The Renewable Energy Law Review: Austria
After consultation with Federal President Alexander Van der Bellen, Federal Chancellor Sebastian Kurz (Austrian People's Party) announced early elections on 18 May 2019 because of the 'Ibiza affair'. Hence, the planned innovations in the energy sector had to be postponed. It is now up to the 'new' government to push through the innovations in the energy sector. Nevertheless, 2020 will be a year of major decisions not only in Austria, but also at the European level, as the domestic electricity industry is waiting for the Renewable Energies Expansion Act (EAG), which was initiated but not passed by the previous government. The current Minister of the Environment wants the EAG, which the power industry is eagerly awaiting, to come into effect at the beginning of 2021. Furthermore, the Energy Efficiency Act is to be revised in accordance with the current government programme.
As was already the case last year, Austria is close to achieving its 2020 renewable energy target of 34 per cent, although it is at risk of missing its 2020 target for energy efficiency.2
In 2016, 33.5 per cent of Austria's final energy consumption came from renewables.3 The government is aiming for all electricity to come from renewable sources by 20304 and for a fully decarbonised energy sector by 2050. The new Austrian government shows a clear political commitment to renewable energy, thus opening, or reopening, a huge potential market. To do so, the Austrian government put additional funding into the renewable energy market by way of an amendment of the Green Electricity Act5 and coupled with that, as already mentioned, the EAG shall come into effect at the beginning of 2021. Therefore, renewable energies are of major importance in Austria. Austria provides a dynamic environment despite the fact that Austrian electricity law is divided between federal and state law. However, among countries in the European Union, Austria leads the pack when it comes to the percentage of electricity it generates from renewable sources.6
The year in review
The latest figures on the Austrian energy industry show that Austria continues to play a pioneering role in the use of renewable energy sources. Above all, the use of biomass, wind, photovoltaics and hydropower is of paramount importance. With the highest share of renewable energies in gross electricity consumption, Austria continues to occupy the top position within the European Union. The share of wind power and photovoltaics increased further between 2005 and 2016, and currently accounts for 4.4 per cent of domestic energy generation.
In May 2018, the Austrian Climate and Energy Strategy7 was decided by the federal government. The strategy aims to reduce greenhouse gas emissions by 36 per cent by 2030, and to decarbonise energy provision by 2050. This will be reached by increasing the share of renewable energy to 45 to 50 per cent by 2030, from the current level of 33.5 per cent, with a sub-target of fully renewable electricity production by 2030; and by increasing energy efficiency by 30 per cent by 2030 as compared to 2015, with a 1,200PJ limit of total primary energy demand in 2030.8
Moreover, according to the current government, the previously delayed EAG will come into effect at the beginning of 2021. This act will succeed the Green Electricity Act of 2012. Under the current government programme, the extent of the level of support is to be based on the expansion schedule. The three-year average may not exceed an annual maximum of €1 billion. Innovative special programmes in respect of climate and energy funds remain possible. Furthermore, the Energy Efficiency Act is also to be revised in accordance with the current government programme.
Nevertheless, the government programme for 2020–2024 sets the goal of providing 100 per cent of total national electricity consumption from renewables by 2030, which will require an additional 27TWh of electricity from renewables. Photovoltaic generation capacity is to be expanded by 11TWh, wind power by 10TWh, hydropower by 5TWh (with a division between small hydropower and large-scale hydropower based on ecological potential) and biomass by 1TWh.
The policy and regulatory framework
i The policy background
The Austrian electricity market, which was liberalised in 2011, operates within a framework that consists of the relevant legislation at EU, Austrian and provincial level: the decisions handed down by the bodies of the Austrian regulatory authority, E-Control, the Austrian electricity market rules and the market participants' general terms and conditions.9 The regulatory regime relating to renewable energy has undergone several amendments in recent years. In general, recent legislative actions have addressed the issue of a more efficient allocation of support funds and have aimed at a quicker approximation of green electricity facilities to real market conditions. The regulatory regime is likely to undergo similar amendments in the years ahead. However, there are currently no indications of anticipated fundamental changes to the regulatory regime governing renewable energy in Austria in the near future.
In Austria, a guaranteed feed-in tariff encourages renewable energy project development. As a matter of statutory obligation, the Green Electricity Settlement Centre offtakes the electricity generated in officially recognised electricity facilities using renewable energy sources (RES) on the basis of set feed-in tariffs and in accordance with contractual terms and conditions approved by E-Control,10 and for the term set in the Green Electricity Act. The task of exercising the functions of the Green Electricity Settlement Centre is conferred by way of a concession issued by the Minister of Science, Research and Economy for the entire Austrian territory. The functions of the Green Electricity Settlement Centre are currently exercised by the joint-stock corporation OeMAG Abwicklungsstelle für Ökostrom AG, owned by grid system operators, banks and industrial corporations. The feed-in tariffs are set by the Minister of Science, Research and Economy in agreement with the Minister of Agriculture, Forestry, Environment and Water Management, and by the Minister of Labour, Social Affairs and Consumer Protection on an annual basis (or more often) by ministerial ordinance. Mandatory contracting at the guaranteed feed-in tariffs is only applicable to RES electricity generated in facilities that have been specifically recognised under the Green Electricity Act. Facilities eligible for official recognition are: (1) power generating facilities that are run exclusively on the basis of RES; (2) specific hybrid plants; and (3) specific mixed combustion plants. The guaranteed feed-in tariffs for RES electricity from recognised facilities depend on the prices at the time of application. The compensation for recognised RES electricity facilities is based on the electricity produced and fed into the public electricity grid system. Furthermore, mandatory contracting only applies if RES electricity generated in a recognised facility and fed into the public grid system is provided to the Green Electricity Settlement Centre over a period of at least 12 months. The duration of the general mandatory contracting period and the mandatory statutory obligation to offtake electricity generated in officially recognised RES electricity facilities is generally 13 years, and 15 years for solid and liquid biomass and biogas facilities from the date on which the Green Electricity Settlement Centre offtakes RES electricity. In any case, it ends at the end of the 20th year of operation of the facility. After expiry of the mandatory contracting period, the Green Electricity Settlement Centre is obliged to offer to offtake the electricity from the RES electricity facility operator at market prices for an indefinite period. RES electricity from specific facilities, such as hydropower plants with a peak capacity of more than 10MW, and from animal meal, waste lye and sewage sludge, cannot be made subject to mandatory contracting at the guaranteed feed-in tariffs. In those cases, the Green Electricity Act might under certain circumstances provide for specific investment grants. The guaranteed feed-in tariffs are set by the Minister of Science, Research and Economy in agreement with the Minister of Agriculture, Forestry, Environment and Water Management, and the Minister of Labour, Social Affairs and Consumer Protection on an annual basis (or more often) by ministerial ordinance. These tariffs are essentially based upon the average production costs for cost-efficient, state-of-the-art production facilities. The tariffs shall foster achieving the purposes of the Green Electricity Act, especially with a view towards an efficient use of funds, and should be designed in such a way that the production of RES electricity increases continuously. However, an increase of the production of RES electricity from RES electricity facilities dependent upon sources can be pursued only where the sources are verifiably secured. Note that the applicable legislation and regulations do not provide for any indexation mechanism. Basically, feed-in tariffs are reviewed on a yearly basis and determined for one full year. However, if it is necessary, they may be set for two or more years. The determination of feed-in tariffs for a period of less than one year is also legitimate.
Since 21 December 2018, the new Renewable Energy Directive11 has been available; this rewrites the previous Directive from 2009 and defines a revised framework for the promotion of renewable energies. This Directive entered into force on 24 December 2018 and must be implemented by Member States by 30 June 2021. It remains to be seen how Austria will implement this Directive in its renewable energy policy.
ii The regulatory framework
The legislative competency in matters of electricity is shared between the federal state, which has competence for enacting the framework legislation in the electricity sector, and the federal provinces of Austria, which are responsible for the implementing legislation.
The federal state has adopted the Federal Electricity Industry and Organisation Act, which contains directly applicable provisions of law and sets out the legislative framework to be further specified by the nine Austrian federal provinces. The federal provinces have enacted provincial electricity statutes in accordance with the framework provisions of the Federal Electricity Industry and Organisation Act. As a consequence of this split of areas of competence, the Austrian legal structure regulating electricity is rather heterogeneous. However, the following acts or ordinances are the principal regulatory acts related to renewable energy in Austria:
- the Green Electricity Act is the central regulatory act for promoting green energy in the Austrian electricity market (However, as noted above, under the current government programme, this act will be succeeded by the EAG at the beginning of 2021);
- the Federal Electricity Industry and Organisation Act,12 together with the provincial electricity statutes, sets the principal regulatory framework for the generation, transmission, distribution and supply of electricity and for the organisation of the electricity market in Austria;
- the Federal Act on Combined Heat and Power provides a support scheme for the operation and modernisation of existing combined heat and power (CHP) plants;
- the Ministerial Green Electricity Feed-in Tariffs Ordinance 201813 for the offtake of electrical energy from green electricity facilities on the basis of contracts concluded through the Green Electricity Settlement Centre from 1 January 2018 until the end of 2019, enacted jointly by the Minister of Science, Research and Economy, the Minister of Agriculture, Forestry, Environment and Water Management, and the Minister of Labour, Social Affairs and Consumer Protection, sets standardised feed-in tariffs for electricity generated from renewable energy sources;
- the Energy Efficiency Act, which is based on EU Directive 2012/27/EU, aimed to reach its 20 per cent energy-efficiency target by 2020, increasing security of supply and the share of renewables in the energy mix, and reducing greenhouse gas emissions. These goals are to be achieved through compulsory implementation of energy efficiency measures and related reporting obligations. Parts of the Act entered into force in the summer of 2014, and the remaining parts entered into force on 1 January 2015. (As noted above, this act is to be revised under the current government programme,14 although no further information is available at present because of the covid-19 pendemic); and
- the Electric Power Transmission Act, together with provincial electricity statutes, applies if an electricity cable for power current affects two federal provinces.
Notwithstanding the above, the construction of a power plant may be subject to various permits.
The construction of a power plant may be subject to an environmental impact assessment (EIA) permitting procedure under the Federal Environmental Impact Assessment Act (the EIA Act). The types of renewable energy power plants subject to an EIA permitting procedure include:
- wind power projects with a total capacity of at least 30MW or 20 converters each with a nominal output of at least 0.5MW (or, under specific circumstances, wind power projects with a total capacity of at least 15MW, or 10 converters, each with a nominal output of at least 0.5MW). Moreover, since the latest amendment to the EIA Act, wind turbines above an altitude of 1,000 metres with a total electrical output of at least 15MW or with at least 10 converters, each with a nominal output of at least 0.5MW, must also undergo an EIA);
- hydropower plants with a maximum capacity of at least 15MW (or, under specific circumstances, 10MW, or in the case of power plant chains); and
- certain thermal facilities (e.g., combining waste management with power generation).
The EIA procedure constitutes a combined permitting procedure that replaces other applicable regulatory permitting procedures. The procedures of the EIA Act provide for extensive participation by the public.
The provincial government of the federal province where the power plant is to be located has competence for the EIA procedure. Under the EIA Act, the provincial government generally must decide upon an application – depending on the type of the particular project – within nine months or six months (e.g., in the case of wind power projects) of the submission of an application. The decision of the provincial government is – as of 1 January 2014 – subject to appeal before the Federal Administrative Court. Taking into consideration the preparation of all relevant documents, the permitting procedure can last up to two years or even more.
If the regulatory regime under the EIA Act does not apply, the power generating facility (in particular hydropower plants) may require the issuance of a water use permit. The water use permit is usually issued by the relevant district authority or, in the case of hydropower plants with a maximum capacity of more than 0.5MW, the relevant provincial governor in accordance with the conditions set out in the Federal Water Act. Moreover, setting up a power generating facility will, in most cases, require a permit under the applicable building laws. Building laws fall within the sole competence of the federal provinces of Austria. Therefore, regulations regarding the construction and operation of a building vary from province to province. In general, a hierarchy of provincial zoning and construction plans determines the sites on which a power plant may be set up. Provincial building laws contain rules regarding the construction of the building and the administrative permitting procedure. The competent construction authority in the permitting procedure is usually the mayor of the relevant municipality. This decision is subject to appeal to the municipal council in most of the federal provinces. In some federal provinces (e.g., Tyrol, Vienna, Upper Austria or Vorarlberg), this decision is subject to appeal to the relevant provincial administrative court. According to the general administrative procedural rules, the authorities have to issue a decision within six months of submission of an application, unless stated otherwise.
Power generating facilities are exempt from the permitting procedure under electricity laws if they serve mainly for the operator's own consumption.15 Such facilities are subject to the permitting procedure under the Federal Trade Act.
Finally, there is no Austrian legislation requiring the participation in a prior tender procedure to be granted the right (concession) to exploit natural resources. Hence, the Austrian legislation does not foresee the possibility of triggering a public tender by way of an unsolicited proposal. Consequently, no specific act prescribing the award of concessions for the right to exploit natural resources by way of a public tender or the mandatory conclusion of a concession contract with some public entity as legal basis for this right has been enacted.
Renewable energy project development
i Project finance transaction structures
In Austria, there is no preferred specific legal form of investment vehicle in the renewable energy sector. As a matter of general business practice, the legal entity operating a green electricity facility will usually be a limited liability company or a joint-stock corporation.
The Green Electricity Act provides for investment allowances granted to the entity constructing or renovating certain hydropower plants and CHP plants.
Besides the Green Electricity Act, the Climate and Energy Fund Act is the legal basis for subsidies from the Austrian climate and energy fund granted for projects relating to energy efficiency and sustainability (e.g., for photovoltaic facilities with a peak capacity of up to 5KW).
One observable trend is the 'citizen participation model'. This model essentially refers to cooperation between companies and private individuals in economic projects, and it is a 'sale-and-lease-back' model. This means, for example, that the participants buy one or more photovoltaic panels from a photovoltaic energy company as part of the citizen participation model, and simultaneously lease the panels back to the company. In return for the provision of the photovoltaic panels, the participants receive annual rental income. At the end of the term, the energy company buys back the photovoltaic panels from the participant for a purchase price corresponding to the purchase price paid by the participant for the panels at the outset.
Interestingly, the citizen participation model is also increasingly used by wind power operators.
The investment allowances granted to the constructing (or renovating) entity of certain hydropower plants and CHP plants under the Green Electricity Act amount to a certain percentage of the investment costs in the case of medium-sized hydropower plants and are processed by the Settlement Centre for Investment Allowances.
In addition, the federal provinces may enact individual investment incentive mechanisms within their legislative competence. Such investment incentives usually relate to the construction of photovoltaic and biogas facilities operated on a private level.
ii Distributed and residential renewable energy
As a matter of fact, the already existing Austrian generation structure is characterised by a considerable amount (16 per cent) of distributed generation.16 In particular, the key players for distributed energy are in the hydropower, wind power and photovoltaic sector. A steady tendency for a significant rise in distributed renewable energy is expected in Austria.
iii Non-project finance development
In Austria, the project finance model is typically used for the purpose of financing the delivery of long-term infrastructure or natural resource projects, including a wide variety of energy types (e.g., wind, solar and hydro) and infrastructure assets (e.g., roads, schools and hospitals).17 Project finance is the standard form of financing and to date there have been no cases of non-project finance being used for a renewable energy project; neither has crowdfunding been used as a source of finance. In general, structures other than project finance are uncommon in the Austrian renewable energy market.
Renewable energy manufacturing
Renewable energy as an alternative to fossil-fuel energy is more than simply a catchword for Austrian companies. Austrian companies are aware of their responsibility and invested early in this promising area.18 There are no special policies or programmes supporting renewable energy manufacturing; however, the Green Electricity Act, the environmental support for companies, and the climate and energy funding pools, as well as the Austrian Research Promotion Agency,19 may be quoted as prime examples of state subsidy programmes, although not specifically aimed at the manufacturing sector. Furthermore, there are no tariff or trade policies with respect to renewable energy equipment in Austria.
Conclusions and outlook
The regulatory regime relating to renewable energy has undergone several amendments in recent years. In general, the recent legislative actions have addressed the issue of a more efficient allocation of support funds and have aimed at a quicker approximation of the green electricity facilities to real market conditions. However, Austria is still an interesting market for investors and project developers because of a guaranteed feed-in tariff that encourages renewable energy project development. Hence, the proportion of renewable energy compared to the gross amount of energy consumption in Austria is exemplary. With a share of 32.2 per cent, Austria lies in third place behind Latvia and Sweden.20 The fields of hydropower (38.9 per cent), solid biomass (31.5 per cent) and district heating (10.3 per cent) contribute primarily to the total volume of renewable energy.21
The European Union has set itself the target of improving the energy efficiency of buildings by 2020 and increasing the use of renewable energy for heating, hot water and air conditioning.22 The Austrian government goes one step further and is aiming for all electricity to come from renewable sources by 2030, and for a fully decarbonised energy sector by 2050. What is certain is that Austria with its renewable energy strategy will play a major role in the future, especially in view of the forthcoming entry into effect of the EAG in 2021, succeeding the Green Electricity Act of 2012 and making Austria even more attractive for investors in the process.
1 Stefan Lampert is an attorney at law specialising in environmental and energy regulatory matters.
3 See Statistics Austria.
4 See Government Programme 2017–2020 (Regierungsprogramm 2017–2020), page 175: 'Klare Zieldefinition für die Steigerung des Anteils von erneuerbaren Energien am nationalen Gesamtverbrauch: 100% (national bilanziell) Strom aus erneuerbaren Energiequellen bis 2030'. At the same time, the government facilitated implementation by bundling relevant areas of competence within one ministry (Bundesministerium für Nachhaltigkeit und Tourismus).
5 See Metzler, Die 'kleine Ökostromnovelle' – auch eine 'kleine Ausgleichsenergienovelle', ZTR 2017, 174.
9 See E-Control, The Austrian Electricity Market.
10 E-Control is a public authority.
11 Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources.
12 Federal Gazette No. I 110/2010; 'Federal Electricity Act'.
14 The Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology announced the revision of the Energy Efficiency Act as part of the government programme.
15 Hauer, EIWOG (2007), 146 et seq. Further VwGH 24 February 2004, 2002/05/0010.
22 Information from the Commission, COM (2008) 772.