Germany's heating sector on the path to decarbonisation: heat pumps and district heating networks set to dominate

Three-quarters of Germany’s municipal energy companies consider achieving climate-neutral heating by 2045 unrealistic under current conditions. While cities are gradually turning their heating decarbonisation plans into investments, they are significantly underestimating solar thermal energy, according to the BSW-Solar association. Yet a study by the Fraunhofer Institute for Solar Energy Systems and the Öko-Institut found it has the greatest theoretical potential of the low-emission sources examined, but only a small proportion of municipalities have taken it into account in their plans.

Plans are moving into practice, but the rules remain uncertain

Germany aims to achieve climate neutrality by 2045, five years earlier than the EU-wide target. The same goal applies to the heating sector. In a survey by the VKU association this September, 51% of 225 municipal energy companies called the deadline unrealistic, a further 24% considered it very unrealistic, and only 7% thought it was realistic.

The lack of confidence is related not only to costs, but also to the rules governing investment. Legal certainty was considered essential by 86% of companies, 56% said financing conditions were inadequate, and 61% considered the legal framework unclear. Moreover, every second company expects its expenditure on climate-neutral heating to be more than twice as high in 2030 as in 2024.

Uncertainty deepened after the abolition of the requirement that new heating systems use at least 65% renewable energy. The new framework leaves the option of continuing to install gas and oil boilers. Instead, the obligation to gradually increase the share of renewables is to shift to fuel suppliers. A 10% share of biomethane, hydrogen or liquid biofuels is envisaged for 2029. The requirements for subsequent years have not yet been published.

Great solar potential, but little room in the plans

An analysis by the Fraunhofer Institute for Solar Energy Systems and the Öko-Institut assessed 377 submitted heating decarbonisation plans covering 938 municipalities. According to the published results, around 40% of heat in 2045 should come from individual heat pumps, with district heating systems accounting for a slightly smaller share. The remaining heat generation is expected to be covered mainly by sources burning biomass or hydrogen, or by geothermal energy. Heat pumps are also expected to be the dominant heat source in these district heating systems, supplemented by biomass, geothermal energy or waste heat.

The BSW-Solar association highlighted the untapped potential of solar thermal systems, estimated at 457 TWh per year—the highest figure among the sources examined. By comparison, the projected heat demand of the municipalities covered by the plans is around 121 TWh in 2045.

The analysis authors cite as barriers, in particular, the mismatch between the predominantly summer heat generation from these sources and the high demand for heat in winter, as well as competition for land with photovoltaics. In its press release, however, BSW-Solar says solar heat can be stored in large storage facilities and used during the heating season. According to the association, similar seasonal storage systems are already operating in pilot projects.

Leipzig and small municipalities show the way

Leipzig shows how solar collectors can supply some of the heat to urban district heating networks. Its facility, commissioned in June 2026, is expected to produce around 26 GWh of heat per year across an area of approximately 65,000 square metres. According to calculations by the local district heating network operator, it could save around 7,160 tonnes of carbon dioxide a year and meet up to one-fifth of the network’s heat demand on sunny summer days.

An even higher share of solar heat can be achieved in smaller municipalities, where it is usually easier to find suitable sites and connect collectors to a large seasonal storage facility. In Bracht near Rauschenberg, solar thermal energy is expected to cover around 70% of the annual heat demand of connected buildings. Heat is stored there in an underground facility, allowing it to be retained for the heating season. In nearby Rüdigheim, solar heat is expected to provide approximately 87% of heat supplies, according to the operator of a similar system, with the remainder covered by renewable electricity and no biomass used.

The technology’s deployment therefore still falls short of its potential, according to BSW-Solar. Germany has around 3,800 district heating systems, but only about 75 large solar thermal fields are in operation. Whether this changes will also depend on whether municipalities secure suitable land early enough during planning and include both daily and seasonal heat storage in their projects.