The energy transition in Germany will be decided largely in the building sector. This is clearly shown in the latest Market Report 2025 published by the Building Transition Alliance (BGW). Buildings account for around one-third of national energy consumption—and thus for heating, cooling, and hot water. Anyone who wants to achieve climate targets must start here.

Stagnation in renovation rates, pressure on existing buildings

While the federal government has set ambitious targets, the reality falls short of expectations. The renovation rate has been stagnating at less than one percent for years, and new construction activity is well below political targets. High construction costs, lengthy approval processes, and a severe shortage of skilled workers are exacerbating the renovation backlog.

Particularly problematic is the fact that the share of renewable energies in heat supply has been stagnating at just under 18 percent for over a decade. District heating continues to be based predominantly on fossil fuels. At the same time, Germany imported fossil fuels worth around 69 billion euros in 2024 – capital that is lacking for the transformation.

Initial momentum for heat pumps and digitalization

Despite these challenges, there are also positive developments. After a massive market slump in 2024, the heat pump market is recovering significantly: in the first quarter of 2025, sales rose by 35 percent compared to the previous year. At the same time, digitalization is gaining momentum. With more than 1.5 million smart meters installed, the foundation for an intelligent, cross-sector energy system is being laid.

Nevertheless, the investment required remains immense. The dena estimates that around €207 billion will be needed for the expansion of distribution networks alone by 2045. Support programs, reliable regulatory frameworks, and a qualified workforce will be crucial to accelerating the heating transition in existing buildings.

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Relevance for practice: Existing buildings as the key

The market report makes it abundantly clear: The greatest potential and, at the same time, the greatest deficits lie in existing buildings. Millions of residential and commercial units do not meet current efficiency requirements or the ESG criteria of institutional investors. Those who fail to act here risk massive losses in value and rising CO₂ costs.

The right moment for Heat-as-a-Service

With PAUL Net Zero, the company offers an immediately effective solution for decarbonizing existing buildings. Through the intelligent combination of heat pumps, photovoltaics, and AI-controlled heating control, buildings can be upgraded to energy efficiency class A without the need for costly complete renovation.

The “Heat-as-a-Service” model also takes the pressure off owners: instead of high investments and credit risks, PAUL takes on the transformation as a service. For investors and property owners, this means predictable costs, a significant reduction in operating costs, and the avoidance of future CO₂ taxes. At the same time, the solution strengthens the ESG balance sheet and makes a measurable contribution to the heating transition at the municipal level, where it reaches the people.

Scalable, economically viable, and immediately deployable models are in demand

The 2025 Market Report shows that the building sector remains the central lever of the energy transition—and existing buildings in particular are a crucial area for action. This is precisely where PAUL positions itself: PAUL Net Zero not only makes the heating transition in existing buildings possible, but also affordable and future-proof.

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