Government aims to spur German heating grid expansion

The German cabinet has agreed initial elements of a reform to expand heating grids while keeping climate-friendly heating affordable. In a paper from the economy ministry, the government said its upcoming ‘heating grid package’ would bring existing legislation together under a single framework, a new heating grid law.

The reforms are also meant to encourage investments, Tagesspiegel Background reported, for example by allowing companies to pass investment costs on to consumers, if they invest “in measures to decarbonise or expand the network”. Price rises would be allowed only once a new renewable energy generation plant has been connected to the grid.

The government said that district heating is of “crucial importance” for Germany’s decarbonisation and heating supply, especially in urban areas and where heat pumps cannot be used. The country aims for a greenhouse gas neutral heating supply by 2045, and existing legislation says that renewables and unavoidable waste heat should cover half of the heat supplied in grids on average by 2030. Today, the share is just over 30 percent, Tagesspiegel wrote. 

The decarbonisation of Germany’s heating sector is one of the hardest challenges in the country’s energy transition. The buildings sector has repeatedly missed emissions targets, mainly because of the slow shift to climate-friendly heating and lagging energy-efficiency upgrades. More than half of households in Germany have gas boilers, and more than a third of district heating is also fuelled by gas.

Heat pumps are often seen as the most promising way to achieve climate-friendly home heating, especially for detached houses in suburban or rural areas. Among newly installed heating systems, heat pump sales last year overtook gas boilers for the first time, and have led sales in new buildings for years. However, in densely populated cities, heating grids are often a better solution. While most currently run on fossil fuels, they often require only the conversion of the central heat production plant to instantly provide low-emission heating for hundreds of buildings. 

Many of the disputes between consumers and heating suppliers arise because heating networks are monopolies, explained Tagesspiegel. Parallel infrastructure from different providers is neither desirable nor economically or technically viable. The monopoly commission and consumer protection organisations have repeatedly criticised this lack of competition, as it can lead to high and non-transparent prices. The government now plans to improve price transparency and options for households to terminate contracts. 

“The heating grid package is a key component for the success of the heating transition,” said Kerstin Andreae, head of the energy industry association BDEW. Companies now needed reliable operating conditions, investment certainty and the right regulatory framework. Andreae called the ministry paper “a good basis for discussion”, saying it struck a balance between customers’ interests on pricing and grid connection terms and the need to transform the networks.