The topic of heating is back again. This time it’s about the district heating market. Economics and Climate Protection Minister Robert Habeck is planning changes.
District heating is set to play an increasingly important role in the heating transition – but consumer advocates have long been demanding that the market become more consumer-friendly. The Federal Ministry of Economics now wants to create more cost transparency. In addition, consumer protection against excessively high district heating prices is to be strengthened, the ministry announced. A change to the district heating regulation is planned. This should achieve “significant competition and customer-friendly improvements” for more transparency and flexibility in supply conditions.
What is planned
The publication obligations of district heating supply companies are to be expanded. In future, a sample invoice will be published on the Internet, from which the application of any price change clause can be clearly understood, as the draft bill shows. Price components will also be listed. In addition, the customer’s “adjustment rights” with regard to the contractually agreed heat output will be specified. The term of the supply contract for follow-up contracts is to be shortened from 10 to 5 years.
From the point of view of consumer advocates, it is currently difficult for consumers to understand how district heating prices are determined. The prices for district heating in Germany vary considerably from region to region.
How Germany heats
Around 70 percent of heating systems in Germany are powered by gas or oil, according to data from the German Federal Association of the Energy and Water Industries (BDEW) on the heating market in 2023. The share of district heating is therefore around 15 percent of all apartments – and the trend is rising.
District heating is heat that is not generated in the house, but comes from a power plant or heating plant in the area. Water is usually heated there and then piped into the houses through insulated pipes. In the future, the heating networks will increasingly be fed by renewable energies.
As part of the heating transition, the gradual replacement of fossil heating systems, district heating is to be expanded – as part of municipal heating planning. This is to be available in large cities from mid-2026 and for the remaining municipalities from mid-2028. Homeowners should then have clarity as to whether they will be connected to a district heating network, for example, or whether they should look for their own decentralized solutions for a new heating system – for example a heat pump.
What consumer advocates say
The ministry’s draft contains some progress for private consumers, said Thomas Engelke, head of the Energy and Construction team at the Federal Association of Consumer Organizations. He mentioned, for example, more transparency in the publication of information on the Internet and the specification of some requirements for price change clauses.
However, one key point is missing, namely nationwide price supervision, says Engelke. The district heating market represents the strongest monopoly in the energy sector. “Nevertheless, there is no central price supervision by a federal authority.” Consumers must be effectively protected from “black sheep”.
What the energy industry says
BDEW Managing Director Kerstin Andreae said that the expansion and decarbonization of district heating plays a central role in the heat transition. Investments in existing facilities as well as significant new investments are necessary. This requires planning and investment security. It is therefore right that the draft provides for the contract term to remain at ten years for initial contracts. “It is good that the draft law does not provide for a price cap. This would be a major intervention in the market,” Andreae continued. Price cap refers to the regulation of the maximum price.
The Monopolies Commission had warned against excessive prices for district heating due to the monopoly positions of the suppliers – this could lead to a decline in public acceptance of the heating transition. The Federal Government’s advisory committee proposed introducing a “market-based price limit”. Last November, the Federal Cartel Office opened proceedings against six district heating suppliers on suspicion of excessive price increases.
Association against price control
Ingbert Liebing, general manager of the municipal utility association VKU, opposed calls for price supervision. This would be “absolutely counterproductive” and a complete stop to the expansion of district heating. Pricing for district heating is not a legal vacuum today, there are already clear legal rules and functioning control mechanisms, for example antitrust authorities carry out checks. Liebing also referred to a district heating price transparency platform run by energy associations for more transparency.
Prices for district heating
A spokesman for the Association of Municipal Companies (VKU) said that every heating network is different, as are the local prices. For example, local energy sources and the local type of heat generation differ. Wholesale gas prices have now stabilized after the sharp price increases in 2022/23. In district heating, wholesale prices are only passed on to customers with a delay. This time delay means that price peaks are absorbed and spread out over time.
With the price adjustments in January 2025, the “energy price crisis” in district heating will most likely be completely overcome. He also said that the comparison between district heating and gas prices should be based on a “full cost comparison”, which also takes into account the costs of a gas boiler and its installation.
Source: Stern
