The future of heating: The green gas quota and its significance

Gas and oil heating systems in residential buildings will soon have to be supplied with a small but increasing proportion of climate-friendly fuels. How that should work.

The new quota: Companies that sell heating gas and oil should add climate-neutral or low-carbon fuels from 2028. Natural gas would then contain a small proportion of biogas from agriculture. The Federal Ministry of Economics calls this the “green gas/green heating oil quota”. In 2028 the share should be 1 percent, in 2030 5 percent, in 2035 20 percent, and in 2040 it will be 50 percent. After that, rapid increases to 100 percent are planned. How all this will be implemented is still unclear. So far there is only a two-page key points paper from Minister Katherina Reiche (CDU).

What that means: The quota is part of the new regulation with which the Union-SPD government replaces the building energy law of the previous SPD-Green-FDP coalition. It said: Old gas and oil heating systems may only run for a maximum of 30 years. Modern heating systems must then be installed that use 65 percent renewable energy. With the new Building Modernization Act, old gas and oil heating systems can remain and new ones can also be installed. However, the goal of being climate neutral by 2045 still applies. In principle, heating systems should no longer emit climate-damaging CO2. The green gas quota affects the fuel for all heating systems in residential buildings, regardless of whether they are old or new.

The “biostaircase”: There is an additional regulation for new gas and oil heating systems, the “biostaircase”. Anyone who owns a house must conclude a contract with the gas or oil supplier so that the fossil fuel initially contains a 10 percent climate-friendly admixture from 2029. By 2040, this proportion will rise to 60 percent.

Why quota and stairs? The government wants to encourage both consumers and gas and oil companies to do their part. The organic staircase applies to residential and commercial buildings, so it also affects the new heating systems of bakeries, workshops and other companies. The green gas and green oil quota, on the other hand, should only be applied to residential buildings. “The consumption volumes of industry and commerce (…) are excluded from the quota obligation,” says the key points from the Ministry of Economic Affairs. A spokeswoman writes in explanation: “Industry and commerce are under cost pressure, especially when they are active in international competition.” Claudia Kemfert from the German Institute for Economic Research summarizes it as follows: “Apparently companies should be protected from additional energy costs.”

Consequences for private households: They would probably bear the costs of the biogas economy alone. And most experts suspect that these are increasing. In order for raw biogas from agriculture to be burned in building heating systems, additional connections to the gas network and new processing plants are required. Fuel prices with biomethane admixtures could “increase in real terms by 25 percent by 2030 and by 130 percent by 2040 compared to today’s natural gas prices,” says Kemfert. The Association of the Gas and Hydrogen Industry also assumes cost increases, but not quite as high.

Why the government is relying on gas: Green energy politician Michael Kellner describes the possible economic calculation as follows: The new green gas quota “also serves to keep the gas infrastructure running”. The local network encompasses more than 500,000 kilometers of lines and involves tens of billions of euros in investments. The companies want to continue making money for as long as possible. Even the gas association assumes that “gas demand in the heating market will be roughly halved by 2045”. Until then, heat pumps powered by green electricity will probably take over a large part because electricity is cheaper than gas.

Promoting agriculture: Biogas plants often belong to agricultural businesses and offer additional income opportunities for farmers. This clientele is particularly important to the Union.

Is this a path to climate neutrality? On paper, yes. However, it is noticeable that both the quota for green gas and oil and the organic ladder will increase rather slowly over the next ten years. The greatest increase is planned between 2035 and 2045. It is unclear whether this can be enforced. It is also strange how commercial heating systems are supposed to become completely climate-neutral by 2045 if they do not have to meet the quota by then. The Federal Association of Renewable Energies therefore recommends including industry and commerce earlier.