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Heat turnover: Pending renovation items are being addressed – economics

Thanks to funding from the federal government’s climate protection package, the heat market is finally moving after years of stagnation. The number of applications has tripled in some cases. “This is great news because there has clearly been an increase in interest – renovation backlogs are finally starting to dissolve,” commented the German Energy Efficiency Initiative (Deneff).

To prevent the various funding programs from running out of money because of their complete success, they are now receiving another injection: the Bundestag’s Budget Committee on Thursday approved 2.2 billion euros more. The total budget is now 5.2 billion euros.

For 2021, BMW announced “adequate funding”. The speaker was not yet able to state the exact amount upon request. “This is the subject of negotiations on the budget of the Energy and Climate Fund for 2021 and is currently in the parliamentary process,” she said.

The energy and climate fund is uncertain

Crucially, this demand will be reliably met in the coming years, notes Deneff. He expects that demand for building modernization could continue to rise, as new federal funding for efficient buildings would simplify conditions and facilitate access from 2021 onwards. In Coronian times, there is uncertainty about the income of the energy and climate fund. The source is federal funds, but also revenues from European emissions trading.

After all, from this year there is another possibility to let the state subsidize the renovation of buildings: through tax cuts. The climate pact has also untied the knot here. We will find out what this will bring in the autumn of 2021, when income tax returns will be filed.

Consider the entire life cycle of the building

However, this is by no means deprived of building space in the heating sector. So far, emissions from building materials have hardly played a role – the keyword gray energy. According to the Energy Performance of Buildings Act, employment will not be available until 2023.

In order to promote this issue, the Greens want to submit an appropriate proposal to the Federal Assembly soon. You already require a legally required resource ID for buildings and a mandatory building life cycle assessment. This would motivate building owners to use environmentally friendly insulation materials. The Greens are also calling for the mandatory use of only renewable heat in new buildings by 2025.

Polystyrene can also be recycled. However, the material has been criticized for consuming fossil fuels. Photo: Peter Förster / picture-alliance / ZB

This aspect should also play a role in the feasibility study of the Wuppertal Institute, which Friday will present for the future on Tuesday in Berlin. Accordingly, it should be possible to achieve climate neutrality throughout Germany by 2035 – under certain conditions also in the heating sector.

Subsidies for district heating should be greener

The whole district heating area is still in trouble. Attempts are already being made to decarbonise district heating with renewable energies, such as geothermal or solar thermal energy. A study by industry associations recently found that the potential is significant: it could reduce emissions in the construction industry by 20 percent. And this, in turn, represents a third of all emissions in Germany.

However, “massive subsidies for fossil fuels and climate-damaging heat” are slowing down renewable energies as a source of heat, German aid for environmental protection believes. In the positional contribution, it names critical points and requires the law on district heating from renewable sources.

Agora Energiewende shows the benefits of warm rent

Even a very old problem in the heat market has not yet been solved: the dilemma of the tenant and the landlord. Energy-reasonable investments are not made because the landlord does not have any direct benefits from energy renovation. It only reduces additional costs for tenants. This, in turn, has no effect on the required investment.

However, according to Agora Energiewende, there is a solution to this dilemma: Say goodbye to the cold rent and introduce rents. “The current system, which passes on heating costs to tenants and at the same time allows for an increase in housing rent after renovations, is obsolete and should be abolished,” said Patrick Graichen, Director of Agora Energiewende. Think tank today presents its model in the study: the rent is paid for a warm apartment, the landlord pays for energy for heating. This gives them an incentive to save on heating costs.

On the contrary, according to the study, the current fee for modernization rewards above all how expensive the renovation was and not how efficient. The fee is not just about climate protection: landlords can also rent out bathroom renovations or install balconies or lifts. Energy efficient renovation theoretically increases the attractiveness of the apartment on the market. However, this would hardly have the effect of managing energy quality in many cities. “Because there is such a high demand for flats that many tenants cannot afford to pay attention to the energy condition of the flat and not rent it when there is a high demand for heating,” write the authors Agora-Energiewende and the University of Kassel.

If the price of CO2 makes oil and gas heating more expensive, owners should bear half the additional cost, so three … Photo: Hauke-Christian Dittrich / dpa

In order to introduce warm rents on the German rental market, Agora Energiewende proposes so-called temperature feedback: landlords and tenants agree on the room temperature, which the landlord guarantees in the winter months. The reference consumption is then determined by measuring the room temperature with normal heating behavior. If the tenant exceeds this consumption, it pays later. If he saves, he will get compensation. This accurate measurement is necessary because, according to the specifications of the European Energy Efficiency Directive, consumption must be recorded individually. This was the result of the second Agora study on the legally safe feasibility of hot rentals in Germany.

If the apartment is then refurbished, the reference consumption will be reduced because less energy is needed to reach the same temperature. The price of the agreed room temperature remains the same. The landlord thus benefits from the saved heating costs.

The price of CO2 will increase the price of fossil fuels

In Sweden, where the model worked well, legal requirements are simpler. Emissions from the heating industry have fallen by 95 percent since the introduction of hot rents in 2000, Agora Energiewende said. However, in connection with the price of CO2 from oil and natural gas. That should now come in Germany as well. From January, one tonne of CO2 in buildings and transport will cost 25 euros.

Consumers have nothing to do with it directly, because the price is paid by fuel importers. But you can pass on the cost. Specifically, this means a surcharge of 7.9 cents per liter of fuel oil and 0.6 cents for natural gas in 2021, the Federal Ministry of the Environment said. That’s a surcharge of about 20 percent on fuel oil and about ten percent on natural gas. The price of CO2 is expected to rise to € 55 per tonne by 2025.

According to the decree on operating costs, landlords are allowed to transfer these surcharges to the tenant in full. Yet. Because the three federal ministries led by the SPD want to change that. In a joint document on key issues, they agreed that tenants and landlords would share the costs. This would also create an incentive for landlords to invest in economical or CO2-free technology.

Easier modernization in property communities

Finally, one topic was clarified last week with the final approval of the Federal Council. The law on the modernization of flats sets new rules for the owners of approximately ten million flats in Germany. It is now easier to upgrade, both with regard to energy-efficient renovations and the installation of charging stations. For example, half the owners can now decide to install a greener heating system.

A wave of renovations is approaching in Europe

Deneff now expects the wave of renovation to kick-start something at the European level, as it did in Germany through funding programs. The Commission is likely to present its strategy on this issue next Wednesday. It is clear that the EU will first focus on the buildings with the lowest energy efficiency, said Deneff board member Christian Noll. This also keeps the promise they made under the Green Agreement to make the transition to the new energy system fair.

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