General economic environment 1) Sources: IHS (Institute for Advanced Studies) Press Release 29 March 2019, WIFO (Austrian Institute for Economic Research) Monthly Reports February 2019 and March 2019, WKO (Austrian Economic Chamber) Economic Situation and Forecast Release March 2019, and Economic Profile Czech Republic February 2019.
The first half of the 2018/2019 fiscal year (1 October 2018 to 31 March 2019) was characterised by an economically more subdued, but still solid economic environment compared with the previous year.
Economic growth in the Euro zone slowed in the reporting period, with experts forecasting average growth in the amount of 1.3% to 1.9% for 2019 and 1.6% to 1.7% for 2020 (2018: 1.9%) after a two-year boom. Especially external economic uncertainties, in particular the continuing open nature of Brexit and the threat of trade policy conflicts, pose considerable downside risks to both the Euro zone's and Austria's economic development.
While the Austrian economy grew significantly faster than the economy of the Euro zone in 2018, the pace of growth is likely to converge with the Euro zone level in 2019. Economic researchers expect GDP (gross domestic product) growth of 1.5% to 1.7% for Austria in 2019 and between 1.6% and 1.8% for 2020 (2018: 2.7%).
For the Czech Republic, a market relevant to Energie AG, GDP growth is forecast to remain constant at 3.0% in 2019.
Energy policy framework
In the reporting period, the EU winter package Clean Energy for all Europeans was finalised after more than two years of negotiations. The new EU electricity market design envisages stricter guidelines for new capacity mechanisms, as well as the availability of new processes for price zones and minimum capacities for cross-border trade. Furthermore, it is now clearly regulated throughout the EU that electricity from renewable energies has priority in grid bottlenecks. New market roles such as aggregators and citizens' energy communities will also be created and the prosumer concept strengthened. It is of great relevance here that a level playing field, that is an equal and fair competitive environment for all (new and existing) market players, has been created. In the future, e-charging stations and storage facilities will in principle be left to the market and will only be operated by grid operators in exceptional cases in the event of negative market tests. The national implementation of the guidelines in Austria is planned in the course of the Renewable Energy Sources Act 2020 and in the course of an extensive Electricity Industry and Organisation Act (ElWOG) amendment in 2020.
At the end of November 2018, the EU Commission published its long-term decarbonisation strategy A Clean Planet for All for the reduction of greenhouse gas emissions in the EU by 2050.
In order to reduce CO2 emissions in the transport sector, at the end of 2018 and beginning of 2019 new stricter fleet limits for passenger cars and commercial vehicles were adopted in the EU. It can be assumed that alternative, emission-free drive systems will become more significant as a result.
At the end of January 2019, the Growth, Structural Change and Employment Commission tasked by the German Federal Government presented the final report which provides a timetable for the gradual phasing out of coal-fired power generation by 2038 at the latest. The elimination of thermal coal-fired power plant capacities is to be compensated for in part by new gas-fired power plants. Germany's decision to phase out nuclear energy by 2022 remains unaffected. It is to be expected that the exit from coal in Germany will also have a significant impact on the Austrian electricity market and its prices.
The publication of a term sheet in the course of a proposal by the Federal Government's Council of Ministers in December 2018 saw the implementation work for the Renewable Energy Sources Act 2020 commence in Austria. The central pillars of the law will be a new competition-orientated subsidy model for green electricity, general conditions for Green Gas and more system responsibility for market participants. The plan is to implement parts of the EU winter package (Renewable Energies Directive and EU internal electricity market package in the area of market design) in the Renewable Energy Sources Act 2020 and as accompanying measures in the Electricity Industry and Organisation Act and Gas Industry Act (GWG).
In the reporting period, the Austrian legislator also enacted a pertinent statutory environment for project development and implementation of infrastructure companies. The Site Development Act is intended to create opportunities for speeding up procedures for site-relevant environmental impact assessment (EIA) projects.
In response to European Court of Justice case law, it was necessary to adapt national procedural participation schemes in pertinent environmental matters. The federal legislator regulated this in the Aarhus Participation Act regarding the Water Act, Waste Management Act and Air Emission Protection Act. The necessary adaptations to the nature conservation laws of the federal states are still outstanding. The key element of the new guidelines is the extension of participation in proceedings or legal protection options for recognised environmental organisations in proceedings outside the EIA sector.
Furthermore, an amendment to the EIA Act took effect in the reporting period. This amendment established a site lawyer, introduced new procedural rules and laid down new requirements for environmental organisations.
1 Sources: IHS (Institute for Advanced Studies) Press Release 29 March 2019, WIFO (Austrian Institute for Economic Research) Monthly Reports February 2019 and March 2019, WKO (Austrian Economic Chamber) Economic Situation and Forecast Release March 2019, and Economic Profile Czech Republic February 2019.