30 April 2026
In an interview, researchers from Jülich talk about what heating systems will be worthwhile in the future, the role that climate-smart alternatives will play - and what consumers need to know when they are making decisions today.
Gas, heat pump, or district heating? The German Federal Government has agreed on key points for a new Buildings Energy Act - a Building Modernization Act (GMG). The obligation to operate new heating systems with at least 65 % renewable energy will no longer apply. While this will give homeowners greater freedom of choice, it will also cause greater uncertainty when it comes to long-term decisions.
Economic researcher Prof. Dr. Stefan Vögele, systems researcher Dr. Thomas Schöb, and heat supply research specialist Dr. Noah Pflugradt work at Forschungszentrum Jülich in the field of energy systems analysis. They investigate how different technologies interact - from heating systems to power supply to industrial processes - and what solutions are economically viable and climate-friendly in the long term.
Is installing a gas or oil heating system still worthwhile for homeowners - both financially and in the long term?
Stefan Vögele: Taking current subsidies and grants into account as well as the expected trend in electricity and gas prices, most people will find that switching from a gas or oil heating system to an electric heat pump is already worthwhile today. That being said, the issue requires a nuanced assessment. Many homeowners base their decisions on current prices or only plan for the next few years. Others simply struggle to replace a reliable heating system they are used to. A lack of clear framework conditions could lead to decisions being made that are not economically optimal in the long term.
Noah Pflugradt: Installing a gas or oil heating system instead of a standard heat pump is only worthwhile today under very specific conditions. Here are a few figures: If the cost of oil or gas per kilowatt-hour is significantly below 33 percent of the price of electricity, it can be worthwhile.
But this is not the case at the moment. The price of gas is currently much higher than 50 percent of the price of electricity. With a highly efficient heat pump, the price of electricity per kilowatt-hour must be lower than 20 percent of the price of gas for gas heating to be worthwhile.
On top of this, carbon levies on the price of gas are constantly rising and there are uncertainties regarding energy supply. The geopolitical situation and developments in recent years have led to a lack of supply security for oil and gas and unpredictable prices, meaning that further price spikes for gas and oil would not be surprising.
Although heat pumps are still much more expensive to buy and install, prices are falling, and, in many European countries, they are already at a similar level to fossil fuel heating systems.
Who is set to benefit most from a heat pump - and what does this depend on?
Thomas Schöb: A heat pump can be really worthwhile if the higher purchase costs are offset over time by lower operating costs. That's why it would make sense for the German government to subsidize the purchase of a heat pump. After all, heat pumps are much more efficient to operate: they use ambient heat and generate three to five times more heat per kilowatt-hour of electricity, which often results in lower running costs. These lower operating costs mean that the heat pump pays for itself within a few years.
However, how quickly this investment pays for itself and which heating technology is the most cost-effective also depends to a large extent on the building - on factors like the efficiency standard of the building or the type of heat distribution, such as underfloor heating or classic heating. And of course, it also depends on energy costs and subsidies.
For heat pumps, the price of electricity is the decisive factor. Currently, the long-term scenarios commissioned by the Federal Ministry for Economic Affairs and Energy point to an overall stable price trend. Although a growing share of renewable energy in the electricity mix increases the demand for power grids and storage facilities, it simultaneously makes electricity prices less dependent on fluctuating import prices for fossil fuels. Government levies and taxes also have a major impact on final electricity prices - in 2025, they accounted for roughly one third of the electricity price. To reduce emissions further and increase electrification in the building sector, policymakers should avoid increasing electricity prices for end customers through new levies and instead lower them over time, by bringing the electricity tax for households down to the European level, as promised in the Coalition Agreement.
Our model analyses at Forschungszentrum Jülich clearly show that heat pumps are the most cost-effective option in new buildings over their entire life cycle. Particularly when combined with underfloor heating, heat pumps can prove three to five times more efficient than a modern gas or oil heating system and they reduce energy consumption accordingly. Even in old buildings with poor efficiency standards, heat pumps are already more cost-effective than gas or oil heating systems due to the rising oil and gas prices we mentioned earlier. Even small measures can help homeowners reduce their heating costs, for example lowering the flow temperature or replacing old radiators with more modern, efficient ones.
One of the requirements for purchasing an oil or gas heating system is that it will use an increasing share of carbon-neutral fuels from 2029 onwards. How realistic is this?
Noah Pflugradt: According to our long-term model analyses, the large-scale production of synthetic fuels would require massively more renewable energy - considerably more wind and solar installations than are currently installed. This makes this option limited and expensive for the foreseeable future.
Stefan Vögele: One question is where these carbon-neutral fuels will be used in future. It is possible that they will have to be redistributed between different sectors or imported, in other words that less will be used in the trade and commerce sector and more in private households. It is also possible that we will have to import more biomethane and similar products. The wording in the draft should be noted in this context, namely that the applicable quota can be met on a 'net basis'. This could open up additional ways of meeting the quota in purely mathematical terms, without actually increasing the use of green gases across the board.
Thomas Schöb: The share of biomethane in the German natural gas grid is currently around 1.6 percent and this can only be increased to a limited extent. According to calculations by the German Biogas Association, this amount could be doubled or tripled. The proposed legislation requires that new gas and oil heating systems use at least 10 percent climate-friendly fuels from 2029. This share is set to increase consistently. In addition, existing gas and oil heating systems are supposed to use up to one percent carbon-neutral fuels from 2028, and the plan is to increase this gradually too. This target is feasible, but after that things will become difficult. Our energy systems models in Jülich show that biomass and hydrogen will be needed above all in areas that are difficult to decarbonize - industry, aviation, and shipping, for example. When it comes to heating buildings, they are generally not the most cost-effective or practical option in the medium or long term. In short, 'green gases' should be used where there is pretty much no alternative - and ideally not in the boiler room.
Biomass power plants, alongside hydrogen gas turbines, are a viable option for bridging 'Dunkelflaute' periods - periods when there is little or no wind and the sun is not shinning, and there is generally less renewable energy available. And, if the CO2 produced in the process is captured and stored, this can lead to net carbon removal in the atmosphere - this is also known as negative emissions.
And what about climate change mitigation? Is the new law compatible with the climate targets in the building sector?
Stefan Vögele: The climate targets remain in place. If more emissions are produced in the building sector, they must be offset elsewhere - for example, using emissions certificates. This can lead to additional costs for the state and ultimately for society.
Noah Pflugradt: Renovation rates and energy efficiency are crucial to achieving climate targets in the building sector. Simply switching to heat pumps or district heating will not be enough to achieve carbon neutrality - buildings must become more efficient overall.
Thomas Schöb: For the building sector, which is at risk of missing the climate targets by 2030 according to current forecasts, the Climate Action Program 2026 focuses heavily on retrofitting and the expansion and decarbonization of district heating. However, it is interesting to note that the reform of the Buildings Energy Act is no longer closely linked to municipal heat planning. This carries the risk that homeowners will opt for a heating technology that will no longer be practical or will become obsolete if district heating networks are expanded where they live. In the worst case, this could lead to poor investments. After all, local authorities can make connection to the network mandatory, obliging homeowners to use district heating. The Council of Experts on Climate Change released a statement on the Climate Action Programme, in which it was critical of the planned reform, describing it as a 'counterproductive measure' for reducing greenhouse gas emissions in the building sector. Whether the current reform of the Buildings Energy Act is compatible with climate targets remains to be seen.
Where do you see weaknesses in the law - and what impact does this have for homeowners?
Stefan Vögele: The big unknown is how the requirements will change after 2029. For homeowners, this means that investments are being made under uncertain political conditions. At the same time, climate targets must be met, which is likely to increase the pressure on fossil fuel heating systems in the long term.
The debate on increasing the share of 'green gases' up to 100 percent also shows that what is still permitted today may become significantly more expensive or restricted in the future.
Noah Pflugradt: The biggest challenges in retrofit projects are usually of a financial nature. Energy-efficient upgrades are expensive. Installation costs for roof insulation, full façade insulation, and a heat pump can easily exceed € 50,000 each. Replacing windows and doors can cost another € 30,000 to € 50,000. That's a lot of money and for many people simply not feasible or desirable - even with loans or government subsidies.
In practice, many homeowners therefore face a very real dilemma: should I invest around € 200,000 in a full refurbishment - or should I just accept higher heating costs of € 3,000 per year for the next 10 to 20 years? Many decide against refurbishment and opt for a cheaper short-term solution - even when subsidy schemes cover some of the costs. They would rather invest the money they think they are saving elsewhere.
Another challenge is the shortage of skilled workers and the complexity of the task. It is often difficult for private individuals to find qualified tradespeople, coordinate different trades, and ensure the quality of the work.
Other countries handle this differently. In Ireland and in Spain, one-stop shops organize energy upgrades from start to finish - from the planning to grant application and implementation - and they are heavily supported by government grants. Ireland also has building codes and mandatory inspections by qualified third parties. This ensures that a minimum standard is also guaranteed for homeowners.
Introducing such models in Germany could help to make retrofitting easier, more reliable, and more attractive for homeowners.
