District heating, heat pumps and hydrogen - how Germany plans to decarbonise its heating sector

About a third of the energy consumed in Germany is used to produce heat and hot water for German buildings. At present, most of this energy is generated from fossil fuels. The revised Building Energy Act (GEG) and the new Local Heat Planning Act (WPG) aim to completely decarbonise the heating sector by 2045. The acts oblige 

1. building owners to switch from fossil to renewable heating technologies; 
2. operators of district heating networks to ensure the use of climate-friendly heat sources and;
3. municipalities to identify and describe which heating technologies are or may become available, particularly  with regard to gas, hydrogen and district heating networks.

Decarbonising building heating systems

From 1 January 2024, all newly installed heating systems in both new and existing buildings, whether residential or non-residential, must generate at least 65% of their heat from renewable energy sources or unavoidable waste heat. The GEG lists a number of different suitable heating systems, including connection to a district heating network or the use of hydrogen-ready gas boilers (see drop-down menu below). In contrast, existing heating systems can continue to be used and repaired if necessary. However, after 31 December 2044, boilers will no longer be able to run on fossil fuels. Despite these ambitious aims, the Act allows for various exemptions and transitional rules, which e.g. allow the temporary use of non-compliant heating systems (see drop-down menu below).

Notably, in addition to the universal requirement for new buildings to be built as “nearly zero-energy buildings”, the GEG imposes new requirements on owners of non-domestic buildings with a heating, air conditioning, or combined climate and ventilation systems of 290 kW or more. These buildings must comply with updated automation standards. The main requirement is the implementation of an advanced digital energy monitoring system. In non-residential buildings already equipped with building automation, operators must ensure that the different technical systems interoperate and communicate with each other.

Decarbonising district heating

Alongside the decarbonisation of heating systems under the EEG, the WPG calls for the decarbonisation of district heating networks. By 2045, all district heating networks must be powered exclusively by renewable energy sources, unavoidable waste heat or a combination of both.  It is worth noting that the WPG 

• treats heat from thermal waste and sewage sludge treatment facilities as well as heat produced from mine gas as “unavoidable waste heat"; and
• puts blue (from natural gas using CCU/S technologies), orange (from biomass or with electricity from the waste sector) and turquois hydrogen  (from methane pyrolysis) on an equal footing with “green hydrogen”, as long as it meets the requirements of pt. 3.10 of the climate delegated act of the taxonomy regulation, including the applicable life-cycle GHG emission savings. 

However, it seems more likely that district heating operators will before using (expensive) hydrogen as a heat source revert to other admissible heat sources as geothermal or ambient heat or heat from biomass first .

From 1 March 2025, operators of new district heating networks must ensure that at least 65% of their heat comes from renewable sources. For existing district heating networks, the share of heat produced from renewable sources or unavoidable waste must gradually increase from 30% in 2030 to 80% in 2040.

Municipal heat (and hydrogen) planning

Under the WPG, municipalities are obliged to develop (and subsequently update) local heat plans, with larger municipalities (100,000+ inhabitants) expected to comply by 30 June 2026, and smaller ones by 30 June 2028. 

The purpose of local heat plans is to identify and describe the sources of heat that are available, or could become available, in the different areas of a municipality. They also assess if and to what extent certain areas are suitable for the development of hydrogen or district heating networks.

In addition, the municipalities can provide information on the future of their gas networks, making it easier for building owners to assess whether they will be able to obtain biomethane for heating via the gas network in the future (using guarantees of origin). 

Despite their crucial role in guiding infrastructure development, it is important to note that local heat plans are not legally binding. They do not create any enforceable rights or obligations. However, for buildings in areas where a local heat plan provides for a district heating or hydrogen network, building owners may have a right to compensation for losses they have suffered as a result of their reliance on the plan.

Outlook

The legislation poses considerable challenges for all obligated parties - local authorities, district heating network operators and building owners. In particular, the construction of new networks (especially in already built-up areas) for district heating and hydrogen or the re-dimensioning of existing gas networks for an increasing supply of biomethane appears to be a difficult task, as demand and supply have to develop at the same time. Sufficient availability of hydrogen, biomethane and green feedstock for district heating could also be an issue, at least in the coming years. Geothermal energy might be a solution in some areas of Germany, but is costly to develop. It certainly seems helpful that the WPG includes a fairly broad definition of "renewable sources" and especially of "unavoidable waste heat", thus broadening the feedstock available for district heating.

If you have questions on the impact of this piece of legislation, our energy experts would be very happy to discuss these with you.