EUROPEAN COMMISSION Brussels, 10.VI.2008 C(2008)2749 PUBLIC VERSION WORKING LANGUAGE This document is made available for information purposes only. Subject: State aid N 47/2008 Austria Modification of feed-in tariffs for electricity from renewable sources under the Austrian Green Electricity Act Madam, 1. PROCEDURE The Austrian Green Electricity Act 1 entered into force on 1 January 2003. It established a system for nationwide tariff support for green electricity. On 4 July 2006 the Commission approved the measure (NN 162/A/2003 and N 317/A/2006) 2, which was amended in 2006, as it was considered as being compatible with the common market in application of Article 87(3)(c) EC. By letter of 23 January 2008 Austria notified an amendment of the Austrian Green Electricity Act concerning an increase of feed-in tariffs by simplified procedure. Article 4 2 of Regulation 794/2004 of 21 April 2004 3 foresees that The following alterations to existing aid shall be notified on the simplified notification form set out in Annex II: (a) increases in the budget of an authorised aid scheme exceeding 20 %; 1 2 3 BGBl I Nr. 149/2002 Letter to Austria of 4 July 2006, C(2006) 2955 Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC)No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty, OJ L 140, 30.4.2004, p. 1 Seiner Exzellenz Herrn Frank-Walter STEINMEIER Bundesminister des Auswärtigen Werderscher Markt 1 D - 10117 Berlin Commission européenne, B-1049 Bruxelles - Belgique -Europese Commissie, B-1049 Brussel België Telefon: 00 32 (0) 2 299.11.11 1
(b) (c) prolongation of an existing authorised aid scheme by up to six years, with or without an increase in the budget; tightening of the criteria for the application of an authorised aid scheme, a reduction of aid intensity or a reduction of eligible expenses However, Austria intends to increase the aid amount to the producers of green electricity by a supplement to the feed-in tariffs. From this follows that the notification does not meet the conditions as mentioned above for applying the simplified procedure. Finally the Commission asked Austria to provide further information by letter of 20 February 2008, to which Austria replied on 25 March 2008. To a further request for information of the Commission Austria replied on 23 May 2008. 2. DESCRIPTION OF THE AID 1. The Austrian Green Electricity Act was enacted to incorporate into national law the obligations arising to Austria from Parliament and Council Directive 2001/77/EC 4 on the promotion of electricity from renewable sources in the internal electricity market. The Directive had to be transposed into national law until 27 October 2003. The Act s implementation is being constantly watched by the regulating authority Energie-Control GmbH". The following description concerns the tariff support system for electricity produced from renewable sources (in the following green electricity ). 2.1 The Green Electricity Act in force The support mechanism for green electricity 2. The Green Electricity Act 2003 obliges the so-called eco-balance group representatives ( Ökobilanzgruppenverantwortliche ) to purchase green electricity from eligible generators at a fixed feed-in tariff ( Einspeisevergütung ). The eco-balance group representatives attribute the purchased electricity to the electricity traders, who are obliged by the law to buy the attributed electricity at a fixed transfer price ( Verrechnungspreis ). The difference between the feed-in tariff for electricity and the fixed transfer price is raised by a levy imposed on the consumption of electricity by final consumers ( Förderbeitrag ). 3. The Austrian energy regulator, Energie-Control GmbH, reports annually on the implementation of the scheme analysing to what extent the measure achieves its objectives and can make proposals for improvements or adaptations of the support mechanism. The feed-in tariffs paid to renewable electricity producers 4. The eco-balance group representatives are obliged to buy green electricity which is offered to them at prices decided by the Ministry of Economic Affairs and Labour. 5. As to the calculation of the feed-in tariffs, 11(2) and (3) of the Act stipulates as follows: a. (2) In accordance with the objectives of this Federal Law, pricing shall be such that it promotes a continuous increase in the production of electric energy from green electricity plants. Prices shall be guided by the average production costs of costefficient plants. Distinction shall be made between new and old plants whenever they differ in terms of costs or have been granted public support. Prices shall be set in accordance with the various primary energy sources used, with due regard to 4 OJ L 283 of 27.10.2001, p.33 2
technical and economic efficiency. They may include other means of differentiation, such as by maximum capacity or annual electricity production. A time-based differentiation by day/night and summer/winter within the meaning of section 25 of the Electricity Act shall be admissible. In order to ensure a secure investment climate, the minimum period in which the set tariffs are applied following initial operation of the respective green electricity plant shall be ten years. b. (3) Determination of the average production costs shall be based on the costs of an efficiently managed undertaking which finances the plant under financial market conditions. Service life, investment cost, operating cost, adequate return on capital employed and the quantities of electricity produced per year shall be taken into account. ( ) 6. The tariffs were calculated in order to compensate for the difference between the market price for electricity and the long-term marginal costs of green electricity production. 7. During the negotiation process in Austria, the feed-in tariffs were in most cases set at a lower level than proposed by the experts. In addition, the implementing regulation establishing the feed-in tariffs guaranteed the tariffs only for 13 years following the start of operation of every installation. Only for new or significantly revitalised small hydro power installations the feed-in tariff was guaranteed for 15 years. The average market price for base load electricity is published every three months by Energie Control GmbH 5. 8. The funding of the support mechanism is based on two pillars: Fixed prices to be paid by the electricity traders on the purchase of green electricity and a levy raised from all consumers of electricity. 9. On 24 May 2006, Austria informed the Commission that it has adopted the following amendments of the Act concerning the system of feed-in tariffs of green electricity production: 10. The law maintained the former level of the feed-in tariffs for different types of installations installed/substantially modernised or for installations for which administrative approval was granted at the latest by certain cut-off dates. For other installations the law established the possibility to fix prices through an implementing regulation. The principles for setting the prices remained substantially the same as under the former law. The law newly introduced that prices must be oriented on installations of best available technique and must have in mind the support of installations at the most efficient locations. The prices were fixed for 2006, and reduced subsequently on an annual basis. 11. The duration of the guaranteed feed-in tariff also depends on the type of installation, but does not exceed 13 years from the start of the installation s operation. Almost all types of installation benefit from a purchase obligation at market price minus balancing costs for a further period of 12 years. 2.2 Notified amendments subject to this decision 12. According to information provided by Austria the demand for certain raw materials, which are the basis for producing green electricity from liquid bio mass and bio gas, has 5 The regulator uses for this calculation publicly available indices of electricity exchanges or institutions consoling indices (e.g. SWEP, Platt s Notierungen). The modified law establishes that the market price will be calculated as arithmetic average of the prices fixed by the European Energy Exchange (EEX) for the next four baseload quarter futures. 3
substantially increased and resulted in a strong price push of up to 100 % since the beginning of the year 2007. Therefore, installations producing this kind of green electricity could not cover their production cost and may have to close. 13. The number of installations operating with bio gas is currently estimated at 270 with a total capacity of 65 MW and an annual feed-in between 400 GWh and 500 GWh, whereas on the side of liquid bio mass 45 installations operate with a total capacity of 15 MW and a feed in of 80 GWh annually. 14. To avoid a declining production of green electricity based on bio gas and liquid bio mass Austria intends to grant additional support to the guaranteed feed-in tariffs as provided by paragraphs 11 and 30 (3) of the Green Electricity Act. Based on the assumption of a 100% price increase of renewable raw materials for installations producing electricity from bio gas and liquid bio mass, the additional costs per kwh are calculated with 5,5 Cent/kWh. With the objective to cover at least a large part of the additional production cost Austria proposes to grant a raw materials supplement of 4 Cent/kWh. 15. Excluded from the supplement are new installations, which started its operation after the introduction of the supplement, mixed installations ("Mischfeuerungsanlagen"), hybrid installations and installations, for which the "Oekostromabwicklungsstelle" (the competent authority for green electricity) has no obligation for contracting or compensating or where its obligation is limited on compensating the difference to the market price minus cost of balancing energy ("Ausgleichsenergie"). According to Austria, these installations can adequately react to increasing prices of raw materials or are not or not anymore eligible for the aid. 16. Austria will provide a budget of EUR 20 mio. for this measure that is applicable only in the year 2008. The budget which originates from not used funds for feed-in tariffs of the year 2007 (EUR 13 mio.) as approved on the basis of the Green Electricity Act and formerly approved funds for supporting bio gas and solid bio mass of the year 2008 (EUR 7 mio). Austria intends authorising the supplement of 4 Cent/kWh by introducing an additional paragraph 11 (a) into the Austrian Green Electricity Act. If the measure's budget was not sufficient to support the whole production as described above the Austrian authorities would accordingly reduce the supplement of 4 Cent. Austria undertakes not granting the supplement before the Commission approves this measure. 3. ASSESSMENT 17. The Commission has examined the proposed amendment in accordance with Article 87 et seq. EC and Article 61 et seq. EEA 6 and has decided, in the light of its policy on environmental protection, not to raise objections to its implementation. 3.1. Presence of State aid pursuant to Article 87(1) EC 18. Article 87(1) EC lays down four conditions. First, there must be an intervention by the State or through State resources. Second, it must confer an advantage on the recipient. Third, the intervention must be liable to affect trade between Member States. Fourth, it must distort or threaten to distort competition. 19. The amendment of the Act stipulates that the beneficiaries generate income from the guaranteed prices which they would not receive from the market. The measure therefore transfers an advantage. 6 The following assessment is based on both the EC Treaty and the EEA Agreement, but for reasons of simplification, in the following assessment it will only be referred to the EC Treaty provisions. 4
20. The beneficiaries constitute a selective group of undertakings in the sense of Article 87(1) EC as the measure solely favours certain green electricity producers. 21. At least some of the measure s beneficiaries are engaged in sectors where trade between Member States takes place and, therefore, the measure is liable to distort competition. 3.2 Assessment of the notified amendments 22. The Commission assessed the compliance of the supplementary support of renewable electricity producers with the Article 87(3)(c) EC and particularly on the basis of the new environmental aid guidelines 7 as applicable from the 2 April 2008. 23. With regard to the calculation method for production costs, on which the feed-in tariffs are based, Austria has undertaken to respect the provisions of the Green Electricity Act, which includes investment cost, consumption cost (e.g. raw materials), fixed operational cost (e.g. regular maintenance), insurance and administrative cost. The production cost of the electricity is determined by the tool OekoCost developed by the Austrian Energy Agency. Austria provided detailed information on the variables and parameters of the tool. 24. Based on these methods Austria submitted several examples of cost calculation for electricity producers using bio gas which differed by size (100 kw, 500 kw, 1000 kw, 1500 kw) resulting in increases of production cost of 6,89 Cent/kWh, 6,02 Cent/kWh, 5,96 Cent/kWh and 5,31 Cent/kWh under the assumption that the price for the substrate cost have increased by 100 %. 25. Austria provided official information on the price development of the basic agricultural raw materials (among others: corn, silo corn, wheat, rape seed, palm oil), rape oil, methanol, "Rapsresskuchen" and demonstrated that until the end of the year 2007 the prices for these raw materials increased between 100% and 200 % compared to the situation in the period 2006/2007. 26. The Commission verified the calculation method determining the cost of electricity production based on bio gas and liquid bio mass. It also verified whether the announced cost increases correspond with the development of market prices for the used raw materials. It appears that the method applied, appropriately determines the cost of green electricity subject to this decision. The information on the level of prices for raw materials, from which Austria concluded on the need of a supplement, appears to be in line with the market developments. 27. The proposed supplement to the feed-in tariff complies with the new Community Guidelines for Environmental Protection, first of all with chapter 3.1.6.2 on operating aid for renewable energy sources. In particular, the notified amendment is in line with point 109 (a) concerning operating aid to compensate for the difference between the cost of producing energy from renewable sources and the market price of the form of electricity concerned and point 109 (c) of the guidelines providing the possibility to grant operating aid for the production of renewable energy from biomass exceeding the amount of investment where Member States can show that the aggregate costs borne by the undertakings after plant depreciation are still higher than the market prices of the energy. 28. The Commission therefore finds that the Austrian authorities have illustrated that the support granted under the measure at stake will not exceed the extra production costs of 7 OJ C 82 of 1.4.2008, p. 1 5
the renewable energy sources supported by the measure. Further, it can be concluded that Austria continues to apply the support mechanism described above and in particular the methods of calculating the amount of aid as formerly approved by the Commission. These mechanisms and methods for calculating the notified aid to firms the supplement - are in line with point 109 of the new Environmental Aid Guidelines as applicable from the 2. April 2008. 29. Therefore, the supplement of 4 Cent/kWh for certain installations, which is limited to the year 2008, is in accordance with point 109 of the new environmental aid guidelines. In the context of the Commission Decision on the cases NN 162/A/2003 and N 317/A/2006 Austria has already given the commitment to ensure the respect of the environmental aid guidelines when adapting the tariffs in the future. Austria confirmed its undertaking to exclude any over-compensation of the additional cost by the proposed supplement, which it would reduce if necessary. 30. With regard to the new environmental aid guidelines applicable from 2 April 2008 the Commission reminds Austria that it is required to amend its existing environmental aid schemes in order to bring them into line with the new rules within 18 months after the entry into force of the guidelines. Austria confirmed its intention the revise the Green Electricity Act, which new version it would notify to the Commission Further the Commission reminds the Austrian authorities that according to point 49 of the guidelines state aid may be an appropriate instrument only for those uses of renewable energy sources where the environmental benefit and sustainability is evident. The proposed Directive on the Promotion of the Use of Energy from Renewable Sources (footnote 17 of the Environmental Aid Guidelines) states in Art. 15 that bioliquids will be eligible for financial support only if they fulfil the listed sustainability criteria. 4. DECISION 31. The Commission has concluded not to raise objections to the notified modification of the feed-in tariff as described and formerly approved by the Commission Decision regarding the cases NN 162/A/2003 and N 317/A/2006 as it complies with the environmental aid guidelines (OJ C 82 of 1.4.2008, p. 1) and is therefore considered compatible with the common market in application of Article 87(3)(c) EC. 32. The Commission requests Austria to submit an annual report on the implementation of the aid enabling the Commission to verify that all conditions stipulated above were fulfilled when implementing the measure. Any change in the conditions under which the aid is granted must be notified in advance. If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: http://ec.europa.eu/community_law/state_aids/index.htm. Your request should be sent by registered letter or fax to: European Commission Directorate-General for Competition Directorate for State Aid State Aid Greffe B-1049 Brussels Fax No: (0032) 2-296.12.42 6
Please mention the name and number of the case in all the correspondence. Yours faithfully, For the Commission Neelie KROES Member of the Commission 7