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23.06.2023 | KPMG Law Insights

Traffic light coalition dovetails building energy law with municipal heat planning

In the debate on the amendment to the Building Energy Act (GEG), also known as the Heating Act, the traffic light coalition has agreed on “guard rails”. The linking of the GEG amendment with municipal heating planning is particularly new. This significantly changes the situation for existing buildings.

After the original bill provided, among other things, for a ban on the installation of oil and gas heating systems in new and existing buildings from 01.01.2024, the German government is now moving away from this rigid requirement. The installation ban is to apply only to new buildings from January 2024. For existing buildings, under the current draft, the regulations would not apply until municipal heat planning is completed.

The coalition government wants to pass the amended GEG before the summer break.

Interlocking of building energy law and municipal heat planning

Probably the most significant announcement by the federal government for the proposed legislation is the dovetailing of municipal heat planning with the GEG. Municipal heat planning is currently being advanced in a parallel piece of legislation, the Heat Planning and Decarbonization of Heat Networks Act (Heat Planning Act – WPG). The core of the WPG is that the municipalities identify their existing potential for a climate-neutral heat supply and the construction of corresponding heating networks, and create investment security through heating plans. Another goal of the law: by 2030, half of the heat supplied by pipelines is to be climate-neutral.

For owners of existing buildings, the linkage of the two legislative projects means that they can take into account the heat plan for the building when deciding on the heating technology to be installed when a heating system replacement is required. Because at that point they know whether the building can prospectively be connected to a heating network or whether a heat pump is worthwhile.

Building energy law to be more open to technology

The requirement that 65% of the energy used to supply heat must come from renewable sources is to remain in place. However, the requirements to meet this goal are to be revised. Heating systems that run on wood or pellets are now also considered regenerative. Furthermore, gas heating systems are to be allowed to be installed in new and existing buildings even after 01.01.2024 if they can be converted to hydrogen. The transformation plans previously provided for are no longer required. Instead, municipalities and gas grid operators must present a binding roadmap with binding interim targets for a hydrogen infrastructure by 2045.

Measures to avoid hardship

To avoid hardship for building owners and tenants, the federal government’s “guardrails” call for the creation of a comprehensive funding landscape. This is to be financed from the Climate and Transformation Fund. Further, the federal government intends to revise the exemption like the current exemption for owners over 80 years of age. Hardships in rental relationships are to be prevented by revising the modernization apportionment. In addition, landlords should be able to claim a further modernization levy for investments in climate-friendly heating if they have taken advantage of subsidies and the tenants benefit financially despite the further levy.

Conclusion

With the published guard rail paper of the Federal Government, the much discussed amendment of the GEG takes a new turn. Owners of existing buildings are likely to welcome the link between the obligations under the GEG and the results of municipal heat planning. The intended changes to the subsidy programs and the adjustments to the regulations on modernization apportionment under rental law can also make a significant contribution to the heat turnaround.

 

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