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08.08.2023 | KPMG Law Insights, KPMG Law Insights

Heat Planning Act creates investment security for heating systems

On July 21, 2023, the Federal Ministry of Housing, Urban Development and Building (BMWSB) submitted a revised draft of the Heat Planning Act. The Heat Planning Act is expected to be approved by the federal cabinet in the coming weeks.

The background: The planned Building Energy Act (GEG) amends the legal framework on the installation of new gas and oil heating systems. From 2024 onwards, the installation of new gas heating systems is to be legally permissible only in certain circumstances, according to the values of the current draft status of the GEG. But before homeowners invest in a heat pump or other heating system that is still permitted, they understandably want to know whether their area will be connected to a municipal heating network in the near future. For this reason, local authorities are now to be required by law to identify potential for district heating supply and to draw up heating plans. This is intended to provide building owners with investment security and a reliable framework on which to base a decision about a new heating system to be installed.

Like the GEG, the Heat Planning Act is to come into force on 01.01.2024. After the intense debate about the requirements of the Building Energy Act, the traffic light coalition had agreed to link the GEG with municipal heating planning.

Local authorities in demand for heat planning

The Heat Planning Act would first require states to ensure that heat plans are developed. The states are to be able to transfer this obligation to bodies responsible for planning – usually the municipalities.

Under the current bill, the following would apply to them:

  • For municipal areas with more than 100,000 inhabitants:inside, thermal plans must be prepared by June 30, 2026.
  • Heat plans must be prepared for all other community areas no later than June 30, 2028.
  • A simplified procedure is possible for the areas of small municipalities with up to 10,000 inhabitants:inside.

Municipalities should receive financial assistance for heat planning from the federal Climate Transformation Fund. If municipalities have already drawn up heat plans, these plans are grandfathered. In these municipalities, the provisions of the GEG do not apply until the municipalities are required by federal law to submit their heat plans, which is by June 30, 2026, and June 30, 2028, respectively. However, a municipality can implement planning earlier on its own, unhindered by these specifications. In addition, municipalities can designate areas for the new construction or expansion of heating networks or hydrogen network areas on a binding basis. A prerequisite is that planners show that the low cost per kilowatt-hour has low implementation risk, a high level of security of supply, and low cumulative greenhouse gas emissions. This will provide the basis for the use of hydrogen-based heating systems.

Another requirement of the heat planning law is that at least 50 percent of the heat provided must be green heat, i.e. renewable energy.

Heat plans offer investment security

Another component of the law: data collection for heat planning is to be fundamentally simplified. Instead of collecting data from each individual house in detail – as envisaged in the original draft bill – only data that is already known is to be summarized. The planning approach is based on an estimate of needs and not a detailed survey. After completion, the municipality’s heat planning must be published free of charge on its website so that citizens can view the results.

Conclusion

The Traffic Light Heat Planning Act forms a key component of the local heat transition. The law pushes municipal heat planning by the states. For owners:inside of existing buildings, the heat planning law as a co-player of the GEG previously meant that they could take the heat plan for the building into account when deciding on the installed heating technology for the required heating replacement.

At the same time, however, the law also poses a variety of challenges for the public sector, as data collection, evaluation, and strategic implementation into a heat plan are quite demanding in the timeframe envisioned by the WPG. The final heat plans, through the intended dovetailing with the GEG, now provide a reliable basis for the required investments of building owners.

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