Christophe Hug, Managing Director of the Leipzig-based Tilia Group, argues in his speech at the “Leutzscher Gespräche”, a traditional Leipzig business event, in favour of approaching the heating transition with a cool head. He calls for more stability in the regulatory framework, innovative solutions, more time and more optimism in an increasingly heated climate debate.

Challenge 1: Nobody can see through the regulatory jungle

The political framework for the heating transition is disastrous. There is nothing to gloss over: Countless EU standards, national laws, regulations and directives – all of which are constantly being amended – are creating problems on the infrastructure side. On the construction and utility side, no one knows what to do any more. The climate fund judgement and the resulting budget freezes are a further blow. They will slow down the heating transition. We have to be prepared for that.

Transformation needs stability in the regulations. After all, we are changing infrastructure here…. how is this supposed to work if the framework changes several times during the “strategy process/heat planning” and then the actual implementation? The law on municipal heat planning was officially passed on 15 December 2023 and came into force as planned at the beginning of 2024. A compromise budget has also been agreed in recent days. For the heating transition to succeed, political control and consistency in the legal requirements are needed. This is the only way to build the new, investment-intensive infrastructure that we need.

Challenge 2: Energy transition investment requirement of 1.9 trillion euros

People still underestimate how cost-intensive new solutions in the heating sector are, especially when it comes to purchasing them. If the individual implementation is the most favourable, instead of 6,000 euros for a gas boiler, 40,000 to 80,000 euros are now required for a heat pump with peripherals and adaptations. Extrapolated accordingly, the municipal utilities of a medium-sized city, which are commissioned with the final step of implementing the municipal heating planning, could quickly become dizzy.

The Institute of Energy Economics at the University of Cologne recently calculated an investment requirement for the energy transition of 1.9 trillion euros by 2030, of which one trillion euros alone will be spent on the refurbishment of residential buildings, i.e. the installation of new heating systems.

The heating transition will therefore cause investment requirements to skyrocket to unprecedented dimensions. It is quite clear that a municipal utility cannot manage the transformation on the basis of its current balance sheet alone. A few subsidies are already available, but they are not enough for long-term planning.

A political rethink is urgently needed here. The necessary financing solutions also require “openness and joint thinking at an early stage”. Examples such as Denmark show that it can work. Here, political agreement was reached as early as 2009 to replace fossil fuels with renewable energy sources in new projects.

But we are slowly seeing a change, also in the openness to technology. Tilia projects, such as a cooling district heating network in Soest or a holiday village on Lake Hain near Leipzig powered by Seethermie, clearly show that cities are increasingly opting for sustainable, albeit investment-intensive, solutions. Let’s remember that district heating networks were still frowned upon ten years ago. Today, they are the political will because the greening of large networks is often cheaper and more efficient than individual solutions.

Challenge 3: Resources are scarce

Once political clarity has been achieved, laws have been passed, heat planning has been established and funds have been made available, then what? Then the heat generated has to reach our homes and our industry. This requires building materials, sufficient materials and qualified people who know how to use them. The building materials crisis of 2021 was not so long ago, and we all collectively slept through the skills shortage.

More training, more skilled labour migration and a significant streamlining of the administrative apparatus must be ways out of the crisis. We must optimise the use of our resources – political, economic and, yes, human – at every step of the long transformation. This is the only way it can succeed.

Challenge 4: Everything takes too long

Heating in Germany is to be decarbonised bit by bit, but also remain affordable – a major task. This requires functioning systems that work together. I would like to repeat myself at this point: the heating transition is infrastructure, the heating transition is the nationwide development of grids, systems and power plants. Anyone who is already losing patience or making unrealistic demands has not yet understood the scale of this task. Radical demands are more of a hindrance than a help. Becoming climate neutral tomorrow? And if you miss the targets for this year, increase them for next year? That can’t work.

People often forget that the idea of a heat transition is still relatively new. For three decades, there was actually only talk of an “electricity transition”. Even today, we still only achieve 16 per cent of our total energy consumption from renewable energy sources. This is a dimension that shows that we need to remain realistic. Let’s give the heat transition time without wasting it.

The goal of the heat transition motivates me enormously, because it is feasible. But everyone has to work together, every cog has to mesh with the others. Working together towards one goal: That’s not our greatest strength. But I don’t believe that statements to the effect that we in Germany only account for two per cent of the planet’s emissions are expedient. Nor that other countries are contributing much less to the energy transition than we are. Because if you recognise that an idea is right and are convinced of it, you have to lead the way – and take the rest of the world with you.

Christophe Hug is Managing Director of the Leipzig-based Tilia Group, which supports local authorities, industry, the property sector and utilities in the transformation towards greater sustainability.