The Building Modernization Act

The so-called “Heating Act” comprises the regulations that were incorporated into the Building Energy Act (GEG) in 2023, which has been in force since 2020. When the government factions talk about abolishing the Heating Act, they are referring only to the deletion of Sections 71-71p GEG and Section 72 GEG. These regulations stipulate, in particular, a 65% share of renewable energies in the heat supply for the building sector (the so-called “65% obligation”).

This also addresses the main focus of the amendment, which is the deletion of the aforementioned provisions. The requirement for at least 65% of the heat supply for new and existing buildings to come from renewable energies will be dropped. The previous operating bans on certain types of heating are also to be abolished. Which types of heating this will affect has not yet been explained in detail. However, existing heating systems should be able to continue to be used.

In the future, building owners will be able to decide for themselves which heating option to choose when replacing their heating system. In contrast to the previous legal situation, the Building Modernization Act will also refrain from regulating when and whether existing and functioning heating systems must be replaced.

Instead, the law will include a “technology-neutral” catalog of all possible heating options: Heat pumps, hybrid models, biomass, gas, or oil heating systems will be permitted.

The choice of heating systems will therefore be more flexible than before. However, Germany must continue to meet its national and European climate targets. The new Building Modernization Act also plans to focus on CO2-free heating systems in the future. For this reason, an increasing proportion of CO2-neutral fuel is to be used from January 1, 2029. Specif-ically, this share is to be at least 10% from January 2029 and then increase in three steps until the target year 2040 (known as the “bio staircase”). The key issues paper does not address what will happen if there is not enough CO2-neutral fuel available in the respective grid.

Those who wish to continue heating with fossil fuels will have to gradually increase the proportion of green oil or gas (known as the “green gas quota”) and thus contribute to climate protection. This is also intended to strengthen independence from energy imports and promote the use of domestic energy potential. According to the key issues paper, heat pumps or district heating are already the heating methods of choice for new buildings.

Funding for the Federal Funding for Efficient Buildings (BEG) program is to remain secure until at least 2029. Details are not yet known. Nor is it known what will apply from 2029 onwards.

German lawmakers are required to implement the provisions of the Energy Performance of Buildings Directive (Directive (EU) 2024/1275) by May 2026 at the latest. Among other things, this is to be achieved with the new Building Modernization Act, which, according to the governing parties, “implements the European requirements 1:1,” while at the same time making full use of the existing leeway in implementation.

In any case, it is clarified that the implementation of the Directive for residential buildings will not trigger building-specific renovation requirements. German building efficiency classes are also to be harmonized in line with EU requirements by the end of 2029.

In addition to the amendment to the Building Energy Act, further new legal regulations are to be introduced. For example, a regulation is to be introduced that protects tenants from excessive ancillary costs due to the installation of uneconomical heating systems. This will probably require an amendment to the German Civil Code (BGB).

Municipal heat planning for small municipalities with up to 15,000 inhabitants is also to be simplified and decoupled from heating regulation.

The legal framework for district heating is to be regulated in a heating package. This is intended to improve the framework conditions for investments in the networks, consumer protection, and price transparency for customers. Federal funding for efficient heating networks is also to be expanded.

Many details of the planned new regulations are still unknown currently. It therefore remains to be seen whether the measures mentioned will be effective in achieving the reduction in CO2 emissions that is urgently needed, particularly in the building sector, against the backdrop of national and European climate targets.

There are approximately two and a half years between the planned entry into force of the Building Modernization Act and the deadline for the green gas quota to take effect. During this period, it will still be possible to install fossil fuel-powered heating systems. Their typical operating life of 20 to 30 years means that such systems will continue to use fossil fuels in the long term, provided they are available.

The background to the regulations newly included in the GEG in 2023 and now soon to be abolished again (the so-called “Heating Act”) was the EU's “Fit for 55” program, which aims to reduce greenhouse gas emissions by 55% by 2030 and become climate neutral by 2050. The national target year of 2045 is even more ambitious. And these targets still apply.

This may be one of the reasons why the key issues paper already announces that the target achievement for the building sector will be reviewed in 2030 and, if necessary, the legal regulations will be adjusted.

The legislative process is to be completed in good time before July 1, 2026. The background is that, under the law that will remain in force until the amendment, the 65% requirement will apply in larger municipalities with more than 100,000 inhabitants by June 30, 2026, at the latest.