The heat transition is no longer just an ecological necessity — it's now an economic imperative. The new 2025 Heating Report, published by co2online and the German Tenant Association, draws an alarming picture: heating is becoming significantly more expensive. Households using gas or wood-pellet heating systems are facing cost increases of 15 to 20 percent. District heating remains the most expensive option, partly due to the monumental network investments passed on to consumers.

For property owners and investors, a clear trend is emerging: fossil heating systems are not only undesirable from a climate policy standpoint, but increasingly a financial burden. Thus, the goal of climate neutrality by 2045 becomes an economic as well as a moral imperative.

Fossil Fuels: Cost Traps With Warning Signs

Current developments

According to the Heating Report, heating a 70 m² apartment with a gas heating system now costs around €1,100 per year, and with district heating €1,245. In contrast, a heat pump costs only €715 — a difference of about €400 annually. Heating oil and wood pellets fall somewhere in between, but even they show significant price increases compared to 2023.

Future outlook

The authors of the Heating Report predict that by 2045, heating costs for district heating and wood pellets could double, while oil and gas could triple. Drivers of this trend include rising CO₂ prices, increasing network fees, and the definitive exit from cheap Russian gas. In a detached house with a gas heating system and little insulation, total heating costs up to 2045 could reach €120,000. In comparison, using a heat pump over the same period may cost only €16,000 — even without factoring in investment subsidies.

CO₂ prices as a cost driver

A central element in the evolving cost structure is the European emission trading system (ETS2), which from 2027 will include the building and transport sectors. While current CO₂ prices are around €55 per ton, early market forecasts suggest €80/t by 2027. The German Umweltbundesamt expects figures of €250/t by 2040 and €300/t by 2045. Thus, CO₂ costs — today accounting for 8 % of gas and 12 % of heating oil prices — could become a dominant factor in heating expense calculations.

The Heat Pump: Ecologically and Economically Superior

State of research

Recent results from RWTH Aachen and Fraunhofer ISE confirm the superiority of heat pumps, even in older buildings. Depending on the scenario, CO₂ savings range from 48 % to 91 %. Even poorly insulated existing buildings can benefit, because heat pumps draw on ambient heat and eliminate dependence on fossil fuels entirely.

Economic arguments

For the first time in heating cost comparisons, the heat pump is not only ecologically favorable — it is also economically optimal. Lower operating costs, falling electricity prices due to the energy transition, and economies of scale in manufacturing shift the cost curve significantly. Thus, the heat pump is no longer a niche product — it is emerging as the baseline technology for the heat transition.

PAUL Net Zero: Bridging Theory and Practice

Our latest initiatives illustrate how macroeconomic trends translate into practical business models:

• PAUL Net Zero: With decentralized, smart sector coupling, we demonstrate how 100,000 apartments can be supplied with climate-neutral heating by 2027 — proof of scalability.
• 2025 Market Report on Building Transition: The analysis reveals that speed and commitment are lacking in existing properties. PAUL positions itself as a partner for municipalities, owners, and investors to close this gap.
• Recent research results: Heat pumps are not only technically superior but remain the only economically viable long-term option — a conclusion PAUL actively implements in practice.
• Heat-as-a-Service: Through this innovative model, we overcome investment barriers. Owners and investors benefit from predictable costs, while tenants are financially relieved.
• Heat Pump Market Trends: PAUL positions itself as a shaper of the new heating market and opens opportunities for real estate players through early engagement.

Let's talk about PAUL Net Zero – get in touch now

The Truth About Costs Forces Heat Transition

The message is clear: The heat pump is inevitable. PAUL demonstrates how the heat transition in the building stock can be achieved not only technically but also economically and socially — through innovation, new business models, and a consistent focus on scalability.

This transition becomes a dual opportunity: for climate protection and for the future economic viability of tenants, owners, and investors alike.

Let's talk about PAUL Net Zero – get in touch now