Insights and Opportunities
As in most industrialized countries, Austria would like to become less dependent on foreign sources of energy, reduce greenhouse gas emissions, and at the same time keep energy prices at a level that will not hurt industry or the economy in general.
In 2006, Austrian final energy consumption was 1.093 million terajoule (1012 Joule), down slightly from 1.098 in 2005 and considerably higher than the 1.063 from 2004. The trend has been increasing energy consumption of 2-3% per annum – the dip in 2006 was largely the result of a particularly mild winter. Austria is highly dependent on energy imports, with an import ratio of 72% in 2005. The lion’s share of energy imports is fossil fuels, specifically, petroleum products and natural gas. There is no nuclear power production in Austria, nor will there be in the foreseeable future as the population is overwhelmingly anti-nuclear.
Austria’s domestic energy production is largely renewable. This is due to two gifts of nature, namely, an alpine geography and rich precipitation, which together make hydropower a highly feasible and readily available energy source. Well-maintained forests are another excellent source of renewable energy in various forms of biomass. The market for renewable energy in Austria is driven to a large extent by political factors, including various legislative measures, international agreements and incentive programs designed to reward investment in cleaner, more efficient energy solutions. The single most important economic market driver over the past several years has been high and volatile fossil fuel prices.
The most notable sources of renewable energy in Austria are large and small hydropower plants, bio-fuels, biomass/wood burning, and waste incineration. Solar-thermal and geo-thermal are only a small part of the total market, but show excellent growth potential for single-family homes. Wind energy and small photovoltaic are also part of the picture, but their economic feasibility is strongly dependent on the budget for guaranteed feed-in tariffs set by the government.
Austria has a significant body of technology in the renewable energy sector. In 2005, 200 Austrian companies sold over $1.8 billion in products and services related to renewable energy. Though there are no statistics for later years, it is safe to estimate sales well over $2 billion today. Austrian companies are among the world leaders in biomass, PV and solar-thermal technologies, with strongly export-oriented production. Waste incineration and district heating systems are also technologically highly advanced.
Austria is heavily dependent on foreign energy sources. In 2005, imports less exports and domestic production totaled 71.8% of final energy consumption, up from 70.7% in 2004. This is primarily due to the demand for fossil fuel for transportation (petroleum products) and heating (natural gas), as well as imported electrical energy, which is cheaper than locally produced electricity. Austria’s most important energy sources as a share of final consumption are petroleum products (46%), natural gas (18%), and electric energy (18%), followed by renewables (11%) and district heating (5%). Coal accounts for a share of only 2%.
Of the energy Austria produces domestically, renewable sources are the most important with a share of 75.6%, followed by natural gas (14%) and petroleum products (10%). The only sector of energy production that grew in 2005, if only by 2.2%, was renewable. Other domestic sources of energy fell in output: petroleum by 8.9%, natural gas by 16%, and coal mining was discontinued completely.
Hydro power is the most important renewable energy produced in Austria, with 38.8% in 2006, down slightly from the 41.4% of 2005. Biogenic sources, including bio-diesel, account for 29% of the total, up from 27.3% in 2005. This will grow again as new regulations come into effect and enter the statistics. Wood burning/pellets has declined slightly, from 20.1% in 2005 to 19.1% in 2006. The fastest growing segment is waste incineration, which makes up nearly 8% of the total in 2006, up from 6.5 in 2005 and expected to rise further as new incinerators come online. Wind and solar energy, taken together, account for only 2% of domestic energy production. Though the share is small, it is up significantly from 1.5% in 2005. Finally, ambient or geothermal heat has stayed relatively constant at 3.1% in 2005 and 3.2% in 2006.
The most important market drivers for renewable energy in Austria are political, including legal measures, international agreements, and incentives. The Austrian “green electricity” law (Ökostromgesetz) regulates the guaranteed feed-in tariffs for green electricity providers. The original law, passed in 2002, guaranteed attractive feed-in tariffs for 13 years and had an annual budget of about $153 million. Between 2003 and 2005, the number of renewable energy source power plants grew quickly, and the budget to cover the difference between market rates and the guaranteed feed-in tariffs was overburdened. The law was amended in 2006, when a budget ceiling was added and the guarantee feed-in tariff period was reduced to 10 years. One important aspect of this amendment was the creation of the OeMAG, a public-private-partnership company dedicated to managing the system.
Their main areas of responsibility are: managing the yearly green energy budget; publishing the remaining yearly contingent of renewable energy support available; purchasing the green electricity at the mandated feed-in rate; processing applications for new green electricity projects; and keeping statistics on the green electricity quotas.
Currently, the green electricity law is under review again. Expert sources expect the new version of the law to go into effect in the summer of 2008, and to contain a stronger focus on wind and small hydro projects. The reasons for this shift of focus are twofold: first, legislators are wary of supporting power plants dependant on vegetable resources after the rescue action for biomass plants in 2007, when raw materials prices shot up and facilities required an emergency financial injection in order to survive. The second reason has to do with the cost of operation: small hydro plants are able to produce electricity at market-profitable rates, and wind energy is significantly cheaper than PV. According to the 2006 Green Energy legislation reform, feed-in tariffs are guaranteed for 10 years plus 2 additional (reduced tariff) years. The tariffs are constantly being recalculated for new plants coming online.
Another significant legal market driver has been the EU Directive 2002/19/EC: Energy Performance of Buildings Directive. Basically, the directive requires that all buildings be tested for energy efficiency and that they receive a certificate (Energieausweis) that gives standardized and comparable information about the energy efficiency of a building. This directive is currently being phased in, and will be mandatory for the sale or rent of all buildings starting January 4, 2009. The hope is that this will encourage property owners to improve their energy efficiency of their buildings in order to attract buyers or renters.
A third piece of legislation that has had an impact on the market for renewable energy, is the landfill regulation (Deponieverordnung), which was amended in 2004 to require mechanical/biological treatment of all waste before it can be put into a landfill. The result has been a boom in waste treatment and incineration, the last of which are scheduled to come online this year. These incinerators generate energy, which in turn is being used in waste-to-energy projects, most notably district heating projects.
Finally, the bio-fuel regulation should be mentioned. In October 2007, Austrian legislation requiring a biogenic component in automotive fuels was strengthened from 2.5% to 4.3%, and will be strengthened again in 2008 to 5.75%. The EU has set the goal of a 10% biogenic component to automotive fuels by 2020; the Austrian government would like to see that goal met by 2010. The popularity of biogenic fuels is being challenged by their apparent impact on foodstuff and forestry product prices and questions about their ultimate impact on greenhouse gas reduction; the future of bio-fuels will depend on the outcome of further studies on its efficacy as a tool to combat CO2, and on market adjustment to higher demand for biologically based raw materials.
Two international agreements are also factors in the Austrian market for renewable fuels. The Kyoto Protocol, of which Austria is a signatory, set as its goal that the industrialized nations reduce CO2 emissions by 5% compared to the base year of 1990 by 2012. To date, Austria has not reduced CO2 emissions – in fact, instead of reducing emissions by 13%, Austria’s emissions have actually risen by 18% (2005). This is symptomatic of the conflict facing Austrian politicians: they see climate change as a real danger, but have thus far failed to take sufficient action to promote energy efficiency and renewable energy use for fear of hurting the country’s economic base or challenging the expectations of their voters.
The European Commission introduced a Proposal in January, 2008, to reduce greenhouse gas emissions by 20% while at the same time increasing the market share of renewables to 20% in the European Union by 2020. While some green activists see this as regression from the ambitions goals of Kyoto, because it is based on 2005 emissions, many also see it as a more realistic goal that could positively impact the European market for renewable energy and provide opportunities for technology providers.
Fiscal incentives are both a political and a microeconomic market driver. With the possible exception of the general tax break for biogenic fuels, there is no transparent national incentive system to encourage the use of green energy in Austria. Instead, there are various incentive programs administered by cities and provinces, each with its own focus and its own location within the regulatory framework.
The single most important purely economic market driver is the volatility and relatively high price of fossil fuels, including heating oil, natural gas, and petroleum products. Renewable energy sources are becoming economically more attractive compared to the competition.
Photovoltaic Market: On December 31, 2006, there were 2,031 PV installations with a capacity of 16,110kW attached to the Austrian electricity grid, accounting for an insignificant 0.03% of Austrian electricity use. 82% of all PV systems are attached to the grid and 17.5% are autonomous. In 2006, 39,599kW (peak) of solar modules were produced, 9,992 were imported and 46,705 were exported. The domestic market reached an unimpressive 1,564kW (peak), collapsing by 47% compared to 2005. Production, however, rose by 123% as did exports. Sales rose by 102% over 2005. These somewhat contradictory figures are explained when the domestic and the export market are considered separately. Austria has several PV global players; though the domestic market collapsed with the review of the Green Energy Law in 2006, which weakened feed-in tariff guarantees, the export market continues to boom.
Solar-thermal Market: At the end of 2006, there were 3.3 million square meters of installed solar-thermal collectors with a thermal capacity of 2,318 MW thermal. In 2006, nearly 300,000 square meters were newly installed, mostly in single and two-family homes. Sales value in 2006 is estimated at $500 million, up from $330 in 2005. Around 65% of the systems installed were for warm water and 35% were attached to the heating system. Financial incentives offered at the county and provincial levels covered an average of around 45% of the initial investment. Austria is also a leading producer of solar-thermal energy systems. In 2006, Austria produced around 1.1 million square meters of solar-thermal collectors, growing by 66% compared to 2005. The export quotient is high at 75%.
Biogenic Fuels Market: In 2006, Austria was the third largest consumer of bio-fuels in Europe with 275,200 tons, after Germany (3.3 million tons) and France (682,000 tons). That is a remarkable statistic, considering Austria’s population of only 8.1 million. In total, EU consumption rose by 78% between 2005 and 2006, from 3 to 5.38 million tons. In October 2007, Austrian legislation requiring a biogenic component in automotive fuels was strengthened from 2.5% to 4.3%, and will be strengthened again in 2008 to 5.75%. Diesel fuel currently contains a biogenic component of around 5%; in order to comply with the new regulation, an ethanol component is now being added to gasoline. Though biogenic fuel is still considerably more expensive than fossil fuel, tax breaks make up the difference and allow for price stability. The EU has set the goal of a 10% biogenic component to automotive fuels by 2020; the Austrian government would like to see that goal met by 2010.
Wind Energy Market: In 2004, there were 392 wind turbines online in Austria. In 2005 the number had grown to 531, and in 2006 there were 612. That is a 54% growth in the number of turbines over that 2-year period. The profitability of wind energy, however, has fallen since 2006 as steel prices have gone up and feed-in tariffs have gone down.
Biomass/Pellets Market: Pellets heating systems are gaining popularity in Austria. In 2000, Austrian pellets consumption was a niche product at 50,000 tons per year. By 2006, that figure had risen to nearly 400,000 tons. Pellets production in 2007 is estimated to have topped 1 million tons, more than twice the (predicted) consumption of 450,000 tons. Primary drivers in this market are high and rising petroleum and natural gas prices, and provincial incentives for renovating old buildings to improve their CO2 footprint (incentives vary from province to province, ranging from $1,370 to $4,100 reimbursement of initial investment).
In 2007, there were 1.5 million boilers installed in privately owned homes. 450,000 of those are more than 20 years old, of which half again are old oil-fired boilers. These are the prime candidates for replacement with pellets systems because they are the most expensive to run. Pellets-fired boilers, though they are low-emission, use renewable energy, and are cheaper to run than oil-fired burners, are also significantly more expensive than conventional natural gas or oil-fired boilers. Conventional boilers cost between $5,500 and $9,000, but pellets boilers average around $13,700.
The market for pellets systems is expected to continue on its growth pattern, supported by volatile petroleum and natural gas prices, financial incentives, and the increasing availability and technical prowess of the new pellets systems.
Small Hydro Market: There are currently more than 2,400 small hydrothermal plants in operation in Austria with a combined capacity of around 4,000 GWh, or 8% of the current Austrian electricity demand. Small hydro plants power approximately 1.5 million Austrian households. The future of this renewable energy source has excellent potential for two reasons. First, these small plants are capable of producing profitably at current market rates. And second, it seems likely that the 2008 reforms in the green electricity law will increase incentives for this sector.
Geothermal Market: At the end of 2006, there were 160,000 geothermal pumps in operation in Austria. Of all the installed systems, 65% are used for heating water and 31% for homes. In 2006, more than 13,630 new systems were installed - a growth of 37% over 2005. The strongest growth was charted in geothermal pumps for temperature control in home ventilation systems, where production figures grew by 65% and domestic demand by 141%. Domestic market demand for the whole range of geothermal products saw strong growth in 2006: the market for heating-system pumps grew by 43%, and for water-heating pumps by 18.8%.
Waste Incineration Market: The 2004 amendment of the landfill regulation caused the tonnage of incinerated waste to increase dramatically; in 2000, around 880,000 tons were incinerated; by 2005, that number had increased to 1.8 million tons. Additional increases are expected through 2009 as the incineration plants still under construction come online. Energy recovered through waste incineration is used for district heating, process steam, or power generation; while some plants concentrate exclusively on one form of recovery, the most efficient plants generate a mix of electricity and heat.
Opportunities: Austria has established itself as a competence-center for renewable energy technologies, presenting interesting opportunities for U.S. companies to establish partnerships for expansion throughout Europe. Austrian companies are particularly strong in these sub-sectors: Solar energy systems for heating and cooling; Waste to energy and district heating; and Pellets heating systems.
The renewable energy sectors that are growing fastest in Austria are solar-thermal and geothermal systems for heating single-family homes. Wind energy and small hydro projects are expected to gain momentum with the 2008 reform of the green electricity law.