Q&A – Germany agrees phaseout of fossil fuel heating systems

In theory, a whole range of heating systems qualify for the 65 percent renewable energy rule, for example heat pumps, solar thermal, and hybrid systems combining a fossil fuel system with a heat pump. Installation of “hydrogen-ready” gas boilers also remains possible, but they must run on an increasing share of biogas if hydrogen is not available, making them more expensive. Biomass and biomethane systems can also be used, but only in existing buildings.

Despite the range of technological options and numerous exemptions, the law is set to initiate a broad shift towards heat pumps. Modelling by think tanks for the government show that heat pumps will make up more than 80 percent of new installations by 2030, with district heating covering most of the rest.

Environmentalists and many experts argue that the law is still insufficient to reach the country’s climate targets in the building sector. The law has been “watered down, takes effect far too late, and is unclear on many points," according to Friends of the Earth Germany. Economist Veronika Grimm, who advises the government as a member of the German Council of Economic Experts, said earlier proposals had been “substantially weakened without any measures being taken to ensure that climate protection targets are met.” Nils Thamling, heating expert at think tank Prognos, also said reaching 2030 climate targets has become “highly unlikely.” NGO Germanwatch said the law will finally end years of standstill in cleaning up the building sector, but will not be enough to achieve Germany's climate targets. It added that the new exceptions for hydrogen and "green" gases are set to become very expensive for users. Environmental NGO Nabu heavily criticised that the law also allows the use of wood for heating, which it described a "grave mistake." The economy ministry (BMWK) has estimated that by 2030, the law will only achieve around three quarters of the emission reductions envisaged by the its original proposal.

The municipal utility association VKU however welcomed the principle that municipalities must present a "heating plan" before homeowners are forced to make a switch. This would at least give citizens planning security as to whether connection to a district heating network is possible or foreseeable, as "in this way, they can avoid bad investments."

The controversy mainly centred around the higher cost of climate-friendly boilers. Installing heat pumps is usually at least twice as expensive as conventional heating systems, often costing more than 20,000 euros. However, proponents argue that heat pumps’ operating costs are much lower than conventional systems’ because of their much higher efficiency and Germany’s rising CO2 price for heating fuels like oil and gas.

There are not only concerns about high costs for homeowners, but also for tenants as Germany has one of Europe’s highest share of renters. The law says that landlords are allowed to add ten per cent of the costs of a new heating system to the rent. In addition, the rent may not increase by more than 50 cents per square metre. Original plans for an exemption for homeowners older than 80 years were dropped.

Another point of controversy was the inclusion of “hydrogen-ready” heating systems, which was added at the insistence of the pro-business FDP in the name of “technology freedom.” Most experts say “hydrogen-ready” boilers don’t make sense, because they are highly inefficient when compared to heat pumps, and therefore could result in higher costs for those who install them. Dozens of independent studies have concluded that hydrogen will not play a significant role in heating, given that it will require five to six times more renewable energy than heat pumps – and that the scarce fuel is going to be needed in industrial sectors. This is why a broad coalition of environmentalists, trade unions, consumer groups and professional associations have called them a “sham” solution that delays effective climate action. The FDP’s arguments in the heating debate mirrored the party's insistence on allowing the use of synthetic fuels in combustion engines for decarbonising transport, which are also considered unrealistic by most experts.