UIA Congress
2000, November 1
I. The Austrian Electricity Law Framework

The Federal Electricity Supply Industry and Organization Act (Elektrizitätswirtschafts- und organisationsgesetz, ElWOG; BGBl 1998/143) entered into force on 19 February 1999 and was designed to implement the EC Electricity Directive 96/92 on Common Rules for the Internal Market in Electricity into Austrian law.

The Act introduced a gradual opening of the Austrian electricity market to competition. The market opening rate in Austria amounted to 26,7 % by 19 February 1999 and 30,9 % by 19 February 2000. Apart from initiating the liberalization process, the new Act also laid down rules on network access for industrial customers (entitled to participate in the liberalized market) and subjected vertically integrated operators to unbundling obligations.

The Austria Parliament is currently negotiating a far-reaching amendment to the ElWOG. Enactment of such new law is expected for the near future. The cornerstones of this amendment are:

· The Austrian electricity market shall be fully liberalized as of 1 October 2001.

· A new regulatory authority Elektrizitäts-Control-Kommission shall be set up. This body is designed to safeguard competition on the market and shall, inter alia, decide disputes over network access and tariffs.

· The new Act further introduces a new legal framework for renewable energies (see below).

II. Renewable Energies under Austrian Electricity Law

1. The Market for Renewable Energies in Austria

Renewable sources of energy currently constitute 27 % of Austria’s energy consumption (e.g. hydropower, biomass, solar and wind energy, etc.). The level of exploitation of renewable energy sources varies significantly among the different sources.

The most important renewable sources of energy are hydropower with a share of 13.4 % of the total energy supply and biomass with about 13 %. Overall, hydropower accounts for about 70 % of domestic power production. In summer, all of Austria´s electricity can theoretically be supplied by hydropower whereas biomass sources like fuelwood, wood chips, bark, sawdust, straw or biogas make up nearly half of the total consumption of renewable energies throughout the year.

Austria is a relative newcomer in the production of energy from wind. Wind power is considered a practicable supplementary form of alternative energy production as two thirds of the wind circulation in Austria occur during winter when water availability is at its lowest and power demand is at its highest. It is particularly during this time that wind power stations could replace thermal power stations, thus helping to reduce electricity imports. Yet, before further developing Austria´s wind power potential, it must be considered that Austria is a landlocked country and wind speeds are lower than in coastal regions. Wind incidence makes power output subject to considerable fluctuation.

Geothermal energy and energy from waste, the latter not considered as renewable energy source deserving promotion according to the ElWOG, are increasing as sources of energy. In respect of solar thermal installations, Austria, quite surprisingly, ranks in the second place after Greece.

As regards small hydropower, about 1,690 small plants are connected to the grid of regional utilities, representing approximately 9 % of the total annual national hydropower capacity. Another 4,000 to 5,000 small stations exist which are not connected to the public grid. Austria´s small-scale hydropower stations are characterised by their decentralised location, the investment of private capital and the objective of satisfying the immediate energy needs of private or industrial users. According to estimates of the Austrian Association for the Promotion of Small Power Stations, 40 to 45 % of the potential for small hydropower plants has been exploited to date, leaving approximately 4,000 GWh per year still to be developed. Since 1997, investment grants of 25 % have been available for the reactivation of defunct stations and the extension of operating ones, and in some cases also for the construction of new installations with a capacity of up to 500 kW. The idea is to stimulate efforts for further reducing CO2 emissions.

Although the Austrian government has allocated grants amounting to ATS 240 million to support the development of renewable energy sources in the past 3 years, additional incentives are considered necessary to make it economically attractive to install and operate renewable energy sources.

Even though the use of renewable energy, in fact, has doubled over the past 20 years, renewable energy technologies still face certain difficulties in “taking off” in marketing terms. Under the prevailing economic conditions, a serious obstacle for the greater use of certain renewables has been the cost associated with their exploitation. The use of renewables, in many cases, is hampered by higher capital costs than those relating to conventional fuel or gas cycles. Another significant obstacle, as with most innovative technologies, is the lack of confidence from investors, governments and users, the lack of knowledge about the technical and economic potential and a general resistance to change and new ideas.

To counteract these obstacles and facilitate the development of new energy technologies, a new policy strategy was implemented by way of amending the ElWOG.

2. The new Austrian legal framework for Renewable Energies
To further promote renewable energies is one of the major principles governing the envisaged amendment to the ElWOG. In this respect, the draft new Act provides for the following measures:

· The Act obliges electricity distributors to obtain a certain portion of electricity from renewable energy sources (with the exception of hydropower), i.e., from solid or fluid domestic biomass, biogas, deposit- or sewer-gas, geothermic energy and wind as well as solar energy. The amount of electricity to be acquired from such sources by distributors ranges from 1 % in the period from October 2001 to 2003, 2 % from October 2003 to October 2005 and 3 % from October 2005, calculated from the aggregate amount of electricity consumed by the end users connected to the network of the distributor concerned.

Compliance with this obligation shall be monitored by the regulator.

· The new Act is further designated to promote "small" hydropower energy (i.e., hydropower plants with a bottleneck production of not more than 5 MW). Operators of such small hydropower plants shall be entitled to issue certificates to their customers evidencing the amount of energy delivered. Electricity traders shall be under the obligation to obtain 7 % of their traded electricity from small hydropower plants. A trader failing to furnish proof thereof by producing the respective certificates to the regulator must pay an equalization levy to a fund designated to promote renewable energy facilities. In addition, end-users acquiring electricity from traders which do not hold the necessary amount of certificates must themselves produce evidence that they obtained at least 7 % of their power consumption from small hydropower plants.

It is interesting to note that energy stemming from "big" hydropower plants is not promoted under the Act, the reason being that, at present, approximately 70 % of electricity produced in Austria already comes from hydropower plants.

· In order to enable consumers to recognize the sources of electricity they buy from their supplier, the latter shall be obliged to identify such sources in its invoices issued to the end-user. The Austrian legislator hopes that rising ecological awareness among consumers will increase demand from suppliers offering a higher degree of "green energy".

III. Nuclear Power under Austrian Electricity Law

The new ElWOG will introduce a rigorous system designed to prohibit nuclear power imports from countries regarded "unsafe" in the context of nuclear power production:

Under the present regime of the ElWOG, electricity supply agreements with non-EC countries are subject to notification and approval by the Ministry of Economic Affairs. Only recently the Austrian government stopped imports of electricity from the nuclear power station in Temelin (Czech Republic), which started power production at the beginning of October 2000 (against fierce protest of the Austrian government).

With the new ElWOG entering into force, however, electricity imports from third countries using facilities not complying with the state of technology (in particular with respect to nuclear power) and therefore constituting a threat for life and health of humans, animals or plants shall be generally prohibited. The regulator shall be in charge of identifying these countries by way of issuing a specific ordinance.

This provision, however, has been criticized in the Austrian legal literature as failing to address the real issues: First, the new law would allow to generally prohibit electricity imports from a given country for the mere fact that one of its production sites was deemed dangerous irrespective whether electricity imported to Austria was actually produced in such facility. Second, Austria´s anti-nuclear power policy might be even undermined as one can hardly identify the origin of electricity when electricity traders are involved and "laundering of electricity" might increase if the present notification and approval requirements for individual supply agreements are lifted.

IV. Outlook

Due to Austria´s geographic location, rich forests and fast-flowing rivers and also the legislator´s traditionally favourable position towards "green energy", Austria has developed a renewable-energy industry that accounts for more than a quarter of the total power generated. This puts Austria at the forefront of countries relying on environmentally sound sources of energy, worldwide, and places it third in Europe after Norway and just slightly behind Sweden. Analysts predict that Austria´s rapid expansion into renewable energy could see it top the European league early in the next century. The proposed new legal framework for renewable energies should serve as another step into that direction.


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