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How much could green renovations save homeowners in Germany?

A new study shows that renovations for energy efficiency in single-family homes pays off in Germany. Investments made today would result in net savings before 2045.

Published: 16 July 2024 12:34 CEST

Investment costs in roofing insulation or better windows save homeowners money in the coming years, according to a study released Tuesday. Photo: picture alliance/dpa | Daniel Bockwoldt

If you’ve been thinking about renovating your house in Germany, it’s a good time to go ahead, according to a study published Tuesday by the economic research centre Prognos AG.

The study looked at the profitability of home renovations up until 2045 in Germany. It found that investments in energy efficiency in single family homes will ultimately save money in the long term – despite the initial investment costs.

The study was carried out on behalf of the World Wide Fund for Nature Germany (WWF).

Of course renovations require an initial investment, and costs range widely depending on the kind of upgrade. But overall the study suggests that modernisation efforts are cost-efficient in the long term.

Even smaller renovations such as upgrading roof insulation or replacing windows could lead to savings.

As a report by German economic outlet Handelsblatt summarised: “Doing nothing is the most expensive option for action in the long run.”

Save on energy regardless of your heat supply

The study found that renovations in energy efficiency save homeowners money whether they use a heat pump or a gas boiler.

So while investing in a climate-friendly heat pump is certainly a wise decision from an environmental point of view, better insulating your house could be a better place to start in terms of savings.

For example, in one case examined, the total energy costs for a single-family house with gas heating and no renovations taken are expected to amount to €89,000 by 2045.

But if that same house is renovated to the efficiency house standards EH 70 or EH 55 and a heat pump is also installed, energy costs would fall to around €65,000 – a net saving of about €24,000.

A heat pump in a garden in Germany.

A heat pump in a garden in Germany. Photo: picture alliance/dpa | Daniel Reinhardt

On the other hand, if the gas boiler is replaced with a heat pump but no other renovations are made, the expected savings come in just under €1,000.

Finally, if the homeowner were to buy a new gas boiler without renovating, their total costs would rise to about €94,000.

Apartment building renovations benefit landlords

Renovations to an apartment building with a gas boiler tend to benefit landlords but amount to raised costs for tenants, according to the findings.

Landlords tend to benefit from renovation projects on their buildings, because they can increase rents to offset investment costs according to the modernisation levy – often beyond the initial costs, amounting to a basic rent increase for tenants.

There are caps on how much rents can be raised. But all the renovation options considered by the study resulted in raised costs for tenants compared with unrenovated conditions.

“In buildings with multiple apartments, better equity measures are needed to ensure that refurbishment is worthwhile for everyone” said Viviane Raddatz, head of climate at WWF.

How do home renovations fit in Germany’s climate plans?

Germany is aiming for climate neutrality by 2045 – including in the building sector.

Along with transportation, building heating is a notoriously high source of energy use and carbon emissions in Germany.

Increasing energy efficiency, such as by better insulating buildings, is essential for Germany to reach its climate goals.

But the renovation rate is currently only about 0.7 percent per year, far from the government’s stated target of over two percent.

Homeowners interested in investing in a low-energy heating system can apply for a grant to install a heat pump with Germany’s investment and development bank KfW.

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“The number of employees in Germany is to be successively reduced by 11,000 to 14,000 from the current level of around 54,000 by 2028,” ZF said in a statement.

The decision to significantly reduce the size of its domestic workforce was needed to “respond to the changes in the mobility sector, particularly in the field of electromobility”, ZF said.

The move was “difficult but necessary”, ZF chief executive Holger Klein said in a statement.

“The seriousness of the situation calls for decisive action to be able to adapt the company to the tougher market and competitive environment,” Klein said.

Restructuring the auto supplier in Germany was needed to “strengthen our competitiveness and consolidate our position as one of the world’s leading suppliers”, Klein said.

Strong competition, cost pressures and weak demand for electric vehicles meant the restructuring would focus on ZF’s electric motors division, the group said.

The emerging market, in which Chinese manufacturers have taken the lead, was “highly competitive”, ZF said.

Building the motors for electric cars had “low margins” and the group was struggling to “cross-finance purely electric drives” from its efforts in conventional and hybrid vehicles, ZF said.

The switch to electric vehicles was eating away at demand for “transmissions for conventional and hybrid vehicles”, an area where German suppliers have traditionally excelled, it said.

At the same time, “the current glaring weakness in demand for purely electric vehicles” meant ZF had been left with overcapacity in areas backed with high investments.

Despite the difficulties, “the future belongs to electromobility”, CEO Klein said.

ZF would continue to “invest heavily in this area”, he promised, but would have to explore cooperation with other firms in the area to remain competitive.

‘Leaner’

As part of the restructuring, the Friedrichhafen-based supplier said it would “increase its investments” in the areas of in-car technology, vehicle chassis, industrial tech and aftermarket services.

ZF’s network in Germany would be made “leaner” after recent acquisitions had seen it gradually expand, the group said.

The ultimate extent of the job cuts would depend on “the further development of the markets”, ZF said.

EU plans to outlaw the sale of new fossil fuel-powered cars from 2035, means some jobs in the industry will inevitably become redundant.

Meanwhile, Chinese manufacturers have grabbed the advantage in electric vehicles and are hauling in a growing share of the market.

The Chinese battery-maker CATL has grown in short order to become the world’s third largest auto supplier.

The double shock delivered by the end of combustion engines and rising Chinese competition has piled pressure on European suppliers.

Besides ZF, parts makers like Bosch, Continental and Webasto have been among the companies in the sector to have announced job cuts.