Course Correction: 2017 Amendments to the Austrian Electricity Act

The recent CARISMA discussion paper, Contextual factors affecting EU climate policies, discusses the institutional, economic, and social contexts which influence climate policy instruments, and the recent passage of the Green Electricity Act (GEA 2017) in Austria serves as a convenient example of how policymaking is influenced by such factors, and how they may help or hinder investment into low carbon policies requiring regular policy updates.

Recently, the Austrian government introduced the GEA 2017, accompanied by proposals for a Biogas Technology Compensation Act (BTCA) and Cogeneration Points Act (CPA). The GEA 2017 amends a previous version of the law from 2012, and the three pieces of legislation together attempt to reinvigorate investment into renewables and bail out biogas production plants which are neither profitable nor “green” enough. Motivation for the bill stems from a strong decrease in electricity market pricing, which has led to green electricity plant projects being unable to gain access to special promotion quotas. Renewable projects applying for subsidies and feed-in tariffs currently face a long delay before their application might be processed, e.g. 2020 and beyond, and feed-in tariffs for existing plants are set to expire in the near future, with no successive tariffs have yet been put in place.

The GEA aimed to solve these problems; allowing for new subsidy agreements for wind, hydro, and photovoltaic (PV) plants, and allowing for 10 million euro to be made available for solid and liquid biomass plants by removing support for construction of biogas plants, with expiration periods for subsidy applications being extended from 3 to 4 years. In the original 2012 GEA, the rise of e-mobility was not as evident as it is today, and biogas was seen to be a key factor in greening the transportation sector; as a result, Austria currently supports green biogas electricity plants which cannot be modernized and have proven to be unprofitable. The solution to this problem is found in the BTCA, which introduces a mechanism to subsidize the decommissioning and demolition of such plants. The final act, the CPA, focuses on cogeneration plants – those which generate heat and power – which have been under extreme economic pressure due to low market prices for electricity. The act attempts to create framework conditions for support of electricity and heat generation in such plants, targeting new plants which contribute thermal energy to district heating networks, by subsidizing cogeneration plants up to 45 euro per megawatt hour.

As can be seen within the context of this new legislation, there is a high degree of relevance of the contextual factors discussed in CARISMA; mainly in regards to institutions and governance and innovation and investment. There is already mention of possible problems in regards to implementing a new assessment policy for PV subsidy applications, which will change from a “first come, first served” approach to one based on quality, defined by a to-be-determined framework set up not by the Austrian government, but the Austrian Clearinghouse for Green Energy (OeMAG), a joint venture owned by electricity grid operators, banks, and industrial enterprises. This raises some questions of legality and constitutionality in regards to such an enterprise determining quality benchmarks for receiving tariff payments. The market and regulatory framework in general and as set forth by the original GEA of 2012 can be seen here as another contextual factor, as the current framework has been too limiting to adequately promote investment, and changes are needed, due to the low electricity prices arising from the broader macro environment Austria finds itself in. More broadly, this recent example highlights how well-intentioned climate policy can itself become part of the contextual factors which hinder renewables development, and eventually necessitate follow-up legislation.

Source of this article and further reading on the changes to the Austrian Green Electricity Act, see the recent analysis from the law firm Schönherr.