1. What happened so far
More than a year ago, the Renewable Energy Expansion Act (EAG) came into force; it is intended to make a significant contribution to achieving the climate targets by promoting plants for the generation or storage of energy from renewable sources and provides for two funding tracks:
- one-time investment grants forthe construction, expansion or rehabilitation of power plants and
- so-called feed-in premiums, i.e. monthly support paid out over 20 years, for electricity from renewable energy sources fed into the public grid.
Initially, however, hardly any support payments have been made because the required ordinances ofthe Federal Minister for Climate Protection, Environment, Energy, Mobility, Innovation and Technology (BMK) were missing. In April 2022, the Renewable Energy Sources Act Investment Subsidies Ordinance - Electricity came into force (Federal Law Gazette II No. 149/2022), followed on 05 October 2022 by the long-awaited Ordinance on the Granting of Feed-in premiums under the Renewable Energy Expansion Act for the Years 2022 and 2023 [Renewable Energy Expansion Act Feed-In Premium Ordinance 2022 - EAG-MPV 2022 (Federal Law Gazette II 369/2022)].
This ushers in a new era in the promotion of green electricity in Austria: Up until now, the generation of green electricity was supported via fixed feed-in tariffs. Plant operators received (or, in case of ongoing support contracts, continue to receive) a fixed amount per kWh of electricity fed into the public grid from the Clearing and Settlement Agency. Historically, these tariffs were often far above the market price for electricity. Green electricity was purchased centrally by the Clearing and Settlement Agency and allocated to the various electricity providers. This was financed, among other things, by the green electricity flat rate paid by customers buying electricity.
In the new system under the Renewable Energy Expansion Act (EAG), electricity producers are now responsible for finding buyers for their electricity as direct marketers. Nevertheless, under certain conditions - defined in more detail by the new ordinance - they receive financial support from the renewables support management entity (RSME) in the form of the feed-in premium.
2. More about the feed-in premium
The feed-in premium is support paid for electricity from renewable sources fed into the public grid. It is calculated from the difference between the general market price or the weighted market price (both published on the E-Control website) and the so-called guaranteed price:
- The general market price corresponds to an annual average price for electricity in Austria. The general market price for 2021 is approximately 10.69 cents/kWh.
- On the other hand, the weighted market price is calculated on a monthly basis and differentiates according to the type of energy generation. Most recently, it was between 35.74 cents/kWh and 39.48 cents/kWh.
- The guaranteed price is either set under the EAG-MPV ordinance or determined by auction.
Since the general market price or weighted market price changes annually or monthly, the support payment will no longer be a fixed amount in the future, it will be subject to fluctuations, just like the market price for electricity itself.
3. How does an auction under the EAG-MPV work?
The EAG-MPV determines the dates and volumes for auctions, which are carried out by the RSME. In December 2022, the first round of auctions will take place for photovoltaic plants (700,000 kWpeak), biomass plants (7,500 kWel), wind power plants (190,000 kW) and there will be a mixed auction for wind and hydropower plants (20,000 kW).
For 2023, monthly auctions are planned; these will be divided up among the various technologies (sec. 5 par. 2 EAG-MPV). A detailed overview is also provided in the funding calendar of the RSME.
Within each auction period, participating energy generators can submit bids, i.e. offer a price at which they can produce one kWh of electricity from their (planned) plant in a cost-covering way. The maximum bid is the price cap specified in the EAG-MPV. The bids are ranked in ascending order and accepted until the respective support volume or the prescribed maximum price has been reached.
An awarded pricecorrection is applied to bids from wind turbines; this takes into account the difference in wind conditions in different locations and results in up to +20% or -14% on the bid price.
For photovoltaic systems installed on agricultural land or green land, a 25% reduction applies to the awarded price(sec. 6 par. 1 EAG-MPV). An exception is made for so-called agrivoltaic systems, which are erected with minimal soil sealing (a maximum rate of 7%) on land that is still mainly used for agriculture (at least 75% of the total area).
Once the price has been awarded, the eligible applicants conclude contracts for theprocessing of their support payments with the RSME. The feed-in premium is paid monthly in arrears for a period of 20 years from the commissioning of a plant.
4. Administrative feed-in premiums
For the time being, it is also the possible for a feed-in premium to be received on application, not on the basis of an auction: this applies to wind power in 2022 only, and will also continue to apply to biomass, biogas and hydropower plants in 2023. The EAG-MPV sets the guaranteed prices and the volume of support funds available for this. The applications are ranked on a first-come-first-served basis until the support funds are exhausted.
5. What is the impact of the current high electricity prices on the feed-in premium?
Currently, the electricity prices that can be fetched on the market are so high that the weighted market prices arefar above the maximum prices stipulated in the EAG-MPV. This results in mathematically negative feed-in premiums. In this case, the EAG provides for the following:
Small plants (wind power plants with a bottleneck capacity of less than 20 MW, hydropower plants with a bottleneck capacity of less than 20 MW, photovoltaic plants with a bottleneck capacity of less than 5 MW) simply do not receive a feed-in premium in such cases (sec. 11 par. 5 EAG).
Larger installations are governed by sec. 11 par. 6 EAG. Accordingly, if the weighted market price exceeds the guaranteed price bymore than 40% (currently, it exceeds the guaranteed price by more than 400% [!]), 66% of the excess price obtained must be refunded to the RSME.
According to the wording of the law, the refund must be deducted "when the feed-in premium is paid out" (sec. 11 par. 6 second sentence of the EAG). In the current situation - i.e. before the first payment of a feed-in premium - neither the EAG nor the EAG-MPV ordinance is clear about whether these excess portions are to be "saved up", so to speak, and over what period of time this should happen, so they can be taken into account in future payments (after market prices have fallen). Potentially, this could impact the amount to be paid out over a longer period of time.
Thus, given the current high general market prices, it is not likely thatfeed-in premiums will be paid out after the auctions thisyear. However, since the support contracts have a 20-year term, this does not mean that participation in the auction will not be worthwhile in the future.
If you have any questions on this or other energy law issues, the KWR Energy Team will be available to you at any time.