Utilities press Merz government for fresh plan to decarbonise heating sector

Local utilities in Germany have called on the government to quickly implement a highly anticipated reform of the country’s Building Energy Act (GEG) to allow the country to scale up decarbonisation in the heating sector.

The target must be to make decisions within the next months, said Ingbert Liebing, head of the Association of Local Utilities (VKU) at an industry conference in the city of Mainz. Draft laws for both the GEG and the Combined-Heat-and-Power-Law (KWKG) are needed as soon as possible to arrive at a decision and provide utilities, companies, and citizens with planning security as soon as possible, Liebing said. “Climate neutral heating must be secure and affordable for all,” he added.

In a survey among more than 600 local utilities and local energy suppliers, 82 percent said that the current legal framework would lead to excessive costs for all consumers. More than two thirds (68%) voiced doubts about adequate funding for current heating decarbonisation plans, and more than half (55%) criticised the current legal limbo regarding the transition’s course in the sector.

The GEG in its current form was adopted by the previous government in early 2024. It stipulates that new buildings must use heating systems powered with at least 65 percent renewable energy. Many existing buildings are covered by municipal plans for cleaning up district heating. Larger cities must present plans on how to decarbonise heating by mid-2026 and smaller towns by mid-2028. According to the VKU survey, over 90 percent of local utilities are confident that the timetable will be kept in their city. Nearly half (48%) planned to apply a mix of district heating and heat pumps to comply with decarbonisation targets. “Green gases only play a minor role,” the association said. The same share of surveyed utilities said they expect to double their investments in clean heating by 2030.

The law’s regulations for replacing fossil fuel heating systems with cleaner alternatives such as heat pumps had caused a stir in the run-up to the law's adoption, leading the previous Green Party-led economy ministry to ease bans on new natural gas and oil heating systems. The coalition of the conservative CDU/CSU alliance of chancellor Friedrich Merz and the Social Democrats (SPD) had promised to “abandon” the law. However, it has not yet released any details on how it plans to do so and how to achieve emissions reduction targets in the buildings sector.

Cutting greenhouse gas emissions in the heating sector is one of the biggest hurdles on Germany’s path towards climate neutrality, which the government aims to achieve by 2045, as the vast majority of heating systems is still fossil-powered.