One solution for environmentally friendly heating in residential buildings is called district heating. But the necessary investments challenge owners and landlords alike.
Heating is a significant driver of CO2 emissions: According to the Federal Statistical Office, almost 70 percent of CO2 emissions in the living area in 2021 were due to heating, and a further 13 percent were due to the provision of hot water. One thing is clear: these emissions must decrease. District heating is considered a promising heating system for the future if converted to renewable energies.
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A current study by Agora Energiewende now shows what measures are necessary to expand the heating networks so that around a third of all apartments in Germany can be supplied with district heating by 2045. This would be a significant increase compared to the current 15 percent. In order to achieve this, annual investments would have to double to around five billion euros.
Climate-neutral heat – but at what price?
So more money would have to flow quickly into expanding the infrastructure. The study shows that the potential expansion is hardly possible without reliable public funding. The federal funding for efficient heating networks (BEW) currently only runs until 2028 and does not provide enough resources to heating network operators at around 0.8 billion euros per year. The authors of the study therefore call for the funding to be extended and increased.
The transition also brings significant challenges for property owners who have to implement the necessary adaptations to their buildings. The consumer advice center estimates that switching to district heating in smaller buildings will result in one-off costs of between 8,000 and 15,000 euros. The costs include disposing of the old heating system, connecting the building to the district heating network and installing a district heating transfer station.
The federal government supports at least 30 percent of the conversion costs through federal funding for efficient buildings (BEG). However, property owners can only apply for funding if they hire an energy efficiency expert to ensure that the minimum technical requirements are met. The funding applications go through the Federal Office of Economics and Export Control (BAFA). Anyone who replaces an oil heating system can also receive a bonus of ten percent, the so-called oil replacement bonus.
Allocation to tenants only possible to a limited extent
Once the heat carrier is in operation, owners face new challenges: A key disadvantage of district heating is that there is hardly any competition on the market. Because district heating networks are usually local or regional monopolies, it is hardly possible to change supplier. If the costs are higher than expected, for example due to hefty additional payments, it is simply not possible to change the provider. Reversing the high investment is also unlikely to be an option. The problem is a real obstacle to acceptance and also to the further expansion of district heating. Consumer advocates have recognized the structural problem. For example, the Federal Association of Consumer Organizations (vzbv) is calling for “reforms of the district heating monopoly sector”.
In addition, the legislature sets strict limits for renting owners with the Heat Supply Ordinance. For example, the heating costs that landlords pass on to their tenants must not exceed the costs of the previous decentralized supply, such as gas heating. The regulation involves a lot of uncertainty, so some owners may hesitate to connect their apartment buildings to district heating networks.
Heat contracting: energy delivery as a service
Contracting models offer one option for not having to make the necessary investments in existing buildings yourself. With so-called heat contracting, owners hand over the heating system to an energy supplier who takes over the financing, operation of the heating system and the direct billing of the heat generated to the residents. However, this model also poses significant risks for owners. You lose a lot of control over your property’s heating system and may no longer be able to influence the heating regulations. In the worst case, this can lead to providers operating the heating systems according to their own economic interests and, for example, generating and billing for heat when this is not necessary.
Without suitable support, the economic incentive for owners and landlords to convert to district heating remains limited. Smaller landlords and private owners in particular face high investment costs and a challenging regulatory framework, which make switching to district heating even more difficult. But despite all the challenges, district heating also offers long-term opportunities. One thing should be clear: the heat supply to buildings must work in the medium to long term using climate-friendly technologies and energy sources. If you find a good solution for your own property or property, you should definitely say goodbye to heat sources that are not promising for the future.
Source: Stern
