January 17, 2024
Last updated:

The Building Energy Act: Germany’s push for clean heating

On January 1, 2024, a new German heating law, the Building Energy Act (in German, Gebäudeenergiegesetz, and abbreviated GEG), came into effect, requiring all heating systems installed in new buildings to be powered by at least 65% renewable energy. For older buildings, there are extended deadlines and a selection of technologies to make heating renewable.

The deadline for when the new heating options must be in place is decided by each German state and depends on the size of the municipality. Large cities (i.e municipal areas with more than 100,000 residents) must comply by June 30, 2026. Municipal areas with less than 100,000 people have until June 30, 2028. However, under the GEG, not all heaters currently in use need to be replaced and can continue to operate. 

Before we dive into the new law, let's take a look at Germany’s heating landscape.

Germany’s heating at a glance

When it comes to heating indoor spaces, about 80% of residential buildings in Germany still rely on fossil fuels. Building emissions in the country are responsible for around 15% of Germany’s overall CO2 output. While progress has been made in recent years and the adoption of renewable sources in newly constructed buildings grew to 61.4% in 2022, it is not enough for the necessary phase out of fossil fuels. 

Still, Germany has made some strides in its attempts to decarbonize heating. In 2022, the installation of heat pumps rose from 50.6% to 57%. Germany has also started to incorporate more and more “green” heating options, such as solar energy, wood and biogas/biomethane, in addition to the increase of heat pumps.

Under the Building Energy Act, which heating systems must be replaced?

According to GEG, only heating systems that are mostly fueled by renewable sources may be installed in new buildings within new development areas. Longer transitional periods are planned for existing buildings and new buildings erected in gaps between buildings. There is no general obligation to replace old, fossil-fuel boilers in 2024. Only heating systems that are more than 30 years old and use out-dated technology must be replaced. Replacing heating systems will become increasingly worthwhile as the CO2 price for fossil fuels, including heating oil and gas, will become more expensive. In 2024, it will rise to 45 euros per ton and in 2025: 55 euros. The increase is meant to help countries reach their net zero emissions goals.

To stay warm while cutting costs and your carbon footprint, there are several renewable heating options: heat pumps, direct electricity heating, “H2-ready” gas heating systems and solar thermal energy or, so-called, hybrid heating, which is a combination of renewable heating and gas or oil boilers. Each technology operates primarily by carrying hot water through underground pipes from a central source. For these renewable options to work, it’s important that the correct networks are in place to make each system as efficient and cost-effective as possible.

The most mature and scalable clean heating option is the heat pump. A heat pump is an energy-efficient device that transfers thermal energy from a warmer space to a cooler space and vice versa. They can deliver up to 500% more heat than the electricity they use. Gas boilers, for example, have an efficiency of 90%. So some energy will always be lost. According to the MIT Technology Review, heat pumps have the potential to cut global emissions by 500 million tons by 2030. This is the equivalent of pulling all cars off the road in Europe. 

Subsidies and incentives for replacing heating systems

Although heating in Germany is still heavily reliant on fossil fuels, regulatory shifts and subsidies are propelling heat pumps to the forefront in new constructions. To make renewable heating even more attractive and affordable, a subsidy for landlords and homeowners is available as a part of GEG. Homeowners, landlords, non-profit associations and local authorities that replace old fossil fuel heating systems will receive a basic subsidy of 30% of the costs. Owner-occupied homes that replace their old systems within a given time can also receive a bonus. Until the end of 2028, this bonus amounts to 20%. After that, it decreases by 3% every two years, starting at 17% on January 1, 2029.

Guaranteeing thermal comfort with home energy management

With smart energy management, costs are lowered, grid stability is maintained and users don’t have to compromise on thermal comfort – a win for all players involved.

Heating can be seen as the final frontier towards achieving fully carbon-neutral homes – and heat pumps can provide the needed boost. However, there are a number of unique challenges to the decarbonization of heat. As Claire Thorhhill, Associate Director of Frontier Economics, summarized at gridXdays, “To decarbonize heat, you have to go into people's homes and that brings risk, it brings hassle and it's generally quite a difficult thing to do.” Another sizable barrier is consumers’ unwillingness to compromise on thermal comfort. This challenge can be exacerbated by the increased intermittency and unreliability of heating devices powered by decentralized, renewable power sources. The key to overcoming these lies in smart, holistic home energy management systems, which optimize energy use and consumption in a way that maintains temperature control with burdening the grid or utility bills.

When integrated with PV/battery systems, SG Ready heat pumps can be optimally controlled by an energy management system (EMS), enabling optimization on both a household and system level. Kedar Balasubramanian, Product Manager at gridX, says, “Integrating heat pump flexibility into home energy management systems financially benefits end users as they can strategically use electricity during lower-cost periods to heat buffer storage. With an EMS, users also benefit from the new paragraph 14a of the EnWG through reduced grid fees. So, with smart energy management, costs are lowered, grid stability is maintained and users don’t have to compromise on thermal comfort – a win for all players involved.”

Additionally, individuals adopting 65% renewable energy for heating systems can receive state funding ranging from 30% to 70%, encouraging a widespread shift towards sustainable heating practices. Funding can also be applied for when purchasing further energy-related renovation measures, such as insulating the building envelope, new windows, system technology or heating optimization.

Together with the new renewable heating law and the subsidies, Germany is on the right track of encouraging the phase out of fossil fuels. Investing in clean, renewable technologies and promoting them through policy decisions, such as the Building Energy Act, is the right way to do this.

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