The Building Modernisation Act (GModG) replaces the previous Building Energy Act and broadens the options when replacing heating systems. However, this does not automatically make the decision easier for owners and managers: alongside capital costs, greater attention must be paid to the long-term costs and availability of gas, biomethane, bio-oil, electricity and district heating.
For larger property portfolios in particular, replacing heating becomes a combined investment, operations and procurement decision. A technology may appear attractive to purchase but create substantial additional costs over time through CO₂ prices, network charges, renewable fuel quotas or unfavourable supply contracts.
Legal position as at 11 September 2026. The main new provisions have applied since 29 July 2026. The German government explains their entry into force and the planned green gas and green oil quota. Its details are to be regulated in separate legislation.
Key points
The previous blanket requirement for at least 65 per cent renewable energy when installing new heating systems is removed.
Owners can continue to choose between heat pumps, district heating, hybrid solutions, biomass and gas or oil heating.
Newly installed gas and oil heating systems must use progressively higher shares of climate-neutral fuels from 2029.
From 2045, the fuels used must be entirely climate-neutral.
For newly installed fossil-fuel heating in existing residential buildings, certain ongoing costs are shared more extensively between landlords and tenants.
The commercially appropriate solution therefore cannot be determined from purchase costs alone.
Heating choices as an investment and procurement decision
In a varied building stock, the available technologies have different prerequisites. Not every building is immediately suitable for a heat pump as its sole heat source, district heating is not available everywhere, and hybrid solutions can increase technical and contractual complexity.
For owners and asset managers, the crucial question is which heating solution is viable for the specific property across investment, operation and energy supply. A technology being permitted in principle does not resolve this commercial question.
Renewable fuel staircase: stages, scope and evidence
Under section 43 GModG, gas, heating oil or LPG heating systems newly installed in an existing building after 29 July 2026 face increasing requirements for the share of heat supplied from legally permitted fuels:
Observation date | Minimum share under section 43(1) |
from 2029 | 10% |
from 2030 | 15% |
from 2035 | 30% |
from 2040 | 60% |
The objective of fully climate-neutral fuels from 2045 is distinct from these four stages. The legal provisions are set out in sections 42a and 43 GModG.
Fuel options include biomethane, bio-oil, biogenic LPG and legally permitted forms of hydrogen. Where compliance is achieved through fuel procurement, the technical properties of the system alone are insufficient: supplier confirmations and invoices must demonstrate compliance. Section 43 also includes alternative compliance routes and transitional rules, for example for certain hybrid solutions or irreparable heating failures. These must be assessed for each property.
This creates three tasks for owners and property managers: secure the required shares and evidence contractually, compare products on price and quality, and assess the availability of the necessary volumes before investing.
Which costs and risks belong in the decision
The commercial viability of a fossil-fuel or hybrid solution depends significantly on ongoing energy procurement. The assessment should cover:
Wholesale natural gas prices, and the price and availability of biomethane or other permitted fuels;
Increasing fuel requirements and CO₂ pricing;
Gas network charges and possible changes in network costs as connection numbers decline;
Contract duration, price fixing and volume flexibility;
Quality of evidence and regulatory recognition of the products.
A low purchase price may therefore come with significant price and availability risks over the system's lifetime. A heat pump is not automatically the most economical solution either. Building condition, flow temperature, load profile, electricity price and potential network and capacity charges affect its total cost.
Cost allocation between landlord and tenant
For covered newly installed systems in existing buildings, section 5a CO₂KostAufG regulates cost allocation in residential tenancies. In principle, landlords and tenants each bear half of gas network charges and CO₂ costs from 2028. From 2029, the equal split also applies to the legally defined price component of mandatory fuels, limited to a share of 30 per cent of total fuel consumption.
This refers to the relevant price component, not simply an additional premium over fossil fuel. Scope, transitional and hardship provisions must be considered; exceptions exist for certain smaller landlords. The relevant provisions are sections 5a to 5d CO₂KostAufG.
Procurement decisions therefore affect owners' costs and property cash flow or NOI. A commercial assessment should separately identify investment and subsidies, lifetime energy and operating costs, and their allocation between owner and occupier.
Five review tasks for property portfolios
1. Segment heating supply across the portfolio
Group properties by suitable supply options: heat pump, district heating, hybrid solution or temporarily gas-based supply. Building technology, consumption, contract terms and municipal heat planning belong in the same assessment.
2. Centralise energy and contract data
A reliable supply point and consumption data set includes market location and meter numbers, historical consumption and load profiles, electricity, gas and heat contracts, prices and price formulas, contract terms and notice periods. It also includes renewable fuel and green electricity shares with evidence, allocation to properties, owners and use types, and planned modernisation dates.
3. Calculate scenarios rather than snapshots
Do not compare only today's unit rates. Scenarios for CO₂ costs, network charges, renewable fuel shares, electricity and gas prices, and consumption trends show how sensitive a technical option is to market and regulatory changes.
4. Procure biomethane and biogas competitively
Assess the existing supplier's standard products alongside alternatives. Price premiums, origin, sustainability criteria, evidence, flexibility and duration must be comparable. A structured tender helps avoid expensive or inflexible commitments.
5. Coordinate technical planning and procurement
Technical advisers design the system; energy procurement and asset management assess supply and commercial viability. Bring both perspectives together before making the investment decision.
How NeoBid supports procurement
NeoBid supports energy procurement for professional property portfolios: from structuring supply point, consumption and contract data, through analysing price, duration and volume risks, to procurement strategy and tenders for natural gas, biomethane, biogas and electricity.
This includes comparing price, origin, evidence and contractual terms, and supporting supplier selection, contracting and the start of supply. The consolidated data foundation supports asset management, property management and ESG reporting.
NeoBid does not design heating systems or replace technical or legal advice. The procurement perspective adds market, data and contractual questions to investment planning.
Conclusion: assess technology, energy supply and cash flow together
By choosing heating technology, owners also establish long-term requirements for energy sources, availability, evidence and cost allocation. Property portfolios therefore need a combined view of technology, the energy market, contracts and cash flow.
Is a heating replacement planned in your portfolio?
Discuss with NeoBid how energy contracts, fuel requirements and procurement risks can inform your investment planning.
