Power policy

Austria is on track to surpass its goal of having renewables meet 34% of the country’s final energy needs and 100% of its electricity demand by 2030. The government also aims to install 1 million rooftop solar photovoltaic (PV) systems by 2030 under its Climate and Energy Strategy “#mission2030” initiatives. Renewables are supported through feed-in tariffs and upfront capital grants in the case of small hydro and solar projects, although the government drafted a new energy law to transition to a premium-based auction system. Originally due by 2021, the final law came into effect in the second half of 2022.

Austrian law sets priority dispatch for renewable energy projects over other, non-renewable sources to meet the grid’s demands.

The country has had an energy storage subsidy in place since October 2019. An amendment to the Green Electricity Act provides up to €12 million in subsidies for storage systems for three years with a limit of 50 kilowatt-hours per plant.

Power prices and costs

Austria’s wholesale power prices are lower than most of neighboring countries due mainly to an abundance of large hydroelectric generation. Cheap hydro has long reduced the impetus to invest in other renewables, although this has begun to change as renewables’ costs have fallen. Meanwhile, the country’s low-carbon power fleet has largely been shielded from the rising EU carbon price.

Austria has seen electricity prices grow steadily over the years for commercial, industrial and residential users, from €144.65; €92.53 and €196.40 per megawatt-hour, respectively, in 2017, to €173.95; €132.95 and €225.05 per megawatt-hour in 2021. With the even more drastic increases in prices in March 2022 amid an energy crisis in Europe, Austria unveiled a new energy costs package. This included measures to provide relief worth around €560 to each person receiving the minimum pension.

Power market

Various hydroelectric technologies provide the bulk of generation and flexibility services in Austria – pumped, small and large hydro installations accounted for more than 60% of the 19 gigawatts of installed capacity in 2021.

Other renewables – mainly rooftop PV and onshore wind – have grown from a low base over the last decade to more than 2 gigawatts. The power sector has been partly unbundled and liberalized, but the state retains a central role. Publicly owned utilities are the predominant owners of renewables capacity, with Land Burgenland and Verbund topping the list.

All segments of the country’s power sector are open to private participation, except transmission. Companies have only signed a few bilateral power-purchase agreements with clean energy projects, partly due to the availability of cheap hydropower. Austria also has some lithium-ion battery production facilities, including factories owned by South Korean electric-car battery maker Samsung SDI Co. and Germany-headquartered BMZ Group.

Doing business and barriers

Austrian electricity demand is rising gradually, but growth is unlikely to accelerate without expanded efforts to electrify the country’s heating, industry and transportation sectors. Austria has relatively unremarkable wind or solar resources.

A shift toward organized auctions to procure clean power is underway, but details as to when tenders will be held have yet to be announced. Adding to the uncertainty, investors currently have little visibility on how the framework will ultimately work. Amid the Covid-19 pandemic, policymakers had delayed the phase-out of clean energy subsidies and extended the period of qualification for projects. For PV, the feed-in tariff (FiT) subsidies were extended for three more years until 2023 with an increased budget. Austrian FiT administrative procedures for both wind and solar are often delayed, just like the grid connection process.

Austria has struggled to attract international capital, despite sporting a stable, specialized economy. The country provides a robust framework for private investors, but establishing a new company can be onerous. As in many EU countries, value-added tax (VAT) rates and import duties are not reduced for renewable energy equipment. Another reason for the limited presence of international investors could be attempts by local opponents of wind power to challenge projects by taking advantage of a lack of legal certainty. Further, the state has yet to define protected areas and locations where it is environmentally safe to build renewable projects.

Austria has offered subsidies to promote energy storage investment. One of the aims is to promote a proof-of-concept process to enable small-scale distributed energy resources (DER) to participate in frequency regulation on the grid. Installation requirements for residential rooftop PV systems with storage are inconsistent. Besides that, in response to the energy crisis affecting Europe, the federal government in March approved a €250 million budget package for the deployment of wind and solar energy.

EV market

From 2020 to 2021, the total electric and hybrid car sales in Austria soared from 28,502 to 57,115. The growth was supported by a policy change that imposed punitive taxes on higher-emission vehicles. For vehicles with emissions exceeding 275 grams per kilometer, the tax surcharge rose from €20 to €40 per gram of carbon dioxide per kilometer.

Under Austria’s Integrated National Energy and Climate Plan (NECP) for 2021 to 2030, the government aims to convene an inter-ministerial process to identify and ultimately remove incentives and subsidies that run counter to decarbonizing the transport sector. The fuel prices at the pumps consist not only of the net price, but also a tax share of nearly 50%, constituted by the oil tax, or MÖSt, VAT and an additional carbon dioxide tax from October 1, 2022.

EV policy

Austria’s 2030 goal is to increase the share of renewable energy in transport to at least 14% through a mix of EVs, biofuels and hydrogen. To hit this target, the government is offering consumers purchase subsidies of €5,000 for battery EVs (BEVs). BEVs are also exempt from the Circulation Tax, Standard Consumption Tax, Motor-related Insurance Tax and Benefit In-kind Tax. Austria’s “1 million charging stations” initiative seeks to expand publicly accessible charging infrastructure at rest stops on motorways with the aim of 100% network coverage by 2030. The government also subsidizes private installations.

Buildings market

Under the federal government’s Climate and Energy Strategy, Austria has set a goal of improving primary energy intensity of the whole economy by 25-30% compared with a 2015 baseline. The country’s building laws have also been tweaked in response to requirements in the EU’s Energy Performance of Buildings Directive. The provinces, which are responsible for building regulations, agreed on a new roadmap for all new buildings to be “nearly zero-energy buildings” starting from the beginning of 2022. Such buildings have a very high energy performance and renewable energy sources provide for the rest of their energy needs.

Buildings policy

Austria seeks to cut CO2 by 3 million to 5 million tons by 2030 in an economically sustainable manner, by shunning fossil fuels in new buildings through thermal renovation and switching to high-efficiency district heating in existing buildings. To that end, the Austrian National Council in 2022 passed a federal law prohibiting the fitting of oil-fired boilers in new buildings.

The Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology’s Energy 2050 initiative also includes a technology roadmap for deploying heat pumps. Multiple policies are in force to facilitate the implementation of the initiative. This includes incentives for consumers to purchase heat pumps, and boiler scrappage schemes. Austria is preparing legislation aimed at phasing out fossil fuels in heating, starting with a ban on the installation of gas boilers in new buildings from 2023.