New heating law comes into force

Energy - New heating law comes into force - what it means

The new heating law came into force at the beginning of the year after months of bitter debate. The most important message: the vast majority of homeowners do not have to do anything for the time being.

Functioning heating systems can continue to be operated. Shortly before the start of the new Building Energy Act, there was finally clarity about future state subsidies. However, the criticism continues.

Launch only for new-build areas

The Building Energy Act (GEG) generally stipulates that from 2024, 65% of all newly installed heating systems must be powered by renewable energies. With this reform for more climate protection, the German government wants to promote the "heating transition" in the building sector and protect consumers from price hikes for oil and gas if the price of CO2 rises.

However, the provisions of the new law will initially apply to new buildings in a new development area from January. Many heat pumps are already being installed in new buildings, but other heating models are also possible. Specifically, the 65 percent green electricity obligation applies to all new buildings for which a building application is submitted from January 2024, according to the Ministry of Economic Affairs.

Transitional periods

There are transitional periods for existing buildings and new buildings outside of new development areas. The linchpin is municipal heat planning. It should be available from mid-2026 in large cities and from mid-2028 for the remaining municipalities. Homeowners should then have clarity as to whether they should be connected to a district heating network, for example, or whether they should look for their own decentralized solutions for a new heating system - such as a heat pump.

According to the Ministry of Economic Affairs, earlier deadlines can apply if local authorities have already decided in advance to designate an area for a heating network, for example, which takes into account a local heating plan.

As a general rule, functioning heating systems can continue to be operated. This also applies if a heating system breaks down but can still be repaired.

Replacing broken heating systems

In the event that a gas or oil heating system has to be completely replaced because it can no longer be repaired, there are transitional periods of several years. New oil or gas heating systems may continue to be installed until the deadlines for heat planning expire. However, from 2029, they must use an increasing proportion of renewable energies such as biogas or hydrogen. If the municipality already has a heating plan, the installation of heating systems with 65% renewable energy is mandatory, according to the ministry. In cases of hardship, owners could be exempted from the obligation to use renewable heating.

There is already a general obligation to replace a boiler with a new one after 30 years. There are exceptions for condensing boilers, among others. From 2045, buildings may only be heated using climate-neutral renewable energies. According to a study by energy industry association BDEW in November, just under half of the 41.9 million homes were heated with natural gas in 2023. Oil heating is in second place with almost a quarter.

The ministry points out: In most cases, it makes sense to switch to heating with renewable energies now. This helps to protect the climate and is also economically attractive as there is financial support - even if the heating system is still working.

Future funding

In September, the Bundestag and Bundesrat passed the new heating law - but despite promises to the contrary from the federal government, it remained unclear for a long time exactly what the future state subsidy would look like. Shortly before the end of the year, there is now clarity about the new funding guidelines and subsidies for investment costs.

The most important innovation: there is a speed bonus for owner-occupiers for the early replacement of old fossil fuel heating systems. This is intended to provide an incentive to switch, even if the heating system is still working. The bonus is granted for the replacement of functioning oil, coal, gas or night storage heating systems as well as biomass and gas heating systems that are more than twenty years old.

An extension of the speed bonus for the replacement of particularly old heating systems, which had been planned in the meantime, was canceled for cost reasons. Following a budget ruling by the Federal Constitutional Court, the government has to plug holes worth billions.

In addition, there is also an income bonus of 30 percent of the investment costs - this is available to owner-occupiers with an annual taxable household income of up to 40,000 euros.

According to the ministry, applications for funding can be submitted to the state development bank KfW from the end of February - even retroactively for projects that have already been started.

Boom in new gas heating systems

The GEG is intended to promote climate protection, but the long wrangling over it has apparently had exactly the opposite effect. This year, and therefore before the start of the new heating law, many homeowners have bought a new gas heating system - the industry is heading for a record. The protracted debate surrounding the GEG has had consequences, said Ralf Kiryk, Head of Department at the Federal Association of the German Heating Industry: "People have mainly invested in a gas heating system quickly in order to avoid the requirements of the GEG."

According to the association's figures, sales of gas heating systems had increased by 38 percent to around 694,500 units by the end of October, while sales of oil heating systems had risen by 107 percent to 94,500. Sales of heat pumps increased by 75 percent to 320,500. However, interest in heat pumps had waned as a result of the GEG debate. This was partly due to the long period of uncertainty regarding the new subsidy. Applications for subsidies fell sharply in 2023.

Heating Act: progress or small-scale specification?

From the outset, there was heavy criticism of the law: it contained far too detailed specifications, favored heat pumps, overburdened many owners financially and contributed to great uncertainty. Many in the coalition partner FDP would actually prefer to rely on a different instrument: namely an increase in the CO2 price as an incentive to replace heating systems. The CO2 price makes the consumption of fossil fuels more expensive and therefore also heating. In return for additional charges, citizens could receive climate money, but this is a long time coming.

Martin Sabel, Managing Director of the German Heat Pump Association, sees the GEG as significant progress towards renewable energies and more climate protection in buildings, despite all the uncertainties. From January 1, every person who wants to install a gas or oil heating system will have to sign that they have been informed about the risks of drastically rising prices for fossil fuels and the obligation to use increasing proportions of green fuels. The path to the GEG was a "communicative disaster".

Thomas Engelke, energy expert at the Federation of German Consumer Organizations, said: "It was long overdue to update the Building Energy Act and make the heating of the future climate-friendly." However, this has not been sufficiently successful. "Gas heating systems that can theoretically be operated with hydrogen may continue to be installed." Consumers are threatened with a cost trap here because it is foreseeable that there will not be enough hydrogen available and it could become correspondingly expensive. The interests of private households have also not yet been sufficiently taken into account in the expansion of heating networks.

Irmela Colaço, buildings expert at the environmental association BUND, criticized: "The installation of new oil and gas heating systems remains permitted for far too long. Tenants in particular are not sufficiently protected from high heating costs. This makes it all the more important to educate people about climate and cost traps and to ensure that the focus in municipal heating planning is on an affordable and efficient heating transition instead of the profit interests of the gas lobby."

The climate effect

According to a forecast commissioned by the ministry, the climate protection effect of the law will be lower than initially assumed due to extensive changes to the original draft law from the house of Economics Minister Robert Habeck (Greens), which was long in the crossfire of criticism. However, the CO2 savings will become increasingly stronger over time.