Heating systems in Germany: an overview

The landscape of heating systems in Germany is undergoing a profound transformation in the current moment, one that will bring lasting changes towards sustainability.

The year 2023 has been a key milestone in this transformation. Firstly, in summer 2023, the news broke out:  a government study showed three-quarters of new German residential buildings employ sustainable heating, as picked up by the Germany Trade and Invest portal.

This represented a major shift for heating systems in Germany, and was paired up with the Building Energy Act amendment in September 2023, which focused on the switch to renewable energies for heating, effectively tackling the decarbonisation of heat supply in Germany

A broader look at Germany’s decarbonization efforts shows the country’s commitment to transforming its energy landscape goes back to 2010. That year, the Energiewende was initiated, a public policy that aimed at several sustainability goals, such as a nuclear phase-out acceleration; a shift towards renewable energies, grid modernization and energy efficiency measures, among other things. 

However, in this commitment to transitioning to a low-carbon energy system, the decarbonization of heating had, in a way, stayed behind.  This means that systems based on fossil fuels are still 80% of heating systems in Germany in 2021, while the share of renewable energies is only 16.5%, according to official sources.

This places Germany far from other European countries which have effectively targeted the decarbonization of their heating systems, such as district heating initiatives in Denmark and district heating in Sweden.

Nevertheless, the data and governmental action speak of unprecedented movements towards climate-neutral heating. This is particularly the case with the increasing presence of heat pumps in Germany which, as we see below in this article, are becoming an effective ally towards decarbonized heating systems in Germany.

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As financial incentives and subsidies for the installation of heat pump systems are significantly boosting their market, all signs point towards the same direction: heating systems in Germany are finally ready for their transition towards greener alternatives.

The transition towards renewable heating systems in Germany

The path to incorporating renewable, low-carbon energies within heating systems in Germany has been a winding road. 

While policies such as the Energiewende and the wider European Renewable Energy Directive have been pioneering certain energy measures, the decarbonization of the heating sector had been somewhat lagging behind up until very recently. 

This is particularly significant considering heating systems are responsible for around 15% of Germany’s CO2 emissions. 

The Building Energy Act amendment in September 2023 has come to signify the country’s commitment to reach climate targets with urgent measures to achieve a new height: by law, heating systems in new residential developments must now incorporate more than 65% of renewable energy sources, from January 2024. At the same time, the law includes foreseeable steps and timelines for the transition in existing buildings, such as the introduction of district heating.

To ensure efforts are followed through, a series of subsidy measures has been approved, with the newly-revised BEG guideline ("Federal subsidies for efficient buildings").

Stats provided by the Federal Statistical Office and cited by the Germany Trade and Invest portal show how favorable policies are indeed creating a rippling effect even before the year 2023. For instance, 74.7% of all residential buildings built in 2022 were heated at least partially using renewable energy, growing by 4% compared to 2021. At the same time, 61.4% of these new projects used renewables as a primary source of heat. 

As we continue analyzing below in this article, heat pumps are becoming a crucial ingredient in Germany’s recipe towards renewable energy. 

Heat pumps are valuable for their capacity to employ various renewable energy sources, including solar, wind, and geothermal energy, to extract or absorb heat from the environment. By using renewable energy, heat pumps significantly reduce carbon emissions while also ensuring outstanding efficiency levels. 

This has ushered in a new era for district heating heat pumps in Germany: they have been installed in more than half of new residential projects, rising from being part of 50.6% of new projects in 2021 to 57% in 2022. 

The role of heat pumps and district heating in Germany

While achieving heating systems running on 65% of renewable energy is the goal, there are a variety of options to choose from to achieve it. However, the heat pump formula seems to provide major advantages. In fact, heat pumps are expected to cover more than 80% of new residential projects by 2023.

This aligns with general trends taking Europe by storm. According to EHPA figures,  heat pump sales are breaking all records, with a year-on-year increase of 38.9% when comparing 2021 and 2022. 

With 19.79 million heat pumps installed in the EU (responsible for providing heating for around 16% of Europe's residential and commercial buildings), this formula is indeed providing a way forward for the transition towards greener heating. 

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Their extraordinary energy efficiency, their incorporation of renewable energy sources and their reduced reliance on combustion processes are behind the environmental advantages of heat pumps. 

What’s more, large heat pumps within district heating initiatives have been hailed by organizations such as the IEA and the European Commission as a way forward towards low-carbon heating.

In fact, according to EHPA calculations, the European heat pump stock is now capable of avoiding 52.52 Mt of CO 2 emissions, which account for roughly the annual emissions of Greece altogether. 

Germany is now taking a leadership position within this broader European trend, being in the third position in the top 5 of the biggest European heat pump markets in 2022 (behind France and Italy). 

As we’ve seen above, policies targeting heating systems in Germany now seem to get traction towards stimulating the installation of heat pumps. This has translated into significant subsidies both for new residential projects and retrofit initiatives. 

These grants come to the front to counterbalance public awareness around the cost of installing heat pumps, which typically present higher upfront costs when compared to conventional heating systems. 

However, it’s worth noting public awareness around costs is also shifting, as the operating costs for heat pumps are much lower than conventional heating systems due to their high efficiency. This economic advantage, coupled with rising prices for fuels such as oil and gas, represents another key reason why heating systems in Germany are now on the direct path towards decarbonization. 

The resulting landscape will likely see a no-turning-back scenario where fossil fuels are being steadily replaced for alternative, sustainable heating options.

At ARANER, we’re ready to become the allies that sustainable heating systems in Germany need. Through our decades-long experience in thermal engineering, we’ve paved the way for the development of successful district heating initiatives with efficient heat pumps at the center. 

Want to learn more about how we help developers access the potential of heat pumps and district heating towards decarbonization of heating in Germany? Get in touch with us and speak to our team about how we can help you.

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