Which is an option and would have been an option under the original law.

It is not a realistic option because the federation isn't giving municipalities access to the capital needed to invest in that stuff.

Decentralized solutions are faster

No. Decentralised solutions need decentralised work which more often than not is a higher total amount than if there was some kind of centralisation -- also "municipal level" is not exactly the pinnacle of centralisation. With district heating a municipality needs a couple of specialists dealing with the actual heating part, installation workers which can be any plumber, not just specialists, and road workers which are a completely different pool. For a decentralised solution you need a gazillion of specialists, of which there are not enough. You need to order a gazillion of individual heat pumps and guess what companies aren't able to deliver in those numbers. Want to get a heat pump installed today? Call a company, they'll tell you that they'll be able to squeeze you in for an initial assessment in five years.

And this was known. The studies comparing different approaches had been made. Of course they were made this is Germany. And the Greens went ahead and said "we'll take the one that our members feel comfortable with, where they can feel superior to everyone else because they've been ahead of the curve". The biggest obstacle to Green policies in Germany is not the voter, but the insistence of the Green party to smell its own farts.