Insulation has long been considered a key lever for climate protection in the building sector, but new analyses are putting its importance into perspective. German buildings continue to account for around a third of national emissions, while ambitious renovation targets have been missed for years. Instead, replacing heating systems is gaining more attention because it is faster and spreads costs more evenly. This realignment is fundamentally changing priorities in the building sector, as investments are flowing more towards the rapid replacement of fossil fuel heating systems and less towards costly insulation measures. (klimareporter: 22.12.25)
Insulation and Renovation Rates: Aspirations and Reality
Since 2010, policymakers have aimed to modernize two percent of all buildings annually to improve their energy efficiency, as improved insulation is intended to reduce heating requirements. In practice, however, the renovation rate is only around 0.7 percent. Owners are deterred by high costs, and structural obstacles also play a role. Furthermore, the thermal envelope of older buildings quickly reaches its technical limits, which is why progress is slower than planned.
A new study commissioned by the Climate Neutrality Foundation shows that lower renovation rates do not automatically mean the end of climate neutrality. What is crucial is how heat is generated and which systems replace fossil fuels.
Heating system replacement changes the cost logic
The study compares two scenarios because it aims to make economic viability and impact transparent. In the first scenario, the renovation rate remains at around one percent in the long term. In the second, it rises to approximately 1.7 percent by 2045. While less insulation means higher energy consumption, it also significantly reduces the pressure to invest.
Marco Wünsch from Prognos explains: “We examined what happens if the energy-efficient renovation rate does not increase further in the future but remains at today’s level.” The result is a moderate increase in consumption, which is nevertheless less expensive than widespread modernization. Replacing the heating system proves to be an efficient lever in this regard, because modern systems reduce emissions faster than additional facade insulation.
The Energy Transition as a Technological Driver
In the long term, the additional costs and savings will almost balance each other out. In the moderate scenario, Germany will save around €200 million by 2030, while around €100 million will remain by 2045. At the same time, significantly less living space will undergo comprehensive modernization, even though alternative measures are taking effect. The energy transition is based on district heating networks, electric solutions, and ambient heat, while fossil fuel heating systems will gradually be phased out.
In the short term, energy consumption will rise slightly because fewer buildings will be equipped with additional insulation. The increase will be around one percent by 2030. By 2045, it will be around four percent, but then entirely from renewable sources. This means that climate neutrality remains achievable, even if the path to it differs from the original plan.
Social Effects of Targeted Measures
Another advantage lies in the social dimension, because targeted investments are more efficient. Instead of blanket insulation, the study recommends prioritizing particularly inefficient buildings that are neither well insulated nor can be equipped with heat pumps in the short term. This strategy reduces individual burdens and increases public acceptance of the energy transition.
Thomas Losse-Müller of the Climate Neutrality Foundation emphasizes: “While individual renovation costs can quickly overwhelm individual households, especially in tight housing markets or with low incomes, the additional costs in the electricity system are distributed among many electricity consumers.” Households with low incomes benefit particularly because subsidy programs for insulation have so far been primarily used by higher-income groups.
New Priorities for the Building Sector
The analysis clearly shows that a moderate renovation rate combined with consistent heating system replacement enables realistic progress. While structural improvements remain important, they are losing their status as the sole key. A smart mix of technology, financing, and social balance is crucial to ensure that climate neutrality in the building sector remains achievable.