Austria’s plan to go 100% renewable

A smooth ride or bumpy road?

After many years of intensive negotiations, the National Council in Austria passed the Renewable Energy Expansion Act (Erneuerbaren-Ausbau-Gesetz; short: EAG), which sets the framework for the expansion of green electricity over the next ten years. The goal is clear: by 2030, domestic electricity consumption is to be covered 100% by renewable power generation. 

However, 5 months after the decision, teething problems are already occurring. Contrary to the expectations of many market participants, the EAG has not yet been put into effect due to the lack of approval by the EU Commission. Meanwhile, let's have a closer look at the act: what are the exact goals, how are they to be achieved and what is causing concern along the way? 

The path towards a greener future

According to the BMVIT, in international comparison, Austria is a pioneer in the use of renewable energy sources. At present, around 76% of electricity is generated from renewables. Due to its topographical location, Austria has long had hydropower as a major renewable electricity producer. In the period from 2005 and 2019, it covered between 55 and 67% of domestic electricity generation. The contribution of PV has reached almost 6%, while wind has risen from around 2% (2005) to 11.2% (2022). 

Looking at the expansions in the past 15 years, the target of the EAG seems even more ambitious. As mentioned in the first paragraph, the law stipulates that 100 percent of domestic electricity consumption must come from renewable energy sources, calculated over the course of the year. The expansion is technology-specific, with electricity from renewable sources to be expanded by a total of 27 TWh. This includes 11 TWh from photovoltaics, 10 TWh from wind, 5 TWh from hydropower and 1 TWh from biomass. The share is currently around 78 percent, with the largest share coming from hydropower.  

 
In addition to the main goal of expansion, other goals are to be pursued:  

• integration of the energy system 
• ensuring security of supply
• expanding the information content of the charging point directory for publicly accessible charging points
• increasing the renewable share in district heating

EAG's key steps to arrive at the destination 

In addition to the introduction of subsidies for electricity from hydropower, wind power, photovoltaics, solid biomass and biogas, energy communities and hydrogen are also expected to play a major role. Summarized by Oesterreichs Energie, the legislative package includes some of the following main aspects:  

Expansion of renewable energy: A key point of the EAG is to facilitate the expansion of renewable energy. This includes differentiated siting for wind power, open-space discounts for PV and subsidies for biomass. To enable a broader expansion of wind power and to compensate for location disadvantages, market premiums are to be adjusted based on location criteria. There will be a discount for larger photovoltaic plants on agricultural land. In addition, subsidies will be granted for the construction of new plants, for repowering and for the maintenance of existing biomass plants. 

Subsidies: Unlike other countries in Europe, Austria will heavily focus on subsidies to reach their climate goals. The subsidy instruments used are the market premium and the investment subsidy. The support by means of market premium is based on a monthly determined reference market value for wind power plants, hydropower plants and photovoltaic plants and for plants based on biomass and biogas by means of an annual reference market price. Payment of the market premium is suspended if the day-ahead prices are negative for at least six consecutive hours and the intraday prices are not positive for at least six hours during this period. Investment subsidies for construction, revitalization and expansion of power plants are based on the size of the plant and the investment costs, depending on the technology. The subsidies are generally capped at one billion per year, based on the average value of a period of three calendar years. The annual billion is to be financed by green electricity contributions from private households and companies. Money from the EU reconstruction fund is also earmarked for the energy transition 

Energy Communities: The setup of joint generation plants has been possible in principle since the "small" Green Electricity Amendment 2017 and was previously only standardized in § 16a ElWOG. The EAG is now setting the next steps. With "citizen energy communities" and renewable energy communities, the possibility for citizens, municipalities and associations to participate directly in the energy transition is to be created in the future. These are always an association of at least two, for the joint production and utilization of energy. Example: In a town in Austria, five households join forces and jointly finance a PV system on a suitable roof. They can now use this energy jointly. As a result, they each save on electricity and grid costs and protect the climate.

Hydrogen: The EAG will also focus on investments for green hydrogen projects. More precisely, 80 million annually to promote the expansion of green hydrogen and green gas - an important contribution to the decarbonization of the industry. This includes funding the construction of electrolysis plants to convert electricity into hydrogen or synthetic gas through an investment grant. 

The roadblocks along the way: criticism of the EAG 

The road is already getting off to a rocky start. At the moment, there are starting difficulties and therefore delays for the EAG, due to the still missing approval of the EU Commission. On the one hand, this is caused by problems with state aid law, which the EU Commission is complaining about, especially in the area of wind power subsidies, and on the other hand, the backlog of projects waiting for funding also has to do with internal coalition disputes. Besides the current starting hurdles, criticism is also being leveled at other areas. 

Grid operators are warning about the challenges to grid stability posed by small and medium-sized green power generation plants. After all, power generation from the sun and wind depends heavily on the weather - making it difficult to predict. Especially at a time when blackout scenarios and grid stability are becoming an ever-increasing concern, there is criticism from many parties that the EAG focuses very strongly on the expansion of renewables, but leaves a number of questions unanswered when it comes to the issue of security of supply. There is a growing need for integration of grid expansion regulations, grid reserve and other initiatives to stabilize the power grid. After all, without efficient grids, neither PV plants nor wind farms can be quickly integrated into the energy infrastructure.

A continuously growing share of renewable energy is an integral part of the EAG and therefore a way to tackle the energy transition in Austria but poses major challenges to the stability of our power grids. At enspired, we market our customers' flexible power assets in the short-term electricity market as a service. For that, we use artificial intelligence (AI) and cutting-edge technology to make and execute trading decisions within milliseconds. 

Source: Oesterreichs Energie. Erneuerbaren-Ausbau-Gesetz Erstanalyse der Regierungsvorlage; BMVIT Energie in Österreich Zahlen, Daten, Fakten;