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The Building Energy Act (GEG) - Heating Act in Germany

The supply of heat is intended to become climate-neutral in order to make a contribution to combating climate change. For this purpose, the Building Energy Act (GEG), also known as the Heating Act, is to be revised. However, the project is highly controversial in the political landscape. What are the implications of the new Heating Act for property owners and tenants, and how will the heating system replacement be supported?


New Regulations in the Building Energy Act / Heating Act

The planned Building Energy Act stipulates that in the future, only heating systems that can be operated with at least 65 percent renewable energy will be allowed to be installed. The draft law is scheduled to come into effect on January 1, 2024, and includes the following innovations:

Existing Buildings: No Obligation for Heating System Replacement

Good news for homeowners: There will be no further interference with existing property. Functioning gas and oil heating systems do not have to be replaced from 2024, and a broken heating system can be repaired.

Municipal Heat Planning for Climate-Friendly Transition

When transitioning to climate-friendly heating methods, the state must take the lead – with comprehensive municipal heat planning. Municipalities must create plans for how citizens can heat in a climate-friendly way and what municipal offers there are for climate-friendly solutions. The idea behind this is that without this information, property owners would not have the opportunity to choose the most cost-effective heating method. In some municipalities, there are already heat plans where the law is expected to apply from January 2024.

Requirements for Heating Systems in the New Law

The centerpiece of the Building Energy Act is the requirement that only heating systems that can be operated with at least 65 percent renewable energy will be allowed to be installed in the future. This can be achieved through various technologies such as heat pumps, solar thermal energy, or biomass (wood or pellets). This requirement initially only applies to new development areas from the planned date of the law's entry into force on January 1, 2024. For existing buildings, the timing of the heating system replacement depends on the municipal heat planning.

Discussion about Heat Pumps as an Alternative

Heat pump technology is considered one of the most efficient and environmentally friendly ways to heat and cool buildings. Its popularity is increasing, and it is expected that up to 40 percent of buildings in Germany will be heated with heat pumps in the future. However, there are also challenges, such as high electricity consumption and dependence on climate-damaging electricity generation. Further measures are necessary to make the power supply climate-friendly.

No Compulsion for Replacement of Functioning Oil or Gas Heaters

The planned Building Energy Act does not impose a compulsion to replace functioning oil or gas heaters. Prior to the revision, there was already a requirement in the GEG that oil and gas heating systems older than 30 years must be replaced under certain conditions. This remains unchanged. Installation of New Gas Heaters with Conditions The installation of new gas heaters will not be prohibited starting from the coming year, but mandatory consulting will be introduced. Heating system owners should be informed about rising CO2 prices and the requirements of the Climate Protection Act. Those who still opt for a gas heater must use 15 percent climate-neutral gases like biomethane or hydrogen from 2029, 30 percent from 2035, and 60 percent from 2040.

Grace period for irreparable oil or gas heaters

In the case of an irreparably broken oil or gas heater, there will be a grace period of five years. During this time, heating systems that do not meet the GEG requirements of at least 65 percent renewable energy can still be installed and operated. This allows heating system owners time to wait for the heat planning and decide on a suitable climate-friendly heating system.

Funding for Heating System Replacement

Extensive funding will be offered for heating system replacement to reduce investment costs. A "basic funding" of 30 percent is provided for all heating system owners. Additionally, there is a "social component" of 30 percent additional funding for owners with a taxable household income of up to 40,000 euros per year. Climate Speed Bonus and Heat Pump Bonus are also planned.

Heating Act and New Constructions

Specific requirements for the use of renewable energy in heating will apply to new constructions from January 1, 2024. In new development areas, every newly installed heating system must be operated with at least 65 percent renewable energy. Outside of new development areas, new buildings can also rely on an existing gas network if there is an appropriate heat plan. Impacts on Tenants A new modernization allocation will be introduced for tenants, allowing landlords to pass on 10 percent of the investment costs for heating system replacement to tenants. However, the rent increase is limited to a maximum of 50 cents per square meter to protect tenants from excessive burdens.

Outlook: Decision on the New Heating Act

The coalition factions plan to put the second and third readings of the law on the agenda of the Bundestag in the first week of September 2023. The decision on the new Heating Act is therefore imminent.




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