Austria: Government Bill For Amending The Promotion Scheme For Green Electricity. Hope For New Investments, But Not Yet An Ideal Solution.

As a result of the strong decrease in electricity market pricing, green electricity plant projects cannot find a place in special promotion quotas. As a result, renewable projects are queued on long waiting lists partially stretched until 2020 and beyond (eg until 2023 for small hydropower installations). Moreover, the time-limited and soon to expire feed-in tariff agreements for existing green electricity plants, are seen as problematic since there are no satisfactory follow-up regulations (eg successor tariffs) in place. After a long waiting period the proposal to amend the Green Electricity Act (GEA) was published on 1 February,2017. Those who expect a "boom" for the further expansion of renewable energy in Austria will be disappointed and will need to wait patiently for the envisaged "Large" Green Electricity Act Amendment. However, some proposals give hope for new investments.

Introduction

The planned GEA amendment serves the implementation of the federal government's new agenda 2017/2018 (point 3.1 "Small Green Electricity Act Amendment"). Apart from the amendment to the GEA 2012 (GEA amendment 2017) the amendment package foresees enacting a Biogas Technology Compensation Act 2017 (BTCA 2017) and a revised version of the Cogeneration Points Act (CPA). Essentially, the BTCA 2017 envisages a financial compensation for inefficient biogas plants, as well as their withdrawal from the current promotion regime. The CPA aims to ensure the sustainable operation of all highly efficient cogeneration plants.

Proposed amendment to the Green Electricity Act 2012

The essential cornerstones of the proposed GEA amendment 2017 are:

  • Concluding new subsidy agreements amounted to EUR 19 million for the so-called "remaining pot" (Resttopf) in the respective year, whereas this amount is being reduced by EUR one million annually until 2022. Thus, the remaining pot amounts to EUR 14 million in 2017 and is placed at the disposal of those wind, water and photovoltaic power plants which could not conclude a subsidy agreement with OeMAG due to the exhaustion of their additional annual support payment. The GEA amendment foresees a reduction in the remaining pot of EUR one million (from EUR 14 to 13 million). The million obtained for subsidy is thus directly allocated to the sub quota for small hydropower. Therefore, the support payment for small hydropower will be increased from EUR 1.5 to 2.5 million per year.
     
  • The support of new biogas plants is crossed out of the new supporting regime. As a result, an amount of EUR 10 million will be available for solid and liquid biomass in future.
     
  • Existing biogas plants, which are highly efficient and predominantly operated on a thermal basis, receive a successor tariff from OeMAG. Notably, the proposed successor tariff is independent on the contingent.
     
  • The expiration period for pending subsidy applications (waiting list) is increased from three years to four years. However, applications older than three years will not receive the (more favorable) tariff which applies at the time of the application but rather the last valid tariff. 
     
  • When awarding the subsidies for photovoltaic plants, it is foreseen to create the possibility to rank applicants based on quality requirements rather than the "first come – first served" principle. The detailed criteria are to be determined in the GTCs of the OeMAG. However, this form of transferring legislative powers to the OeMAG seems somewhat critical from a constitutional point of view.
     
  • In future, the recognition of being a green electricity plant will only be made for commodity dependent plants by the state governor. For all other plants OeMAG examines the prerequisites. For that purpose, the newly created sec 15a stipulates which (technical) documents need to be attached to the application by the applicant. There is a possibility to reject incomplete applications with the effect that the ranking of the respective power plant is lost.

Prima vista, small hydropower plants and the existing biogas plants benefit the most from the proposed amendment of the GEA. The extension of the application expiry period from three to four years could facilitate additional investments independent of the relevant technology. However, the application of the most recent tariff (instead of the tariff at the time of the application) to applications which are older than three years usually constitutes a serious disadvantage.

The Cogeneration Points Act (CPA)

It is the aim of this federal law to withdraw green electricity plants based on biogas which cannot be modernised and are unprofitable, by compensating the decommissioning costs and, where necessary, the lost feed-in tariffs. The OeMAG is obliged to conclude compensation agreements with operators of green electricity plants upon their application and to reimburse their costs which are eligible for compensation. However, it is required that the operators of green electricity plants have valid off-take agreements. This prerequisite can pose a problem for older biogas plants since the CPA still needs to obtain clearance from the European Commission. The conclusion of compensation agreements is subject to the following prerequisites:

  • at the time of the application the applicant has to have had a valid subsidy agreement (off-take agreement with OeMAG) for at least seven years;
     
  • the application has to be made within the first 15 years of operation of the plant;
     
  • the application needs to include a precise list of the incurring costs which are eligible for compensation and relate to the decommissioning; the list needs to be approved by an auditor;
     
  • the existing contract about the contracting of green electricity by OeMAG is to be terminated irrevocably; and
     
  • the decommissioning of the plant must not be subject to further granted subsidies; the operator of the plant is required to confirm this through an affidavit.

The following costs are eligible for compensation:

  • costs for dismantling the power plant and the demolition of the structural facilities;
     
  • costs for terminating the existing contracts and redeeming continuing obligations, especially in relation to personnel, insurance, purchase of primary energy sources;
     
  • costs for mandating the auditor pursuant to para 2 lit 3; and
     
  • lost feed-in tariffs due to premature termination of the subsidy agreement (deducting the market price at the time of the compensation pursuant to sec 41 GEA 2012)

Important: The above-mentioned costs are only compensated to the extent that they are "reasonable". Thus, it is recommended to compare different offers in relation to dismantling the power plant and its demolition in order to prove to OeMAG that the costs are reasonable in case of doubt. In relation to the contract related termination costs, discussions with OeMAG are predestined as it is expected that OeMAG will view grossly unfair contractual clauses, with regard to premature termination of continuing obligations, as being contrary to market customs, and therefore will refuse to reimburse these costs.

In addition: OeMAG has to reimburse only 50 % of the decommissioning costs and the lost feed-in tariffs, taking into consideration possible revenues resulting from the exploitation of the plant after concluding the compensation agreement and after presenting the proof that the plant is actually and ultimately decommissioned. In the case where the proof is not submitted within a year after concluding the compensation agreement, the agreement is terminated. Moreover, the compensation for the costs (except lost feed-in tariffs) only amounts to EUR 1,500 per kW bottleneck capacity, and a total of a maximum 100 % of the lost feed-in tariffs. Therefore, the compensation claim is "capped" by law. Further, a total amount of maximum EUR 120 million is made available for the compensation. Once this amount is exhausted, reimbursement is no longer possible.

The Cogeneration Points Act (CPA)

Cogeneration plants are currently under extreme economical pressure due to very low market prices for electrical energy. This federal law aims to improve the perspectives for preserving cogeneration plants by creating framework conditions for the support of simultaneously produced environmental-friendly electrical energy, and useful heat in cogeneration plants. It is envisaged that only operators of highly efficient cogeneration plants, which have been in operation since 31 December, 2014 and are feeding in thermal energy in public district heating networks, shall be the beneficiaries. Cogeneration plants which are predominantly used for the (thermal) self-sufficiency of companies as well as plants which produce energy and useful heat within processes of waste treatment, are exempt from this subsidy scheme. Further, congestion plants which are experiencing difficulties in terms of the guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty, are exempt.

The funds for the subsidies are raised through end consumers by levying a flat rate for "cogeneration points". It is envisaged that the flat rate be charged by the network operator together with the system use tariffs. The amount of the flat rate depends on the network level at which the end consumer is connected to its plant.

Subsidising cogeneration plants is facilitated by concluding subsidy agreements. The subsidy is capped by an amount of 45 EUR/MWh. The grant per MWh is calculated by the cap minus the market price. In the event that the market price exceeds 45 EUR/MWh the grant is excluded. The cap can be modified by Ordinance of the Federal Minister of Science, Research and Economy.

Summary

  • Larger investment incentives in the area of renewable energy are not to be expected on the basis of the proposed amendment to the GEA 2012. However, there are some advantages for small hydropower plants (increase of annual subsidies from EUR 1.5 to 2.5 million) and existing, highly efficient biogas plants (successor tariff).
     
  • Wind power can benefit from the planned extension of the expiry period for pending subsidy applications (waiting list).
     
  • Inefficient biogas plants are to be eliminated from the existing subsidy regime by paying compensation to the plant operators. Whether or not the costs which are eligible for compensation are viewed as reasonable, needs to be discussed individually.
     
  • Caution needs to be exercised by those project developers whose plants are no longer scrutinised by the state governor but by OeMAG concerning their suitability for subsidy. Incomplete documentation regarding the "characterisation as a green electricity plant" can lead to a direct rejection of the application for subsidy.
     
  • Finally, the envisaged CPA will certainly provide for much discussion material. It foresees that funds for additional subsidies for cogeneration plants are raised on the consumer side.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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