Surge in Heat Pump Demand Driven by CDU's Plans Amidst High Costs

The recent announcement by the CDU regarding the potential repeal of the Heating Law has ignited a significant increase in the demand for heat pumps in Germany. As homeowners rush to replace their oil or gas heating systems with heat pumps, the heating industry is witnessing a surge in activity, despite the high costs associated with these installations.

According to the German Heating Industry Association (BDH), there was a remarkable uptick in funding applications, with 46,000 requests approved in December alone--four times the average from the preceding eleven months. Nationally recognized installer Thermondo reported record-high sales, indicating an increase of 2.5 to 3 times the number of heat pumps sold compared to October.

This demand spike can be attributed to the uncertainty surrounding the future of government incentives, as the end of the previous coalition government on November 6 raised concerns that generous subsidies might soon be cut. The state currently covers up to 70% of the costs associated with new heat generation systems, making it crucial for homeowners to act swiftly.

The heat pump boom is likely to persist for several months. However, if a CDU-led government comes to power, changes to the Heating Law may not be addressed until mid-year, allowing manufacturers to capture more market share.

Despite the surge in interest, the heating industry faces significant challenges. Sales fell from 356,000 units in 2023 to just 192,000 in 2024, making the previous government's goal of half a million units sold annually seem increasingly unattainable. Achieving such numbers is essential for meeting national climate targets.

Homeowners' hesitance to switch to heat pumps is partly due to the intricate regulations associated with the Building Energy Law and the link between heating replacement and municipal heating planning. Many homeowners opted to wait for guidance from local governments before making a decision.

The BDH views the end-of-year surge as a positive sign, reflecting a sense of urgency among homeowners. Surveys indicate that approximately one-third of homeowners plan to install a heat pump by 2029, though actual implementation rates remain uncertain.

In Germany, despite state subsidies, heat pumps are among the most expensive in Europe. The think tank Agora Energiewende estimates that, even after subsidies, the average installation cost remains around EUR12,600, significantly higher than in the Netherlands (EUR6,000), France (EUR7,000), and Italy (EUR4,400).

Industry insiders cite high German quality standards as a contributing factor to these costs, but this is only part of the equation. Uta Weiß, a program manager at Agora Energiewende, suggests that declining demand typically leads to lower prices, a trend not observed in Germany's heat pump market due to a shortage of qualified installers. Many professionals in the field remain focused on traditional heating systems, making the transition to heat pumps complicated, especially in older buildings.

Weiß advocates for changes in training protocols to enhance installation dynamics, stressing the need for more user-friendly and robust devices suitable for existing buildings. Furthermore, she highlights the importance of reducing electricity costs for heat pumps. High taxes and fees associated with electricity in Germany contribute to elevated prices, making heat pumps less attractive compared to gas heating.

According to the German Energy and Water Industry Association (BDEW), less than half of household electricity costs derive from procurement and distribution, with the majority attributed to taxes and network charges. This situation creates a significant price disparity between electricity and gas in Germany.

To stimulate the heat pump market, making electricity pricing more competitive with gas is essential. Agora's experts emphasize the need for political stability to signal that climate-friendly heating solutions like heat pumps are the future. The BDH similarly urges the government to avoid abrupt funding cuts or interruptions, advocating for clearer and more practical regulations to support the heating transition.