Fraunhofer ISI Calculations for BUND: Building Modernization Act Could Lead to Sharp Rise in Heating Costs

Berlin (Germany) - The proposed Building Modernization Act is intended to set the framework for the heating transition, but key decisions are controversial. In particular, the role of gas heating is drawing criticism - not only from a climate policy perspective, but increasingly with regard to long-term rising heating costs for consumers.

A study conducted by the Fraunhofer Institute for Systems and Innovation Research (Fraunhofer ISI) for the Bund für Umwelt und Naturschutz Deutschland (BUND) shows that the options for new gas heating systems included in the law could become a cost trap for households. Both tenants and homeowners would have to expect significantly higher expenses by 2045 compared with using heat pumps. The calculations indicate that the Building Modernization Act could become a driver of rising heating costs.

Gas heating in the law: Rising cost risks for tenants

With the proposed Building Modernization Act (BMA), the federal government aims to promote the use of renewable energy in the building sector. At the same time, however, new gas heating systems would still be allowed - provided they are gradually operated with increasing shares of “green fuels.”

This is where the criticism comes in: the study conducted by Fraunhofer ISI for BUND highlights substantial economic disadvantages of this strategy. According to the study, tenants in a typical multi-family building could end up paying more than €18,000 extra in heating costs by 2045 if landlords choose a new gas heating system instead of a heat pump.

The monthly difference rises significantly over time - from around €55 in 2035 to up to €272 in 2045 - driven primarily by rising CO₂ prices as well as energy and biomethane costs.

Julius Neu, energy and climate policy expert at BUND, criticizes the plans: “What the federal government is planning for heating is not only a sham for climate protection, but also a social time bomb.” Particularly problematic is the lack of tenant influence on heating technology, combined with rising operating costs.

Single-family homes: High additional costs and long-term investment risks

Homeowners of single-family houses also face financial risks under the proposed legal framework. Due to larger living areas and often lower energy efficiency, differences in heating costs are even more pronounced.

Fraunhofer ISI calculations show that additional costs compared with a heat pump could total almost €24,000 by 2045. Monthly extra expenses rise from about €73 in 2035 to up to €326 in 2045.

Even under favorable assumptions for gas prices, the cost disadvantage remains. In scenarios with particularly high energy prices, the gap could widen significantly. This increases the risk that investments in new gas heating systems could become poor long-term financial decisions.

Neu therefore recommends clear guidance: “Homeowners should not be unsettled by the federal government’s backward-looking approach to heating. Heat pumps are, in most cases, the most cost-effective solution.”

Against this backdrop, BUND calls for clear legal requirements for switching to renewable heating systems. The association also supports a heating cost cap to protect tenants from rising expenses.

Background information on the analysis

Fraunhofer ISI’s calculations are based on a long-term comparison of operating costs between new gas heating systems - including a gradually increasing share of biomethane (“bio-step”) - and heat pumps up to 2045. Typical multi-family houses (partially modernized, efficiency class D, approx. 70 m² living space) and single-family houses (slightly renovated, efficiency class E, approx. 121 m²) were examined. The starting point was a heating system replacement in 2027.

The calculations used moderately conservative assumptions for energy prices, CO₂ pricing, and grid charges. Extreme price spikes, such as those caused by crises, were not included to provide a realistic basis for political decisions. Ranges were additionally calculated to reflect uncertainties in the development of gas, biomethane, and electricity prices, as well as CO₂ prices and grid charges.

The results show that even under favorable assumptions for gas, heat pumps are generally more cost-effective in operation. In scenarios with particularly high gas prices, however, additional costs for tenants and homeowners could increase significantly. Even in reversed scenarios - with very low gas prices and expensive heat pumps - the operation of gas heating systems often exceeds the costs of a heat pump.

Source: IWR Online, 26 Mar 2026