On 16 September 2020 the eagerly awaited draft Renewable Energy Expansion Act (EAG) was published for evaluation (for further details please see "Sparking change: Renewable Energy Expansion Act published for evaluation"). To help achieve the goals of the Paris Climate Agreement 2015, the draft creates new framework conditions for the expansion of renewable energy in Austria. The country intends for 100% of its total electricity consumption to come from renewable energy sources from 2030 onwards. To achieve this target, it plans to increase its annual electricity generation from renewable sources by 27 terawatt hours (TWh) by 2030, 11 TWh being contributed by photovoltaic (PV) plants.
Market premium instead of feed-in tariffs
Instead of fixed feed-in tariffs, the EAG introduces market premiums, which are intended to lead to greater market integration of plants producing renewable electricity. The market premiums aim to compensate the difference between the production costs of electricity from renewable sources and the average market price for electricity. They will be granted as a subsidy for electricity directly marketed and fed into the public electricity grid.
Unlike previously, there is no central body that guarantees the purchase of the electricity generated. Therefore, plant operators or investors must take care of the sale of the generated electricity. However, 'small' plant operators (ie, those under 500 kilowatts (kW)) are exempt from the obligation of self-marketing by means of an allocation procedure in order to avoid undue burdens.
In contrast to other technologies, the market premiums for PV plants will be granted by means of tender procedures and not on application. The change to competitive tendering procedures is a paradigm shift for the Austrian renewables support scheme. It is intended to create an incentive for a market-based and market-responsive integration of the technology into the electricity market, while avoiding market distortions (see Article 4(2) of the EU Renewable Energy Directive (2018/2001/EU)). A specially licensed funding agency will be responsible for conducting the tenders and processing market premium applications for other technologies.
PV plants eligible for market premiums
Newly constructed PV plants with a peak bottleneck capacity of more than 20kW as well as plant expansions of more than 20kW peak, are eligible for market premiums if the plant is or will be installed on or attached:
- to a building or a structure that was erected for a purpose other than the use of solar energy;
- on a railway facility or landfill; or
- on an open space – except where land use regulations dedicate the area for agricultural purposes or as greenspaces (exceptions apply).
In the case of plant expansions, only the generation volumes resulting from the plant expansion can be subsidised. Further eligibility requirements for PV plants include:
- connection to the public electricity grid; and
- remote controllability and equipment with a load profile meter or – when peak bottleneck capacity is below 50kW – with another intelligent meter.
The funding agency will conclude contracts with bidders which have been awarded a contract for 20 years as of the plant's commissioning.
The market premium for PV plants is granted for electricity fed into the public electricity grid each quarter. The market premium is calculated based on the difference between the value determined in a tender (applicable value) and the reference market value (RMV) in cents per kWh. Accordingly, the applicable value minus the RMV equals the market premium. As a result, the lower the value determined in the tender, the lower the market premium. The contract is awarded in the order of the respective bid value. Lower bid values increase the probability of being awarded a contract in a (capacity-capped) tender.
In contrast to the reference market price (which applies to biomass and biogas), the RMV is calculated separately for each technology (technology-specific market value). The reason for using the RMV is that for electricity generation from volatile (ie, weather-dependent) sources, the sometimes high supply leads to falling prices and thus falling revenues. Therefore, the use of the RMV should lead to a reduction in financing costs because technology-related revenue uncertainties are largely eliminated.
Producers may keep any additional revenue achieved (ie, when the sales price achieved is more than the RMV). Conversely, the producer must bear any shortfall in revenue (ie, when the sales price is less than the RMV). The draft EAG provides for a mechanism to avoid overcompensation; if the RMV exceeds the applicable value by more than 40%, operators of PV plants with a bottleneck capacity of 2 megawatts or more must repay 66% of the excess amount.
The recipients of a market premium and the amount of the applicable value for the calculation of the market premium are determined by tendering procedures, which will take place at least twice a year. The tender volume for PV plants is at least 700,000kW peak per year.
For ground-mounted PV plants, the bidding value amount is reduced by 30%. This discount can be adapted by ordinance. The Federal Ministry of Energy will set maximum prices in cents per kWh up to which bids will be considered. The maximum prices will be based on the costs required to operate a cost-efficient, state-of-the-art plant and will include depreciation as well as an appropriate return on equity and debt capital for the investment.
The funding agency will publish the invitation to tender on its website no later than two months before the respective bidding deadline. Bids must be submitted electronically to the funding agency. The bid must include:
- the bid quantity in kW;
- the bid value in cents per kWh; and
- all permits and approvals required for the construction or expansion of the plant, such as:
- a building permit;
- a permit under electricity law; and
- an environmental impact assessment permit.
The last point refers to the permits and authorisations of the first-instance court; no final legal effect is required. In addition, a cost, time and financing plan must be submitted.
The admissible bids are ranked according to the bid value, starting with the lowest. According to the ranking, the funding agency will award all admissible bids with a contract until the tender volume is exceeded. In addition, the draft EAG contains detailed provisions on:
- the provision of securities;
- the award procedure;
- the exclusion of bids or bidders; and
- the publication of awards.
Bids are excluded from the award procedure if the requirements and formalities have not been fully complied with. This also applies if, for example, a permit required for the construction of the plant is lost before an award decision has been made. The plants must be commissioned within 12 months of the date of publication of the award (this may be extended once for up to 12 months). If the permit is lost after the contract has been awarded, the plant may not be commissioned in time or at all. Consequently, the applicant must pay a penalty by way of forfeiture of its security deposits.
Investment grants can be awarded for PV plants and electricity storage systems that are connected to the public electricity grid and equipped with the necessary metering device. However, PV plant operators must decide whether they prefer funding through investment grants or market premiums. Parallel funding is not permitted.
The construction and expansion of a PV plant up to a 500kW peak bottleneck capacity can be subsidised by an investment grant if the plant fulfils the same requirements regarding the place of construction as those for market premiums. Investment grants are also available for 'small-scale' PV plants (ie, those with a peak bottleneck capacity of less than 20kW), which are not eligible for market premiums. If the plant has an electricity storage system of at least 0.5kWh per kW peak of installed bottleneck capacity, an additional investment grant can be awarded for storage capacity of up to 50kWh per plant. An investment grant for electricity storage facilities alone is not possible.
The annual investment grants amount to at least €60 million and are awarded to different size categories, to ensure that economies of scale are considered. If the available funding in one category is not exhausted, the remaining funds will be used in the remaining categories, starting with the category that requires the least funding per kW peak capacity. The maximum permissible funding per kW peak capacity is set by ordinance. The amount of the investment grant is determined by the required funding stated in the application. For electricity storage systems, the amount of funding per kWh is set by ordinance. The investment grant is limited to a maximum of 30% of the investment volume needed for the construction or expansion (excluding property costs), a discount of 30% being applicable to ground-mounted plants.
For building-integrated plants and particularly innovative projects, a surcharge of up to 30% may be set by ordinance.
Applications for investment grants must be submitted electronically to the funding agency within a limited time prior to the start of works (ie, construction or expansion). Investment grants are awarded in accordance with their ranking (with the cheapest ranked first) and subject to the available funding. In the case of equal funding requirements, the 'first come, first served' principle applies. No waiting lists are formed.
If the PV plant or the electricity storage system is not commissioned within 12 months, the application for an investment grant is deemed to be withdrawn and the grant agreement is terminated.
In the future, PV plants will be subsidised through market premiums (instead of fixed feed-in tariffs) and investment grants.
In contrast to other technologies (eg, wind and hydropower), the applicable value for PV plants – specifically, the value that forms the basis for the calculation of the market premium – will be determined competitively through tenders and not administratively (ie, by ordinance). A maximum price per kWh will be set by ordinance.
The annual tender volume for PV plants will be at least 700,000kW. It is planned that at least two tenders per year will be conducted.
PV plants installed on and at buildings or structures as well as on railway facilities or landfills are eligible for funding. Ground-mounted PV plants are also eligible, except where land use regulations dedicate the area for agricultural purposes or as greenspace (exemptions apply).
Within the framework of investment grants for small PV plants, building-integrated and particularly innovative plants can benefit from a surcharge of 30%, which is added to the fixed subsidy rate (but the maximum is 30 % of the investment volume).
