What’s going on?

After weeks of bad-tempered debate and overnight negotiations, the three parties of the traffic coalition – the SPD, Greens and FDP – have confirmed that the Building Energy Bill has been finalised and will be passed in the Bundestag before the summer break.

The bill, which has been nicknamed the Heizungsgesetz (Heating Bill) in the press, will see Germany transition away from oil and gas heating systems towards more climate-friendly sources of energy. 

Currently, almost 50 percent of the some 41 million households in Germany heat their homes with gas, followed by oil at 25 percent and district heating at 14 percent. In contrast, barely three percent of households heat with more sustainable energy sources like direct electric heating and heat pumps. 

The energy sector – including household heating – is responsible for producing just over a third of Germany’s carbon emissions each year, making it a cornerstone of the government’s climate plan.

However, following fierce opposition from the FDP to earlier drafts of the bill, big chunks of the legislation have been either amended or watered down. 

OK, so what does the new bill look like? 

In theory, the bottom line is still very much the same: homeowners will be obligated to install low-emission heating systems like heat pumps and solar energy by 2045 at the latest – and many will need to do this much sooner.

From January 1st, 2024, it will technically be illegal to install new oil heating systems or standard gas heating systems in new-builds in so-called new-build areas. Instead, developers will need to install systems run on at least 65 percent renewable energy.

However, in the new version of the law, the vast majority of property owners will be given a bit of additional breathing room to make a decision on how to replace their old heating systems – and local governments will have to play a much bigger role in informing people of their options. 

In another relaxation of the rules, there will also be exceptions that mean that some types of gas heaters can continue to be installed – providing they can be converted to eco-friendly systems in the future. In concrete terms, owners will need to undergo an energy consultation and find a gas system that can later be converted to hydrogen power in order to take advantage of this exception. 

These systems will also need to be run on at least 15 percent “green gas” by 2029, 30 percent by 2035 and 60 percent by 2040. 

READ ALSO: Reader question: Should I modernise my heating system in Germany?

Do private homeowners need to take action now?

No. With the new draft of the bill, the majority of owners have at least 2-4 extra years to consider how to replace their heating systems. 

By 2028, all local authorities will have to put together a heating plan that will give owners an overview of what’s possible in their area. For major cities, the deadline will be 2026. However, some districts and cities may submit their plans much sooner.

Only after the local government has submitted its plan will owners of new-builds or existing buildings need to think about installing eco-friendly heating or exchanging their old heating systems – though people who do this beforehand will get higher subsidies. 

In addition, old heating systems run on oil or gas can continue to be used and repaired after the 2026 or 2028 deadline, but if any new system is installed after this date, the 65-percent-renewables or adaptable gas heater rule applies. 

That said, it could be worth looking into your options ahead of time and considering what environmentally friendly heating makes most sense for you. Though the deadlines for switching have been relaxed considerably, it’s helpful to know how much you could need to shell out in the future. And there will also be higher subsidies for those who are quick off the mark. 

What happens if my heating system stops working after 2026/28?

In an emergency situation where your heating breaks completely and can’t be repaired, the bill says homeowners will be permitted to get an oil or gas burner quickly installed. These are generally available at short notice and can be fitted rapidly, whereas installing devices like heat pumps can take much longer. 

If homeowners go down this road, they will then have three years to ecologically retrofit the heating system, for example by swapping their temporary gas heating with a heat pump. Any new system should once again be run on at least 65 percent renewable energy.

READ ALSO: Can German homeowners expect high renovation costs under new EU law?

What are my options for replacing oil and gas?

Economics Minister Robert Habeck (Greens) has primarily focused on heat pumps in his bill, though there are plenty of other options for eco-friendly heating systems. 

In fact, “openness to new technologies” was one of the key points manoevered into the bill by the FDP at the very last minute.

Heat pumps are electricity-powered devices that draw heat from the air, ground or water, compress it to make it warmer and then transfer the heat to a new location. They are one of the most energy efficient heating devices on the market, but can also come with a hefty price tag, depending on what type you choose and how it is installed. However, they are generally a far cheaper source of energy in the long-run than gas or oil. 

The draft also mentions other potential options for heating the home in an energy efficient way, such as connecting to a heating network or direct electricity heating and, under certain conditions, heating based on solar thermal energy, biomass heating, hydrogen heating or gas heating that demonstrably uses renewable gases. Hybrid systems using a combination of heating pumps and gas could also be an option. 

Wood and pellets will be considered renewable forms of heating “without exception”, the bill states. 

READ ALSO: Reader question: How do I install a heat pump in my German property?

Does it make sense to get new oil and gas heaters installed now?

Despite the upcoming ban on new gas and oil heating installations – or, more likely, because of it – there are early signs that sales of fossil-fuel powered heating systems are booming this year. In the first quarter of 2023, sales of gas and oil burners was up 38 percent, suggesting that people are rushing to install new heating systems while they can.

While this might seem like a good strategy for postponing the purchase of a pricey new system, it may not be the best idea in the long run.

That’s because hikes in the CO2 tax is likely to drive up the price of oil and gas heating significantly, while systems driven by renewables tend to be cheaper to run. And even if your gas heater can be powered by hydrogen at some point, this conversion could be pricier than simply biting the bullet and getting an eco-friendly system now.

In addition, all fossil fuel heating systems have to be exchanged by 2045 at the latest anyway, and even a new system (especially if it’s a cheap one) could break down in the meantime. 

What exceptions should I know about?

This is one of the points in the new draft that law that has changed significantly. An earlier of the law set out an exception for people over the age of 80, but this has been scrapped in the latest version of the bill. 

READ ALSO: German government scraps exemption for over-80s in controversial heating law

It’s also unclear how the government will handle cases where people opt for a gas heater that can be run on hydrogen, but later find out that hydrogen power won’t be available in their local area under the local government’s heating plans. In all likelihood, these people will be given a certain amount of time to convert their heating systems yet again.

There are also likely to be some carve-outs for people facing financial difficulties. A hardship clause was included in the earlier draft of the bill and the government has confirmed that low-interest loans, subsidies and other support will be available to prevent people struggling financially. 

Can I get financial support from the government?

Yes. Regardless of your income, you should be able to get a fairly large subsidy from the government for exchanging the heating system in your home – though the amount slightly depends on the timing and other factors.

According to reports in German media, private owners could receive up to 70 percent of the cost of their new heating system in government subsidies.

In future, all homeowners who have to replace their heating will get a flat subsidy of 30 percent. Originally, the subsidies were intended to be on a graded scale and linked to income, but disagreement in the traffic light coalition saw this idea scrapped.

Instead, “low earners” will a salary of up to €40,000 per year will receive an extra 30 percent from the government, and those who switch before the deadline can get an extra 20 percent “climate speed bonus”. 

It’s worth mentioning that people who live in a self-owned flat will only pay a share of the total cost of the refit, which will be split between members of the homeowners’ association. 

READ ALSO: Ask an expert: Is now a good time to buy property in Germany?

Should tenants worry about increased heating costs? 

In the case of landlords and tenants, it’s theoretically possible for the property owner to buy a cheaper and less efficient heating system and pass these hefty operating costs onto their tenants.

However, to avoid this situation, the government has written special new tenants’ protections into the draft law.

Previously, landlords were permitted to pass up to eight percent of the refit costs onto their tenants. This has now been increased to ten percent, but only if the landlord takes advantage of government subsidies.

The subsidies would then be passed on in full to tenants, meaning any rent increases will be lower than they otherwise would have been. 

Do you have questions or concerns about the upcoming Heating Bill? Let us know by emailing [email protected].