Global energy optimization trends and policies in Germany

Overview

Germany’s total final energy consumption of 2022 (195 Mtoe) was slightly below its 2000 level (207 Mtoe, -12 Mtoe, i.e. -6%). In 2022, the largest consuming sector is residential, representing 30.8% of total final energy consumption. The share of residential has slightly decreased from 32.5% in 2000 to 30.8% in 2022, while industry increased its share from 23.9% to 26.5%. The share of transport in total consumption decreased slightly from 28.8% to 27.5% (see Figure 1).

Figure 1. Final energy consumption by sector (with climatic corrections)

Energy efficiency for final consumers, as measured by the so-called technical ODEX, has improved (in average) by around 1.3% per year since 2000. Larger gains have been registered for households (1.9%/year), against 1%/year for transport and 1.8%/year for the services sector. A lower annual rate of improvements has been achieved in the industry sector (0.6%/year).

With the “Federal Climate Change Act” from 2019, Germany introduced legally binding sectoral GHG emission reduction targets for 2030, which were tightened in the first revision in 2021. Since the last revision in July 2024, target compliance is no longer linked to ex-post sectoral statistical emission data, but to overall projected data. In order to achieve the tightened reduction targets, a new Climate Action Programme was adopted by the Federal Government on October 4, 2023. It includes further energy efficiency and climate policy measures. Among those are a new Energy Efficiency Act, which entered into force in November 2023 and serves to implement the 2023 recast of the EU Energy Efficiency Directive. The programme also includes some revisions of legislation on the energy supply side (for coal and wind energy), new regulations for heating of buildings, as well as several new or enhanced funding programs supporting energy efficiency and decarbonization in buildings, industry and transport.

Figure 2: Technical Energy Efficiency Index

Buildings

Figure 3: Energy consumption of household space heating per m2 (with climatic corrections)

As shown in Figure 3 the household energy consumption per m² for space heating has decreased by 32% since 2000, from 16.5 koe/m² to 11.2 koe/m² in 2022. The consumption per dwelling for water heating, for appliances and for cooking stayed relatively constant during the last years and decreased only slightly compared to 2000 (see Figure 4).

Figure 4: Energy consumption per dwelling by end-use (except space heating)

Figure 5 shows a decomposition of the change in energy consumption. It shows that the total final energy consumption of households decreased by around 7.5 Mtoe between 2000 and 2022. Two main factors contributed to an increase in energy consumption – more dwellings (7.5 Mtoe) and lifestyle/comfort (9.7 Mtoe, due to larger homes and more appliances per dwelling). On the opposite, energy savings decreased the consumption by around 26.4 Mtoe, while other effects had only a small decreasing impact of 2.4 Mtoe. Climate effects also had a small decreasing impact of 0.7 Mtoe.

Figure 5: Main drivers of the energy consumption variation in households

Figure 6 shows the development of the specific energy consumption in households for both electricity and total final consumption. Both the electricity consumption per square meter and the total consumption have been steadily increasing until 2006 but dropped significantly since then (-45 % for the total final consumption, -34 % for electricity).

Figure 6: Energy and electricity consumption per employee in services 

To achieve the target of a virtually climate-neutral building stock in Germany by 2050, a set of measures was either newly established or comprehensively revised in the last years. The main building regulation in Germany is the “Building Energy Act (GEG)”, which came into force in November 2020. The GEG regulates the energy requirements for new and existing buildings and for the use of renewable energies in buildings. The GEG has been amended twice since then. From 1 January 2023, especially the standards for new buildings were tightened. From 1 January 2024, the switch to at least 65% renewable energies has been mandatory when installing new heating systems. The requirement to use at least 65% renewable energies is also linked to the existence of municipal heat planning in accordance with the new Heat Planning Act. In parallel, the funding conditions for energy efficiency and renewable energies in buildings were improved and combined in a “Federal funding program for efficient buildings (BEG)” since 2020. From 2024, the revised BEG supports the replacement of old, fossil-fuel heating systems with heating systems based on renewable energies with an investment cost subsidy of up to 70 percent and also includes specific conditions for low-income households.

Policies and measures implemented in the building sector

The German Building Energy Act (GEG)

The German Building Energy Act (GEG), which came into force in 2020 and will be amended in 2023, is a comprehensive legal framework aimed at optimizing the energy efficiency of buildings and promoting the use of renewable energy. The law will replace the three previous acts, Energy Saving Act (EnEG), Energy Saving Ordinance (EnEV) and Renewable-Energies-Heat Act (EEWärmeG) to setting strict requirements for energy performance and emission reduction for both new and existing buildings.

Key points of the law:

• Renewable energy requirements for heating: From 2024, new heating systems must use at least 65% renewable energy, and Germany aims to eliminate fossil fuels from its heating system by 2045. Older buildings can use gas systems until municipalities implement their heating plans, which are expected to be in place by 2026 (for large cities) or 2028 (for small towns)​
• Energy efficiency standards: By 2025, Germany will apply the “Efficiency House 40” standard to new buildings, reducing the maximum permitted energy consumption to meet the European Union’s near-zero energy (nZEB) standard​
• Energy Performance Certificate (EPC): All buildings must have an energy performance certificate, which must declare their greenhouse gas emissions. This provides greater transparency on the climate impact of the building, based on the initial calculated or measured energy consumption.
• Financial incentives and compliance: Developers and building owners are encouraged to adopt renewable energy technologies, such as solar PV systems, although this is not yet mandatory by national law. Some states, such as Baden-Württemberg, have more stringent renewable energy requirements for new construction.

The GEG Act is part of Germany’s strategy to become climate neutral by 2045 and to source 80% of electricity from renewable energy by 2030.

Bonus policy

1. Financial support: Residents who replace their heating systems with units that use at least 65% renewable energy will receive financial support:

• 30% of the basic replacement cost.
• 30% additional for households with an average income of less than €40,000/household per year.
• 20% bonus for replacing systems older than 20 years by 2028.
• Maximum total support up to 70% of the cost, but not exceeding €21,000 per system

1. Additional funding: For general renovations, support can be up to €90,000 if insulation improvements and replacement of all heating, cooling and other energy equipment in the building are included.

Penalty policy

1. Failure penalties: Owners who fail to meet the 65% renewable energy requirement for their heating systems face tiered financial penalties, depending on the scale and duration of the violation.
2. Energy Efficiency Certificate: Failure to provide an energy certificate when selling or renting a building can result in additional penalties. The federal government monitors compliance and can impose heavy administrative fines if violations are confirmed during an inspection.