District heating is actually supposed to play an important role in the energy transition. But the prices are still opaque and incomprehensible.
Berlin – District heating is actually supposed to play a key role in the energy transition. It quickly becomes clear why: There are many industrial processes that generate unavoidable waste heat that could be easily diverted and suitable for heating. There are also places in Germany that can benefit from geothermal energy, which is also an example of how sensibly district heating can be used. In short: it is a lever that is still not used enough in Germany and could provide huge amounts of low-CO₂ thermal energy.
But district heating has a big problem that requires political solutions. Anyone who connects to a district heating network today knows very little or nothing about what they will pay. And for what exactly. What makes the problem worse is that once you're connected, you can't easily leave again - and you can't change provider anyway.
Federal Cartel Office is investigating district heating providers for market abuse
This construct is called “natural monopoly”. What this means is that there is only one provider of district heating within a postal code, if at all. Building multiple networks would also be completely unrealistic and uneconomical. But the natural monopoly naturally means that there is no competition; customers cannot switch to a cheaper provider if prices increase. As consumer advocates describe it, they are “captive customers”.
The Federal Cartel Office is actually tasked with regularly reviewing this market situation. In November, the authority also opened proceedings against six municipal utilities and district heating suppliers on suspicion of abusive price increases. She suspects that district heating providers regularly decouple their costs from the actual price development of the respective energy source. So, for example: A supplier who obtains heat from a waste incineration plant charges prices as if he were using natural gas. This has led to massive price distortions over the past two years and customers have been confronted with enormous bills. However, it is usually not clear to customers how exactly this invoice is generated. But you have no choice and have to pay.
Consumer advice center states: District heating is still opaque and expensive
This situation has been attracting attention from consumer advocates for some time. At the beginning of 2023, the Federal Association of Consumer Organizations (vzbv) began taking a closer look at district heating prices throughout Germany in order to reveal the grievances. It examines the price data in 31 district heating networks throughout Germany on a quarterly basis. And for the first quarter of 2024, the vzbv also states: The prices vary extremely regionally - which is completely incomprehensible. The effective price per kilowatt hour for a household in a typical apartment building in the district heating network examined in Leipzig rose from 17 cents in the fourth quarter of 2023 to 20 cents in the first quarter of 2024. In the network examined in Stuttgart, however, the effective price per kilowatt hour fell during the same period from 22 to 17 cents.
“For consumers, pricing in the district heating market is a black box. Consumers expect fair prices and they must be able to understand price changes. The federal government must ensure this and finally tackle a consumer-friendly amendment to the district heating regulation,” says Ramona Pop, board member of the vzbv.
Ampel is thinking about a new district heating law
The traffic light coalition is also thinking about taking political measures. The only thing that remains unclear at the moment is what exactly can be done. The Federal Association of Energy and Water Industries (BDEW), the Association of Municipal Companies (VkU) and the District Heating Association (AGFW) had already announced at the beginning of the year that they wanted to introduce a transparency platform so that consumers can compare their prices.
According to Daniel Föst, construction and housing policy spokesman for the FDP parliamentary group, this is also the first correct approach. “We should start with a transparency platform. “The price transparency mechanism also works very well in Sweden, where district heating has a high market share,” he says in an interview with
IPPEN.MEDIA
. “In order to address the new challenges, the federal government will hold another district heating summit in the third quarter. In any case, we must prevent consumers from unintentionally being left out in the cold if they rely on district heating in good faith.” However, Föst also emphasizes that he sees the Cartel Office and the Federal Network Agency as having a duty here.
However, according to energy law expert Werner Dorß, the Federal Cartel Office lacks the staff to do this. In an interview with
WirtschaftsWoche,
he recently pointed out that there is a reason why the district heating market is so poorly regulated. Whenever the federal government tried to adjust something, the move was overturned in the Federal Council. Because many district heating operators are municipal utilities, i.e. in municipal hands. And they need the money. “Without the profits from district heating, communities would have to make savings elsewhere. The district heating customer essentially pays for the loss-making local public transport, the expensive new swimming pool or the ice rink,” says Dorß.
Consumer advice center files class action lawsuit against district heating providers
It will take some time before politicians can bring themselves to change the situation. The vzbv no longer wants to watch this idly and has filed class action lawsuits against the two district heating providers EON and HanseWerk Natur. Affected consumers can still register for this. “The district heating market in Germany must finally become more consumer-friendly,” says Ramona Pop.