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How Germany plans to phase out oil and gas heating

April 22, 2023

Germany's cabinet has approved draft legislation to force the transition to renewable energy. It's triggering panic among homeowners.

heat pump outside a house
Heat pumps are a way to replace heating systems based on oil or natural gasImage: Laura Ludwig/dpa/picture alliance

When you ask Dirk Jänichen to show you the orders for his heating and sanitation company, he points to the long row of files filling the shelves of his office in the German capital, Berlin.

"These are all orders that came in last year and that we are now working on," the engineer says, adding that anyone who wants a heat pump installed in their house has to wait nine months.

Heat pumps are like reverse refrigerators. They suck the heat out of the environment to warm houses and water and use just a quarter of the energy of a gas boiler. Since Russia invaded Ukrainein early 2022, Jänchen's business has mainly consisted of installing such heating systems.

"Starting in 2022, everyone was suddenly afraid that there would be no more gas, so they all wanted heat pumps," he explains.

Jänichen, who employs 24 people, can install 40 such systems per year as well as the solar panels that make them even more efficient.

Dirk Jänichen standing in his office
Engineer Dirk Jänichen has more orders than he can handleImage: Sabine Kinkartz/DW

Climate-neutral heating by 2045

Heat pumps run on electricity. If that is generated by renewable sources, the heating system is virtually climate neutral. That's why the German government subsidizes the installation costs by up to 40%.

But even with the subsidy, a heat pump system for a single-family home costs around €17,000 ($18,600). And older houses often also need refurbishments such as thermal insulation and new windows and doors. The more complex the renovation, the more expensive the move to energy efficiency and renewables will be — possibly amounting to more than €100,000.

A new gas heater, on the other hand, can be bought for about €10,000.

"When it became clear at the end of last year that Germany would have enough natural gas after all and the price would go down again, many customers said; 'Then I'd better install a gas heating system because it's available and cheaper'," explains Jänichen.

But no one knows what the price of natural gas will do in the future, and whether natural gas will actually be cheaper in the long run. What is certain, however, is that the price for carbon dioxide emissions will have to rise significantly if the European Union wants to meet its climate targets.

1.2 million heat pumps have been installed in Germany to date, mostly in new buildings. But half of Germany's 19 million residential buildings heat with natural gas — and a quarter with oil.

Why heat pumps are all the rage

Ban on fossil-fuel heating from 2024

According to the think tank Agora Energiewende, the building sector accounts for around 15% of Germany's greenhouse gas emissions.

This is now set to change. The German government wants to make the building sector climate neutral by 2045. The key point of the new draft law is a ban on new oil and gas heating systems from 2024: From next year, all new heating systems must be powered by at least 65% renewable energies.

The announcement has caused many homeowners to try to install the cheaper gas and oil heating systems before the end of the year. "Especially among older customers, there is such a huge demand for the old oil heaters at the moment, I wouldn't have thought it possible," Jänichen says.

A headache for the elderly

Building a house or buying an apartment is often part of a retirement plan in Germany. By the time people retire, they have paid off their mortgages and can save on housing costs in old age. But a costly energy-saving renovation of the house cancels out this calculation. Retirees usually can't get a new loan, and their pensions aren't high enough to cover the costs of the necessary refurbishment.

So the government is planning to exempt those over 80 from the requirement to install a heat pump when their fossil-fuel heating system breaks down. But the uncertainty prevails: Will this exemption really come about? And will it hold up in the courts if, say, a 79-year-old feels discriminated against?

Much of the draft law is still vague, and the subsidy guidelines for new heating systems are complex. Jänichen, who is on the board of the Berlin Guild of Sanitation, Heating and Air Conditioning says customers and his colleagues in the industry need more information because guidelines are constantly changing and new regulations are being added all the time.

Installing a heat pump, he says, is technically quite different from installing a gas or oil heating system.

They not only take longer to install, continual training is needed to be able to keep up with technical developments.

Heat pumps also have long delivery times, and due to the high demand, all sorts of parts are no longer readily available.

"In the past, an assembler would drive to the wholesaler, buy the parts there, bring them to the site and install them," Jänichen says. "Today, we have to order everything and store the parts here on the site, and when we have everything together, I call the customer and offer them an appointment for installation."

Image showing how heating with ambient energy works

Skilled labor shortage

The engineer believes the German government's plan to install 500,000 heat pumps annually from 2024 is unrealistic because of the lack of specialist companies and skilled workers in Germany.

According to estimates by the German Sanitation, Heating and Air Conditioning Association, there is currently a shortage of around 60,000 skilled workers in Germany.

The German Confederation of Skilled Crafts is calling for more time to implement the new regulations.

"Politicians should have started 20 years ago to organize the transition to climate-neutral heating systems," Jänichen says, "but at that time gas from Russia was cheap."

With regard to his own company, he is optimistic: He believes he can increase the number of heat pumps he can handle per year from 40 to 60 with the help of his family.

His two sons, who were planning different career paths, are suddenly interested in their father's trade. "What we do today has a lot to do with the evironment and climate protection. Young people like that," Jänichen says.

This article was originally written in German.

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