Planned state support means heat pumps pay off even in inefficient buildings

Jul 19, 2023

Planned German state support will make a heat pump cheaper than a new gas boiler, even in comparatively energy-inefficient buildings, said environmental NGO WWF Germany. Consultancy firm Prognos calculated several scenarios on behalf of WWF, with different assumptions regarding future energy and installation costs, and found that in the long term, a heat pump was always the cheaper alternative. Even in a home that isn’t energy efficient, people could save about 6,000 euros over 15 years with a heat pump compared to a gas heater, because subsidies cover a significant share of the much higher installation costs of a heat pump. Low-income households, which receive higher subsidies, could save almost 11,700 euros over that period, said WWF.

A draft law for the phase-out of fossil fuel-powered boilers triggered fierce debate in recent months about decarbonisation of the heating sector, with critics arguing that the investment costs for climate-friendly solutions like heat pumps will overburden homeowners and tenants. In reaction, the government plans to provide financial support to households making the necessary investments, with the level of subsidy provided based on income and timing. All homeowners who install climate-friendly heating systems will get reimbursed for 30 percent of the investment costs. If the taxable household income is below 40,000 euros, which applies to 45 percent of homeowners, another 30 percent subsidy will be added. There is an additional 20 percent if the installation occurs before 2028, but total subsidies are capped at 70 percent. The heating law itself is set to be decided by parliament next week.

Recent data showed that heat pump demand in Germany collapsed in the first months of 2023 amid uncertainty while Germany fiercely debated the heating legislation. WWF argued that better communication of facts about costs of installing heat pumps could help the climate-friendly transition of the heating sector. A survey by pollster Civey, which WWF had also commissioned, showed that homeowners stated costs as the main reason for not carrying out renovations to their home to make it more energy-efficient (56%), and even a financial subsidy amounting to 70 percent of the investment costs could not motivate almost half of the respondents to replace their heating system.

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