Germany: Federal government presents draft bill to accelerate the transition to climate-neutral heat supply

Why should I read this?

 On 6 August 2025, the German Federal Cabinet presented a comprehensive energy package including laws to enable carbon capture and storage (CCS) and carbon capture and utilisation (CCU) for commercial purposes (see our client briefing Germany: Government adopts bill for commercial carbon capture and storage | Eversheds Sutherland). The package also aims to to implement the Internal Electricity Market Directive (EU) 2024/1711 into national law to strengthen consumer protection in the energy sector. Additionally, the Cabinet also agreed on a legislative proposal accelerating the expansion of geothermal energy plants, heat pumps, and heat storage facilities, focusing on removing regulatory and procedural barriers to their expansion and, at the same time, serves to implement parts of the new EU Renewable Energy Directive (RED III) into German national law.

What do I need to know?

• Projects in the in the overriding public interest: The draft law foresees significant simplifications to the permitting and planning processes for geothermal energy projects. The recognition of the construction and operation of geothermal energy infrastructure as being in the overriding public interest gives them greater weight in balancing decisions of competent authorities. This allows for faster permitting and planning procedures, particularly for projects that utilise renewable heat sources such as river water, wastewater, or industrial waste heat (e.g. from data centres). At the same time, the planning process for heat transfer pipelines will be accelerated via regulations similar to the ones that already apply to gas and hydrogen pipelines to ensure consistency in the approval of heat generation plants and the necessary heat pipe network.

• Streamlining permitting and planning procedures: A new law, the Geothermal Energy Acceleration Act (Geothermie-Beschleunigungsgesetz - GeoBG), is proposed, accompanied by amendments to several existing laws, including the Water Resources Act (Wasserhaushaltsgesetz - WHG), the Federal Mining Act (Bundesberggesetz - BBergG), the Environmental Impact Assessment Act (Gesetz über die Umweltverträglichkeitsprüfung - UVPG ), and the Code of Administrative Court Procedure (Verwaltungsgerichtsordnung - VwGO). These changes include the imposition of maximum deadlines for mining and water law approvals, the digitisation of procedural steps, and the removal of certain operating plan requirements for large-scale heat infrastructure projects. These adjustments are designed to accelerate the necessary administrative procedures, reduce bureaucratic hurdles and streamline project development.

• Facilitated subsurface exploration: The draft law facilitates subsurface explorations while maintaining strong environmental and safety standards. It obliges land owners to tolerate subsurface exploration using seismic vehicles, in this case, however, nature and species protection regulations must be respected. After completing the seismic exploration, the geothermal project operator must restore the property to a condition that is essentially the same as before. The operator is obliged to keep the damage caused to the land owner by the seismic exploration to a minimum. If the owner suffers direct financial losses as a result of these measures, the project operator may be required to pay appropriate compensation.

Why is this important for stakeholders?

The draft law presents a significant opportunity for energy companies, project developers, and investors active in the renewable heating sector. By introducing legally binding maximum timelines for permitting procedures – particularly under mining and water law – the proposal reduces the regulatory uncertainty that has historically delayed geothermal and heat infrastructure projects. This change is expected to shorten project development cycles and improve the predictability of investment returns. The recognition of geothermal energy and associated infrastructure as being in the overriding public interest strengthens the legal position of developers in approval and planning procedures. This designation can help overcome local opposition and facilitate land use decisions, especially in densely populated or environmentally sensitive areas.

The law also enhances access to subsurface data and exploration rights, which is critical for identifying viable geothermal resources. Developers will benefit from clearer and more efficient procedures for securing exploration licenses and conducting seismic surveys. The ability to carry out year-round exploration activities, including in protected areas under certain conditions, will further support project feasibility studies and reduce seasonal delays.

For companies involved in the construction and operation of large-scale heat pumps and thermal storage systems, the draft law simplifies the regulatory framework and removes redundant approval steps. This is particularly relevant for projects that integrate industrial waste heat or renewable electricity into district heating networks, where coordination across multiple regulatory areas has previously been a barrier.

Moreover, provisions for liability coverage and environmental safeguards provide a clearer risk management framework, which is likely to improve the bankability of projects. Financial institutions and insurers may view the new legal environment as more stable and transparent, potentially unlocking new financing options.

What should I do next?

Stakeholders should consider aligning their project pipelines with the new legal framework and accelerating feasibility assessments for geothermal and heat infrastructure projects. Early movers may gain a competitive advantage in securing exploration rights, accessing public funding, and forming partnerships with municipalities and utilities.