while dedicated support for some domestic electrolyser applications is disappearing.

Wider Energy Budget Changes

The KTF draft also contains several major changes outside hydrogen:

Federal support for efficient heating networks is expected to increase but remains below the €3.5 billion [US$4.0 billion] to €4.5 billion [US$5.1 billion] annual level BDEW considers necessary.
Subsidies reducing electricity transmission charges are planned to fall from €6.5 billion [US$7.4 billion] in 2026 to approximately €5.5 billion [US$6.3 billion] in 2027.
Funding for buses with alternative drivetrains is expected to drop from €403 million [US$460 million] to €130 million [US$148 million].
Charging-infrastructure funding is expected to remain broadly stable.
Electric-vehicle purchase support will become one of the fund’s largest new mobility expenditures.

BDEW argues that permanent consumer-relief measures, including grid-fee subsidies, should be financed through the core federal budget rather than competing with investment programmes inside the KTF.

Key Takeaways

Germany plans to remove dedicated funding lines for offshore electrolysis.
The budget also eliminates a specific line for grid-supporting electrolysers.
Overall hydrogen spending is expected to increase slightly.
BDEW wants the funding programmes retained and supported over the long term.
The 2027 KTF would spend approximately €40.3 billion [US$46.0 billion].
Around €6.4 billion [US$7.3 billion] would be drawn from reserves.
An unspecified €4.4 billion [US$5.0 billion] spending reduction remains in the plan.
€2.7 billion [US$3.1 billion] in emissions-trading revenue would be redirected to the core budget.
The draft must still pass through the parliamentary budget process.

What Comes Next

The 2027 KTF economic plan is expected to be considered by parliament alongside the wider federal budget, with final approval anticipated later in 2026. Lawmakers can still restore or modify individual funding lines during that process.

Hydrogen developers will be watching whether Germany replaces the removed programmes with another financing route. Without a clear alternative, offshore and grid-supporting electrolysis projects may remain stuck in development while capital shifts toward projects with more predictable support abroad.

The blunt assessment is that slightly increasing total hydrogen spending means little if the government removes targeted programmes before the technologies have reached scale. Germany cannot claim it wants a domestic hydrogen economy while repeatedly changing the financial rules needed to build one.