Cities and municipal utilities are planning multi-billion-euro projects for new district heating networks, investing long-term in pipelines, transfer stations, and generation capacity. At the same time, operators are increasingly concerned that they will lose customers. Many property owners might opt for their own heat pumps even before the pipelines are completed, because the subsidies are attractive and they want to act immediately. This is precisely why the Association of Municipal Enterprises (VKU), representing the interests of many municipal utilities and network operators, is demanding that heat pump subsidies be eliminated in clearly defined district heating expansion areas. The VKU justifies this demand with the risk of double subsidies and the lack of planning certainty for investments amounting to billions. (welt: 07.02.26)
Stopping Subsidies as a Lever for Reliable District Heating Networks
The Association of Municipal Enterprises (VKU) is calling for a halt to subsidies in clearly defined expansion areas. “Double subsidies for district heating networks and heat pumps are not a good idea,” said VKU Managing Director Ingbert Liebing. He further explained: “Where the expansion area is clearly defined, subsidies for heat pumps should therefore be discontinued.” The association aims to secure investments and create planning certainty with this measure.
However, the issue isn’t just about pumping technology, but a fundamental problem of the energy transition in cities. Municipalities designate areas for new or expanded district heating networks, but their use often remains voluntary. This gap is driving up cost risks for district heating providers. The German Association of Cities and Towns is therefore warning against a system that forces investment but doesn’t guarantee consumption.
Dispute over the Building Energy Act (GEG) and heating subsidies escalates
Together with other associations, the German Association of Local Public Utilities (VKU) is demanding changes to the Building Energy Act (GEG) and heating subsidies. The focus is on the competitive issue between district heating networks and individual heating systems. A position paper states: “The disadvantageous position of piped networks compared to building-specific individual heating solutions must be eliminated.” The authors include the German Federation of Housing and Real Estate Companies (GdW), the German Association of Building Owners (HDB), and the VKU, and they aim to strengthen the investment logic for district heating networks.
Furthermore, the district heating associations criticize the strong emphasis on building efficiency in the current framework. They are pushing for a policy that systematically treats networks as infrastructure. This also applies to municipal heat planning, as it sets guidelines for entire neighborhoods. Nevertheless, without clear incentives, the risk remains for the affected municipal utilities that each household will optimize its own heating system, leaving the network depleted.
Billion-dollar plans clash with the voluntary commitment of property owners
The German Association of Cities and Towns (Deutscher Städtetag) succinctly summarizes the practical situation. “When cities designate areas for the construction or expansion of district heating networks, property owners are under no obligation to utilize the heating infrastructure,” said Managing Director Christian Schuchardt. This creates a direct conflict between public expansion targets and private investment decisions. At the same time, the demands on energy suppliers, who must plan for decades, are increasing.
Added to this is a tight schedule for large cities. By the end of June this year, municipalities with more than 100,000 inhabitants must submit completed plans for new district heating networks. The German Association of Cities and Towns anticipates expansion costs exceeding €43 billion by 2030. Therefore, the pressure is mounting to establish regulations that prevent district heating projects from failing due to a race for subsidies against heat pumps.