Heating law: What this means for companies

December 7, 2023

This was debated for a long time, but the Bundestag has now passed the heating law. Not only discussions about changes, but also a lot of false information circulating on the Internet caused uncertainty in advance. We show what’s coming now and what that means for entrepreneurs.

Whether they are heat pump manufacturers or energy consultants, salespeople for solar systems or heating engineers – they and many others from the energy industry have been looking forward to the discussions surrounding the heating law in recent weeks with excitement – and perhaps even annoyance. And they’re not the only ones. Many entrepreneurs from other sectors also own real estate and are therefore also affected by the regulations that have now been decided.

Stefan Reichert, lawyer and specialist in construction and architectural law at Ecovis in Munich, has closely observed the debate over the past few months and says: “The law brings a number of innovations that affect many companies. But the excitement that prevailed in some cases is unfounded. The law does not contain an immediate obligation to replace functioning heaters – as is often suggested.”

What the Heating Act is about

The core of the Building Energy Act (GEG), as the official title is, is that in the future heating systems must be operated with a share of at least 65 percent renewable energy. The legislature wants to strengthen climate protection in the building sector. Starting next year, the law will initially only apply to new buildings. Many other regulations for existing buildings passed in the law will only come into effect in subsequent years.

Free choice of heating type – at least almost

Anyone who needs heating for a new property will in future be able to freely choose from a range of heating types – as long as they meet the 65 percent requirement. In addition to heat pumps and the connection to the district heating network, these can also include pellet and wood heating, direct electricity heating, solar thermal heating or hybrid heating.

Owners are also allowed to install new gas heating systems in existing buildings if they can be operated with renewable gases, such as hydrogen. And modern oil heating systems that mix 65 percent renewable fuels can also continue to be installed in existing buildings. In the future, old boilers (installed before 1991) with a nominal output between 4 and 400 kilowatts (kW) that run on liquid or gaseous fuel will no longer be permitted. “The obligation to replace very old heating systems that are over 30 years old is not new and is regularly checked by chimney sweeps or heating installers,” explains Ecovis lawyer Reichert.

What’s next in the inventory

“Whatever works can usually continue to run for the time being,” says Reichert. But not forever: As soon as the municipalities’ concrete heat plans are available, the 65 percent rule should also apply to existing buildings. The Bundestag has also passed a corresponding heat planning law for this purpose. Cities with more than 100,000 inhabitants must submit these plans by mid-2026, while smaller municipalities have until 2028 to do so. Once these plans are available and it is clear whether a climate-friendly district heating supply is possible, homeowners can decide how they want to proceed. “A lot will depend on the specific planning of the municipalities,” confirmed Christian Fiedlerlawyer and specialist in construction and architectural law at Ecovis in Rostock, “and certainly also on the availability of the necessary systems and specialists.” There are still material and supply chain bottlenecks in many areas.

There are also exceptions and transition periods, for example if an existing heating system is broken beyond repair. “However, property owners should consider whether it makes sense to make use of it. Switching to a modern heating system is usually financially worthwhile in the long term,” adds lawyer Fiedler.

Keep an eye on funding opportunities

First of all, all property owners face some considerable expenses. In order to at least cushion these investment costs, the law provides for numerous funding options – from basic funding to various variants of a climate bonus. In addition, there should be low-interest loans for heating replacement. “We advise all owners to inform themselves in good time,” says Ecovis lawyer Fiedler, also referring to mandatory advice if those affected want to install new heating systems that run on solid, liquid or gaseous fuels. “Always talk to your tax advisor so that you can make clever use of depreciation options.”

What else needs to be taken into account

Entrepreneurs who own their own properties and rent them out must also note that they cannot simply pass on the costs of replacing the heating system to their tenants. The GEG regulates that landlords are only allowed to pass on ten percent of the modernization costs if they take advantage of state funding. In addition, the monthly rent increase will be capped at 50 cents per square meter of living space.