Leveraging Local Heat Plans For a Clean Energy Transition

A successful heat transition is crucial to reaching the EU and German climate targets¹ triggered by the EU Fit-for-55 strategy that is in accordance with the Paris Agreement, and the German ambition to be already climate neutral by 2045. However, a successful heat transition is very complex to achieve. The variety of building types, the range of private, public, and industrial stakeholders, and the multiple infrastructures (gas, electricity, and heat) involved are just some factors that must be taken into consideration for a successful transition.

This is where local heat plans come into play. They allow for a whole system infrastructure planning of the future heating supply of a municipality or region, as a joint development of the gas and power distribution as well as heating network operators, building owners, and the local authorities. The result is a strategy that defines how the municipality can align with the national climate targets. Based on that, decarbonized heating options are defined for each building by taking into consideration the availability of infrastructure, sustainable energy carriers, and an estimation of the timeline.

The Roadmap to an Efficient Heat Transition

In August 2023, the German government proposed its draft law for local heat planning and decarbonizing district heating grids,² (Gesetz für die Wärmeplanung und zur Dekarbonisierung der Wärmenetze) which is expected to be enacted by January 2024. This is an important step, however, there are still open questions to address. To tackle the concept of local heat plans further, in cooperation with a major German municipal utility and distribution network operator, Guidehouse has developed recommendations to ensure an efficient and successful heat transition.

There is a strong conflict between the need for investment security for infrastructure operators and building owners and the high uncertainties of a planning process until the climate neutrality target in 2045. A local heat plan should provide a roadmap for implementing the heating technologies districts will need, but should also leave room for flexibility on decisions where it’s not yet clear which infrastructure or heating technology is the most reasonable in the future.

Therefore, it is recommended to have three different types of areas that can be outlined and defined in a local heat plan, that come with different rights and obligations:

1. Prioritization areas — One primary supply infrastructure is declared for these areas, and the infrastructure operators can align transformation and decommissioning measures with the designated timelines. In addition, there is increased funding for the prioritized technology. This creates incentives for building owners who align the choice of technology with the prioritization in the respective area, without a forced connection and compulsory use of a specific technology.
2. Focus areas — There is an emphasis on more than one technology in these areas, but at least one supply solution is excluded. This is particularly relevant for supply areas in which the final technology is not yet clear, but one can already be excluded. An example of this could be natural gas will be decommissioned, but district heating or hydrogen networks are both still an option. The designation in such an area results in similar rights and obligations as for prioritization areas, only for more than one technology.
3. Evaluation areas — No prioritization of technologies can yet be defined for these areas, hence no resulting measures or obligations for infrastructure operators or building owners. These areas need to be updated in the following iterations of the heat plans. Ideally, orientation is provided as early as possible.

German Distribution Network Operators and utilities must prepare local energy concepts and strategies for the upcoming development of local heat plans in their areas. By law, local heat plans need to be finished by 2026 for municipalities with more than 100,000 residents, and by 2028 for all others at the latest, meaning the process will start next year for all large municipalities. Other countries, including Denmark and several municipalities in Switzerland, have already applied this instrument successfully for many years, showing its effectiveness in transforming local heat supply. As other countries consider their heat transition, this roadmap toward efficient application of heat transition plans can help guide a successful outcome.

How Guidehouse Can Help

Guidehouse is well-positioned to support DNOs, utilities, and district heat operators to develop strategies, analyze the impacts on future business models, and validate the effectiveness of local heat and decarbonization plans. This is leveraged by our in-depth expertise on technical aspects of building heat supply, the knowledge of the power and gas infrastructure regulation, the challenges utilities and DNOs face, and the understanding of political decision-making processes and stakeholder management.

1 Bundesregierung Beschließt Aktualisiertes Klimaschutzgesetz | Bundesregierung.” 2023. Die Bundesregierung Informiert | Startseite. June 21, 2023. https://www.bundesregierung.de/breg-de/aktuelles/klimaschutzgesetz-2197410. 
2 “Entwurf Eines Gesetzes Für Die Wärmeplanung Und Zur Dekarbonisierung Der Wärmenetze.” n.d. Bundesministerium Für Wohnen, Stadtentwicklung Und Bauwesen. Accessed October 24, 2023. https://www.bmwsb.bund.de/SharedDocs/gesetzgebungsverfahren/Webs/BMWSB/DE/kommunale-waermeplanung.html.