The Building Energy Act
The new Heating Act marks a decisive step towards a more sustainable and climate-friendly future. With the aim of significantly reducing the use of fossil fuels, the law simultaneously addresses several pressing challenges. It promotes the switch to renewable energies in order to achieve climate policy goals and reduce CO2 emissions. It also reduces dependence on fossil fuel imports, making Germany’s energy supply more secure. Last but not least, the Act protects consumers from the rising costs of fossil fuels by promoting a predictable, cost-effective and stable heat supply. Through these measures, the Building Energy Act makes a significant contribution to the decarbonisation of the building sector by 2045 and supports Germany’s transition to a more sustainable energy future.
The term “energy-efficient refurbishment” describes measures aimed at reducing the energy requirements of buildings through various improvements. This can include the installation of more energy-efficient heating systems based on renewable energies as well as improving the building envelope through new roofs, windows or improved insulation of walls. The aim is to create an energy-efficient home that requires less energy for heating, cooling and hot water. The Building Energy Act (GEG), which came into force on 1 November 2020 and replaced the Energy Saving Ordinance (EnEV), creates a uniform nationwide legal basis for the energy quality of new and existing buildings. The law not only regulates the use of heating and air conditioning technology based on renewable energies, but also sets the standards for the thermal insulation and cooling of buildings. These measures are intended to drastically reduce energy requirements, 40% of which are caused by buildings in Germany according to the Federation of German Industries (BDI). The aim is to strengthen climate protection, reduce dependence on energy imports and protect consumers from rising energy costs by reducing the use of fossil fuels and gradually replacing them with renewable energies.
Key Points
Requirements for existing heating systems
The Building Energy Act (GEG) allows owners to continue using their existing heating systems as long as they are in good working order. This means that there is no immediate obligation to replace functioning heating systems with new ones. If a heating system is defective, it may be repaired.
A special rule applies to heaters that are more than 30 years old. These must be replaced due to their high energy consumption and low efficiency. However, if you have lived in a house with these old heating systems since at least January 2022, you enjoy what is known as grandfathering. This means that the obligation to replace the heating system passes to the next owner.
Until mid-2026 or 2028, depending on the population of the municipality, it is still permitted to install new oil or gas heating systems under certain conditions. However, after 2029, these must cover part of their energy requirements with renewable energies in order to comply with the GEG guidelines. This adjustment aims to gradually reduce the use of fossil fuels and promote the transition to renewable energy sources.
Requirements for new heating systems
Since 1 January 2024, new buildings in new development areas have been required to obtain at least 65% of their energy requirements from renewable energy sources for every newly installed heating system. New oil and gas heating systems can also be installed in existing buildings and new buildings outside of new development areas, but a consultation is required in advance to clarify the long-term consequences of this decision. From 2029, newly installed gas heating systems must cover a certain proportion of their energy requirements – starting at 15% and rising to 30% by 2035 and 60% by 2024 – from climate-neutral gas.
Special regulations for different property types
The GEG contains specific regulations for old buildings, particularly those built before 2002. These buildings must carry out certain retrofitting and replacement measures in order to reduce energy consumption and increase efficiency. For listed buildings or those with special conservation value, exemptions from the general requirements of the GEG can be granted if the necessary measures would impair the substance or appearance or lead to disproportionately high costs.
Time frame and transition periods at a glance
The Building Energy Act sets various deadlines for property owners aimed at increasing the use of renewable energy and reducing energy consumption in buildings. Here are the key deadlines and transition periods that property owners should be aware of:
- From January 2024: For new buildings in new development areas, every newly installed heating system must be powered by at least 65% renewable energy. The installation of oil and gas heating systems is still permitted in existing buildings and new buildings outside of new development areas, although prior consultation is required to clarify the long-term effects of this decision. These heating systems must then be gradually converted to renewable energies from 2029.
- By July 2026 for large cities / By July 2028 for smaller municipalities: These deadlines are set for the creation of municipal heating plans. These plans are intended to provide citizens and businesses with information on the available options for heat supply and the use of renewable energies. This is important for owners, as municipal heating planning can influence which heating systems are subsidised or required by law in the future.
- In the event of a change of ownership: For owner-occupied detached and semi-detached houses, there is a transitional period of two years from the date of transfer of ownership during which the new owner must fulfil the statutory retrofitting obligations. This means that after a purchase or inheritance, any necessary adjustments to the heating system or other energy-related aspects of the building must be implemented within this period.
- By January 2045: This is the long-term target by which all heating systems in Germany must run entirely on renewable energy. This target reflects the federal government’s overarching goal of achieving a largely climate-neutral building infrastructure by the middle of the century.
The deadlines and transition periods set out in the GEG serve to facilitate the gradual transition to a more environmentally friendly and energy-efficient heat supply in German buildings, while at the same time allowing sufficient time for adjustments and investments.
Funding opportunities and financial support
Information on state subsidy programs to support owners with the implementation
The federal subsidy for efficient buildings (BEG EM) supports owners installing new heating systems with grants or low-interest loans. From 2024, owners can receive a basic subsidy of 30% of the costs for the installation of climate-friendly heating systems.
In addition, there will be a 20% speed bonus for replacing old fossil-fuelled heating systems until 2028. Households with an annual income of up to €40,000 can receive a further 30% bonus. There is also an innovation bonus of 5% for the installation of certain heat pumps. These bonuses can be combined, but must not exceed a total of 70% of the costs.
Tip for applying for funding
Funding can be applied for directly from the Kreditanstalt für Wiederaufbau (KfW). It is important to submit the application before starting the refurbishment. However, planning and consultancy services that have already been utilised are eligible for funding. Independent advice from an energy efficiency expert can also be subsidised.
Possible financial impact on owners and tenants
For owners: The initial costs for energy-efficient refurbishment measures and the installation of renewable heating systems can be significantly reduced through state subsidies. In the long term, these investments lead to savings in energy costs. In addition, the increase in the value of the property can be an important financial advantage. The combination of subsidies, low operating costs and increased value forms an attractive package for owners, despite the initial financial outlay.
For tenants: Whilst energy refurbishment can lead to an increase in rent, these potential additional costs are often offset or even exceeded by savings in energy costs. The improved energy efficiency results in lower heating costs, which is particularly important in times of rising energy prices. The statutory regulation on the sharing of CO2 costs between landlord and tenant also promotes a fair distribution of the financial burden and motivates energy-efficient refurbishment.
Summary
Energy efficiency is becoming increasingly important on the property market, both for buyers and sellers. Energy-efficient new builds are becoming increasingly attractive on the property market. Properties that comply with the Building Energy Act can achieve a higher market value.
Investing in energy-efficient construction methods may initially seem very cost-intensive to many, but it can pay off in the long term. Operating costs are significantly reduced due to lower energy consumption. This results in long-term savings in energy costs, which compensate for or even exceed the investment over time.
To summarise – investing in energy-efficient construction methods can be a profitable investment. Buyers who take a forward-looking approach to the relevant requirements can benefit in the long term.