Changes as of 2024: The Building Energy Act at a Glance

After an extensive and controversial discussion, the Bundestag finally passed the much-debated Building Energy Act in September. The details of the law led to disagreements within the governing traffic-light coalition and caused uncertainty among part of the German population. In this article, we will examine the essential aspects of this law and its effects on homeowners and tenants. We will also take a look at the various funding measures.

Entry into force of the Building Energy Act: What changes as of January 1, 2024?

The official start date for the Building Energy Act (GEG) is January 1, 2024. However, many of the stipulated measures will only take effect over the course of the coming years. The phased entry into force of the law aims to improve climate protection in the building sector, which has previously failed to meet the established climate targets.

The future of heating technology: At least 65% renewable energies

Essentially, the Building Energy Act aims to ensure that future heating systems will be operated with at least 65 percent renewable energy. However, it should be noted that these regulations will initially apply only to newly constructed building areas starting in 2024.

Electric, solar or hybrid: Your heating options under the Building Energy Act

Which heating systems will be permitted in the future? In addition to the option of electric heat pumps, buildings can also be connected to a district heating network. Alternatively, heating systems powered by wood pellets or wood chips are also permitted. In addition, households can choose direct electric heating, solar thermal heating systems, or hybrid solutions that combine renewable energies with gas or oil burners.

For gas heating systems, there is still an installation option after the year 2024, provided they are designed for operation with hydrogen and can be modified accordingly at a later date. If a household does not have access to green hydrogen from the year 2029 onwards, staggered requirements are planned: starting that year, at least 15 percent biogas must be used in new gas heating systems, this share will rise to 30 percent in 2035, and finally reach 60 percent in 2040.

Modern oil heating systems also remain permitted, provided they can use up to 65 percent renewable fuels for blending.

Future of older heating systems: What owners of gas and oil heaters need to know

What will happen to older gas and oil heating systems? For the time being, existing gas and oil heating systems may continue to be operated and, if necessary, repaired. As the federal government clarifies, there is no immediate obligation to replace these heating systems.
The further procedure depends on the binding heat plans that must be drawn up at the municipal level. According to the Heat Planning Act, large cities with more than 100,000 inhabitants have until mid-2026 to draw up such plans; smaller municipalities have until 2028. Only when these plans are finalized for the respective regions will the requirements for a share of at least 65 percent renewable energy for heating come into force for existing buildings as well. Property owners can then plan their next steps.

The municipal heating plans are also intended to provide information on whether and how an eco-friendly district heating supply can be implemented. In this way, the federal government aims to create „planning and investment security“ for homeowners. The Building Energy Act and the Heat Planning Act, which is also scheduled to take effect on January 1, are thus closely linked.

What you should know about the transition period

In the event of an irreparable failure of a gas or oil heating system, transitional arrangements are provided for according to amended draft legislation. These also apply in the event that a heating system replacement is planned. Within this five-year transition period, heating systems that do not meet the 65 percent renewable energy criteria may be installed and operated.

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Additional provisions of the new Building Energy Act

What other provisions does the law contain? The new set of rules mandates a mandatory consultation that comes into effect when new heating systems are to be installed that use solid, liquid, or gaseous energy sources. The goal of the consultation is to draw attention to potential consequences in the context of municipal heat planning as well as financial risks, particularly due to rising CO₂ costs. In addition to energy experts, chimney sweeps, heating technicians, and qualified electricians are also eligible as qualified consultants.

Legally compliant heating systems: What are the options?

When installing or replacing heating systems, homeowners have various options to choose from: connection to a district heating network, direct electric heating, electric heat pumps, hybrid solutions (a mix of renewable energies and gas or oil boilers), biomass heating systems, solar thermal heating systems, and „H2-ready“ gas systems that can be converted to run on pure hydrogen. However, a prerequisite for such a conversion is a binding plan for a local hydrogen infrastructure. Alternatively, heating systems based on renewable energies or a combination of different technologies can be used. In this case, mathematical proof must be provided confirming that the 65 percent criterion is met.

Rent increases due to heating modernization: What is allowed?

How does the new set of rules affect tenants? According to the coalition's revised legal texts, the goal is to protect tenants. Previously, owners could add up to eight percent of modernization costs to the annual rent when renovating an apartment. However, the new Building Energy Act provides for a modified allocation for modernizations. Landlords may now pass up to ten percent of the expenses for replacing the heating system on to tenants. The prerequisite for this, however, is that state subsidies are used and the subsidies received are deducted from the allocable costs. This is also intended to offer landlords an incentive to modernize their heating systems.

In addition, there is a cap on rent increases: installing a new heating system allows the monthly rent to increase by a maximum of 50 cents per square meter of living space. If further modernization projects are carried out, the rent can increase by two to three euros per square meter, as before.

The Economics of Ecology: Financial Incentives for Eco-Friendly Heating Systems

What financial support can property owners expect? In recent years, the costs for heating systems have risen noticeably. According to the Federation of German Consumer Organisations, the price for an installed air-water heat pump was around 20,000 EUR in 2021, while costs by 2023 already averaged 31,000 EUR. The situation is similar for heating systems powered by wood pellets: the price rose from 27,000 EUR in January 2021 to 37,000 EUR in March 2023, which corresponds to an increase of 37 percent. In addition, there may be structural modifications to the building.

To facilitate the transition to more environmentally friendly heating solutions, government grants are available. In principle, every modernization is subsidized with a base rate of 30 percent of the investment costs. For people with a taxable annual income of up to EUR 40,000, the subsidy rate increases by another 30 percent. Anyone who modernizes their heating system by 2028 can expect an additional bonus of 20 percent. However, there is a cap on the subsidy, which is a maximum of 70 percent of the total costs.

This financial support is funded by the Climate and Transformation Fund and is expected to amount to several billion euros. In addition, subsidized KfW loans are planned for households with an annual income of up to 90,000 EUR, with the exact conditions still to be determined.

Heating with fossil fuels: The deadline is approaching

Until when is heating with fossil fuels permitted? According to the current heating law, the use of fossil fuels for heating is permitted until the end of the year 2044. From the year 2045 onward, buildings must be heated exclusively with renewable energy. Currently, the German population relies primarily on natural gas for heating: according to the German Association of Energy and Water Industries (BDEW), nearly half of the approximately 43 million apartments and homes in Germany are heated with natural gas. Oil heating systems make up nearly a quarter, and district heating is in third place at about 14 percent. The share of electric heat pumps is also increasing: while it was still 2.0 percent in 2017, it is now already 3.0 percent. In 2022, electric heating systems supplied heat to around 2.6 percent of all apartments. Another 6.2 percent are accounted for by various other heating methods such as wood pellets, solar thermal energy, or even coal.