District heating was considered cheap. Why is it so expensive?

Around 15 percent of German households operate their heating using district heating. During these weeks, many customers receive unpleasant letters. The advance payments increase and/or high additional payments are due. A shock, as the form of heating was always considered a solution for clever people. “Save costs and protect the climate at the same time,” says the consumer advice center website. The federal government wants to greatly expand this form of supply, including as an alternative to heat pumps. However, district heating has some disadvantages.

First: The providers, often municipal utilities, are usually monopolists. There is usually only one district heating network in the locality and it belongs to them. Consumers cannot switch to cheaper competition like they can with electricity or gas. In some municipalities there is even a compulsory connection. This allows the monopolist to determine the price quite creatively. Transparency is rare.

Prices for district heating are no longer capped

Secondly: By the end of 2023, the kilowatt price for district heating was capped at 9.5 cents by the state energy price brake. This brake is now released. Kilowatt prices remain high or even rise, which has an impact on discounts. This is shown by the price monitoring of the Federal Association of Consumer Organizations.

Third: District heating contracts sometimes run for ten years and are often billed with a delay. Many customers are now receiving the final bill for 2022, when energy prices rose sharply. The settlement for 2023, when prices fell, is likely to be milder. In 2024 it will be more expensive again, simply because the VAT for district heating will rise from seven to 19 percent in April. In addition, fuels tend to become more expensive. Around 70 percent of district heating still comes from fossil sources such as coal, gas and oil, which are affected by rising CO2 prices.