According to the German Federal Climate Change Act, the buildings sector must reduce its greenhouse gas emissions by 44 percent by 2030. What is the current situation? And what is the potential for further reductions?
The buildings sector is definitely failing to meet its targets. But it is important to understand that the energy transition in this area is particularly difficult. A very large number of players are involved, by which I mean the ten million or so homeowners in Germany. We have to work with them to make the changeover to climate-neutral heating and they are highly diverse. For example, they include private homeowners, housing cooperatives, and housing associations. From a technological perspective, there are several ways of achieving the heating transition. You only need to think about the first passive houses that were built almost 30 years ago. But in the case of all the options, there is always the question of affordability and of people’s readiness to invest.
What do we need to do in your view to make progress in this area?
One thing is certain: we must cut the demand for energy even further, for example by renovating the existing housing stock. But as well as reducing the demand for heating, we also need to change the type of fuel we use and move away from fossil energy sources. One of the most interesting technologies is heat pumps, because on average they can produce three parts heat from one part electricity. The energy comes from the environment, either from the ground or, more often, from the air. We have measured the performance of heat pumps over recent years and it is clear that the technology works well in new houses and in the existing housing stock. In my opinion, they will make an important contribution to the energy transition in the buildings sector. Another important contributor is district heating, particularly in densely populated urban areas, if the systems can be converted to renewable energy and large-scale heat pumps.
Does that mean that heat pumps are the solution of choice in the buildings sector?
Yes, if using them is cost-effective in each individual case. They will be particularly important as a replacement for old oil-fired boilers. However, in a district where there is a newly installed gas infrastructure with modern boilers in the houses, there is no reason to change over immediately. This means that there will be a mix. Medium-sized towns with populations between 100,000 and 200,000 should be drawing up municipal heating plans and deciding what type of infrastructure is needed in each area of the town. It may be necessary to expand the electricity grid to accommodate the use of heat pumps. There may also be an existing hydrogen infrastructure, for example in an industrial park, and this could be used for surrounding buildings after investments have been made in the existing gas network.
If we electrify our heating systems, the demand for electricity will grow. Will there be enough renewable energy available to cover this?
Everyone agrees that the demand for electricity will rise. This is why we need to increase our renewable energy generation, in particular wind energy, which is much more productive in winter than photovoltaic systems. But expanding our solar energy capacity, if we combine it with storage facilities, can also make an important contribution. As well as increasing the amount of renewable energy we produce, we also need to develop the transport networks between the windy north of Germany and the regions in the south where there is less wind. This gives rise to the question of how we will transport the energy. As well as electricity, there is also the option of gas from renewable sources, which would mean using the existing natural gas infrastructure. This could then be converted back to electricity in gas-fired power plants. However, this is much less efficient than transporting electricity from north to south. In this case, the overall amount of renewable energy generation would have to be increased significantly.
There are a lot of questions that remain unanswered. Will it be possible to make the buildings sector climate-neutral by 2045?
From a technical and economic perspective, it will be possible for the buildings sector to achieve its climate targets. The more interesting question at the moment is what approach the politicians will take. The previous German government provided considerable additional funding for the KfW, Germany’s state-owned investment and development bank, and for the Federal Office for Economic Affairs and Export Control (BAFA). There has been significant demand for their subsidy schemes. The German people seem to be prepared to follow the government’s lead. However, there is a whole raft of confusing subsidy measures and regulations in this area, all of which are linked to one another. The system needs to be simplified, for example in the context of the Buildings Energy Act that regulates the requirements for new buildings, among other things.
Many tenants are worried about rising rents. How can we make the energy transition socially equitable?
My recommendation is that we should first of all be honest and explain to people that they cannot have the energy transition for nothing. It will cost money and the issue of how we can distribute the cost burden in a socially equitable way is a political one. One very effective means of doing this is CO2 pricing, but this will require support from the social benefits system. However, market economy measures of this kind are based on the assumption that there actually is a market. Given the difficult housing situation in Germany, this is not the case in most regions, which means that anyone who wants to move because of rises in combined rent and heating costs often has no chance of finding another property to rent. But this is not a reason for putting a cap on rents. Instead we need to find a solution aimed at the people who are responsible for the investments, generally the landlords. This could take the form of generous state subsidies so that homeowners do not need to pass the costs on to their tenants. If we fund this via taxes, it will also be socially equitable, because the people who are best able to afford the costs will pay more.
What other political changes are needed?
The legislative framework largely dates back to the 1970s and was determined by the oil price shock and a lack of resources. This is why it is mainly aimed at primary energy consumption. Instead it should focus on life cycle CO2 emissions. In addition, the calculations used to assess the different fuels are based on figures from 2016. This puts electricity-based solutions at a disadvantage compared with gas heating systems, for example, because the electricity mix in 2016 consisted of a relatively large proportion of fossil fuels. As a result, there are still incentives for installing gas boilers. This is very much a technical and legal issue, but it has a major impact in practice.