Understanding the heating market

In Germany about 30 percent of energy is used for heating of buildings, mainly speaking of housing. The industry needs another 30 percent for so-called process heat. Thus, it is obvious that meeting climate goals cannot be realized without decarbonising the heating sector.

What could possible solutions look like? The variety of heating systems is as heterogenous as our building structures. Right now, the most used technology by far is gas-based. It makes up approximately 13.4 million out of 21 million of the heat generators, followed by 5.5 million oil heaters, one million heat pumps and about 800.000 biomass boilers. District heating with cogeneration fuels around 14 percent of the mostly urban housing stocks. Countless building clusters result out of division by age, size and geometry.

The building sector consists mainly of inventory. Nearly 70 percent of 19 million residential buildings with 41 million apartments have their origins before 1979. About 50 percent of this inventory are partially renovated, 35 percent count as unrenovated and only 8 percent apply as being new buildings. Meanwhile the heating pump records high addition rates. In 2020 it reached a ratio of 16 per cent of all sold heat generators. By investing a considerable amount of money, oil- or gas-based one-family houses can be transformed like that. The transformation of multi-family houses with gas floor heating systems appears to be much more difficult. In older buildings, the envelope often must be refurbished at the same time by insulation. Over many years the insulation rate was below one per cent sothe refurbishment of all buildings would take a hundred years.

Building renovation is a subject to challenges

There are various reasons for that. The number of craft enterprises declines, many jobs are unstaffed. Numerous enterprises have full order books and the construction and finishing trade is nearly utilised. Ownership structures play a role, too. More than half of the flats are rented, the owner-tenant dilemma in German law is often mentioned. Approximately 40 percent of the owners, who use their living space themselves, are older than 65 years. Therefore, a long-term investment with a slow amortisation tends to be a tough decision. In addition to that households with less income often do not have the means to expensively modernise their building envelopes. For many people the high investment is more important than operating costs. Concerning the installation engineering, the modernisation rate of the last years is around three per cent after all, regarding gas-based technologies there is a wide mix.

Hydrogen in heaters as an option?

Gas-based technologies can also be fuelled by carbon-free hydrogen in the future. But this does not happen overnight, although economic advantages appear to be quite clear. Around 19 million households and 1.6 million industrials clients are being supplied via municipal networks. It is obvious that heat and energy demand fluctuate throughout the year. In winters the natural gas demand for example is five times higher. From March until October we can already cover huge parts of the energy demands with wind and solar energy. From an energy of supply point of view this is amazing. But in winters things are different. Of course, gas infrastructure is adapted to the heating periods to supply people with energy and heat by DNA, even on the coldest days. On those days approximately 60 percent of the used gas comes from storages. This kind of security is similar to one you can provide with hydrogen as well.

Hydrogen can also be used in heaters. Only then the highly efficient hydrogen fuel cell can exploit its potential and advantages. Those fuel cells are still rather expensive, because the gas must be transformed into hydrogen first and the amount of produced fuel cells is low. But it is an exciting technology. A hydrogen fuel cell produces energy even on the coldest days and heat can be used for heating buildings. From an economic point of view the hydrogen market would increase more easily if the heating market would be considered as well. The quantity required is huge, projectable and through the admixture systematically controllable. Admixture enables decentralised production and feed-in of hydrogen at any time in any quantity almost throughout Germany – independent of the actual demand. With a certain demand, more supply comes into the market – production costs will decrease for all users, inclusively the industry.

Of course, there are still hurdles to overcome. The first step is to decarbonise the energy-intensive industry because of the lack of alternatives to hydrogen. This is less complex than to decarbonise the diverse and socio-political heat market. Anyway, the arguments for using hydrogen via a retrofitted infrastructure and modern heating technologies deserve to be considered seriously and systematically as a second step in the upcoming years. Municipal utilities and politicians should collaborate to find a solution for the more than 13 million households on the gas grid that provides them with sustainable, affordable and stable heating – even on extremely cold days. And more than 1.6 Mio industrial users are supplied through distribution grids, many of them without a technical alternative. These often small or medium sized companies deserve a solution to meet up with their goals, too.