How best to reduce emissions?
Economist sees hundreds of billions wasted by heating plans
By Christina Lohner
03/16/2023, 7:33 p.m
Germany’s CO2 emissions must drop significantly, which is why climate protection minister Habeck wants heating with oil and gas to be a thing of the past. Economist Frondel considers this approach to be wrong for cost reasons.
From the point of view of economists, Minister of Economics Robert Habeck’s heating plans result in high unnecessary costs. Manuel Frondel, who heads the Environment and Resources department at the RWI – Leibniz Institute for Economic Research, comes up with a “very rough estimate” of a low three-digit billion amount, as he calculates in an interview with ntv.de. However, the calculation contains several unknowns.
By 2045, all heating systems are to be completely converted to renewable energies. Starting next year, new heating systems should use at least 65 percent renewable energy, which experts say is currently only possible with alternative systems such as heat pumps or district heating. Frondel’s calculation: If all of the approximately 19 million existing oil and gas heating systems were replaced by heat pumps by 2045, this would cost hundreds of billions of euros more, including installation and the necessary insulation, than if new gas and oil heating systems were allowed to continue to be installed. Because heat pumps are considerably more expensive to buy.
In Frondel’s eyes, Germany could save CO2 emissions more cheaply than through the heating sector through the EU-wide emissions trading for the building and transport sectors planned for 2027. “With emissions trading, CO2 emissions are reduced where it is cheapest,” explains the economist. “In all likelihood, that wouldn’t happen with the heat pump in the old building.” According to calculations by Professor Joachim Weimann from Magdeburg, if oil and gas heating systems were replaced by heat pumps, avoidance costs of EUR 600 to 1,300 per ton of CO2 would arise. Frondel’s comparison: In EU emissions trading for industry and the energy sector, the price for CO2 emission certificates has never been more than 100 euros per tonne of CO2, despite the tightened EU climate protection targets.
Gas and oil heaters work with alternative fuels
However, not all gas and oil heating systems will have to be replaced by 2045. On the one hand, Habeck is planning transition periods: Defective boilers may be replaced by fossil fuel systems for a limited period of time. On the other hand, current gas and oil heating models that are currently being installed can also be operated with renewable energy sources in the future. Modern gas heaters also work with biogas or hydrogen, while the current generation of oil heaters use e-fuels, as the spokesman for the Federal Association of the German Heating Industry (BDH), Frederic Leers, explains in an interview with ntv.de. For this, however, such renewable energy sources as biogas or hydrogen would have to be significantly expanded.
The industry therefore emphasizes that the new specifications must include all technical solutions – which the ministry’s draft already does, the planned regulation is open to all technologies. “In addition to the heat pump, we also need other technical solutions,” says Leers. “Then the heat transition will also be more affordable for people.” In the case of poorly insulated existing buildings, there are also some technical hurdles for heat pumps. From the point of view of the industry, hybrid heating systems would also be a sensible alternative. A heat pump could cover the basic requirement and the boiler only take over when there is a particularly high heating requirement – for example when it is particularly cold outside. In addition, the industry is committed to allowing wood heating in the future.
Kemfert: Beer coaster bills for scaremongering
Energy economist Claudia Kemfert from the German Institute for Economic Research (DIW) gives another point to consider when it comes to cost estimates like those of Frondel. “You have to be very careful with such cost estimates,” she emphasizes to ntv.de. “Because they often only look at the pure investment costs without comparing the benefits, namely in the form of avoided fossil heating costs over the entire operating period of the system to be installed, i.e. over several decades.” Such calculations are very different for all buildings. “Calculations for the entire building sector are not available at the moment, individual ‘beer mat calculations’ for creating atmosphere and scaremongering are of little help,” says Kemfert.
The economist emphasizes that the costs of fossil fuels, especially gas and oil, are extremely high. “Heat pumps are much more efficient to operate and, above all, cheaper than gas heating, so that the pure installation costs do not represent a sufficient cost estimate.” Frondel counters that the future electricity price is unclear, i.e. how much heating with a heat pump will cost in the future. The gas price is now back to the level before the Ukraine war.
The federal government is still working on the cost estimate. “The question of the costs will be specified in the ongoing departmental coordination, where the Regulatory Control Council also comments on the question of compliance costs,” explains a spokeswoman for the Ministry of Economics when asked by ntv.de. “A financial assessment cannot be made here.” In addition, where a social balance is under discussion.
Early “panic purchases” of gas heaters?
Kemfert also insists on support programs, especially for low-income households. But the energetic renovation of buildings is overdue. “We’ve been putting it off for far too long, so the ambition to change that is right.” Habeck’s plans would also be doable from the point of view of the trade, as the spokesman for the Central Association for Sanitary, Heating and Air Conditioning, Frank Ebisch, said in an interview with ntv.de.
Frondel, on the other hand, criticizes: “I wonder where the time pressure comes from.” As a result, politicians are tempting consumers to quickly install a gas heating system before this is no longer possible. In his view, politicians could have taken more time because only about half of the electricity for heat pumps is currently “green”. “That means that the specified 65 percent renewable energies will not be met next year with a heat pump.” The time pressure also causes the costs to rise further, since this makes heat pumps and the craftsmen who install them even more expensive than they already are.
Nevertheless, everyone agrees on several points, economists from both camps and the trades: More skilled workers are needed, the production of heat pumps must increase – and the electricity must come entirely from renewable energies.