Macroeconomic environment 1)
The economic situation in the 2022/2023 fiscal year (1 October 2022 to 30 September 2023) of Energie AG Oberösterreich (Energie AG) was characterised by continuing weak economic development, persistently high inflation rates and the struggle on the part of the international central banks to curb inflation by raising interest rates. In what is a historically unprecedented approach, the European Central Bank (ECB) successively raised key interest rates to 4.5% in eight steps during the reporting period. Due to the uncertainty surrounding economic forecasts, the field of tension between fighting inflation and stimulating the economy will remain consistently high in the coming months.
Economic growth and inflation
YoY real change (in %)
Sources: IHS, WIFO, IMF
The Institute for Advanced Studies (IHS), the Institute of Economic Research (WIFO) and the International Monetary Fund (IMF) forecast an economic growth of between +0.4% and +1.1% (2022: +3.4%) in the euro zone for the year 2023.
For 2023, the Austrian WIFO and IHS institutes are forecasting a slight recession in the Austrian economy in the range of -0.4% to -0.8%. The IMF's forecast, however, is more positive, envisaging low growth of +0.1%. In the previous year, Austria's economic growth was +4.8%. Sharp increases in interest rates, high energy prices and purchasing power restraints are the causes of the anticipated economic downturn in 2023.
For the Czech Republic market relevant to Energie AG, an increase in the gross domestic product of +0.2% is anticipated for the calendar year 2023 (2022: +2.4%). In 2024, the Czech Republic's gross domestic product is forecast to grow by an average of +2.4%.
Energy and climate policy environment
In the first half of the reporting period, the EU's energy policy was again largely characterised by the implementation of immediate measures to cushion high energy prices in the form of “emergency regulations”, by activities to reduce dependency on energy imports from Russia and by measures to improve supply security. For example, the EU published the regulation on an emergency intervention to address high energy prices, the regulation on enhancing solidarity and the regulation on establishing a market correction mechanism to protect against excessively high gas prices.
The Council also published the EU Regulation on accelerating the deployment of renewable energy on 29 December 2022; this regulation accelerates energy transition projects through simplified approval procedures. This regulation is directly applicable by all authorities and courts for proceedings initiated after its entry into force and is limited to 18 months.
In the second half of the year, the focus was on reforming the design of the EU electricity market, trilateral negotiations on the gas package and numerous measures in the fight against climate change.
In March 2023, political agreement was reached on a central climate action measure, the revision of the Effort Sharing Regulation. This regulation defines binding reduction targets for all member states in those sectors not covered by EU emissions trading. This represents a significant increase in the EU savings target from 29% to 40% by 2030 compared with the 2005 figures. What this means for Austria is a reduction in greenhouse gas (GHG) emissions of 48% by 2030.
On 18 April 2023, the European Parliament formally adopted the revised EU Emissions Trading System (EU ETS 1) as part of the “Fit for 55” package. Key elements include a significant increase in the GHG reduction target from -43% to -62% by 2030 compared to 2005 figures, with the gradual inclusion of additional sectors such as shipping and waste incineration (as of 2028 following prior monitoring and an impact assessment). Beyond this, the intent is to introduce EU ETS 2, a separate emissions trading system for buildings, road transport and process emissions not covered by EU ETS 1, starting in 2027. In this context, regulatory instruments will limit the CO2 price to EUR 45.0 per tonne.
The planned amendment to the Energy Efficiency Directive to rapidly reduce dependence on Russian gas imports was published in the Official Journal of the EU on 20 September 2023. In line with this, the member states must collaborate to ensure a final energy consumption reduction of at least 11.7% by 2030, compared to the energy consumption forecasts for 2030, which were established in 2020.
After the summer break, trilateral negotiations on the EU gas package were resumed and intensified at the end of September 2023, with negotiations focusing on unbundling rules for hydrogen grid operators.
On 14 March 2023, the EU Commission presented proposals for a reform of the EU electricity market in order to accelerate both the expansion of renewable energies and the phase-out of gas as an energy source, and to protect consumers from price fluctuations of fossil fuels and future price spikes. At a parliamentary level, the negotiation mandate for the trilateral negotiations was adopted on 14 September 2023.
Both the large number of emergency regulations and the upheavals on the energy markets also led to numerous political and legislative measures in Austria. National CO2 pricing for fossil energy came into force on 1 October 2022 as a central instrument of the eco-social tax reforms. This means that CO2 emissions in Austria have, for the first time, been assigned a price beyond the bounds of the emissions trading system. This will be in the range of EUR 30.0 to 55.0 per tonne in the period between 2022 and 2025. Due to the rise in energy prices, the issue value for national certificates was reduced from EUR 35.0 to EUR 32.5 for 2023 in line with the price stability mechanism provided for in the Act.
Two minor amendments to the Renewable Energy Expansion Act in October and December 2022 essentially regulated an extension of the commissioning deadlines for renewable electricity generation plants or rather improvements to the application system and a suspension of the flat-rate renewables charge for 2023. The accompanying ordinance on the allocation of market bonuses to promote larger photovoltaic (PV), wind and hydropower plants for the years 2022 and 2023 was enacted on 4 October 2022. The regulation on investment grants for 2023 for small renewable electricity generation plants was published on 15 March 2023.
In July 2023, Austria's National Council passed an amendment to the Electricity Industry and Organisation Act (ElWOG) in the scope of the “Inflation Relief Package”. It defined further mandatory reporting obligations for suppliers and transparency requirements to improve price transparency and promote competition.
Based on the EU Emergency Regulation on Revenue Skimming, the Federal Act on the Energy Crisis Contribution – Electricity was published on 29 December 2022. This caps the revenue from inframarginal electricity generation plants with a capacity of more than 1 MW at EUR 140/MWh. The maximum revenue increases to EUR 176/MWh if preferential investments in renewable energies can be claimed in 2022 and 2023. The levy amounts to 90% of surplus revenue and applies from 1 December 2022 until the end of 2023. Following a minor amendment in June 2023, the upper limit for market revenue was reduced from EUR 140.0 to EUR 120.0/MWh in response to the fall in wholesale prices.
The Electricity Cost Subsidy Act was passed to relieve the burden from increased energy prices for households. Private households will receive this subsidy for electricity consumption of up to 2,900 kWh per year, with effect in the period from 1 December 2022 to 30 June 2024. An amendment published in February 2023 extended the cap on electricity costs for households with more than three people. As of 1 June 2023, the group of beneficiaries was expanded to include people with an electricity supply contract classified as for agricultural, forestry or commercial purposes.
The amendment to the Environmental Impact Assessment Act (UVP-G-2000) announced in March 2023 has enabled significant facilitations for energy transition projects. This amendment is intended to enable faster and more efficient approval procedures and is welcomed by the industry as a whole.
The amendment to the Gas Industry Act (GWG), announced on 22 March 2023, provides for an extension of the protected customer group to district heating plants that supply heat to households, social services or small and medium-sized enterprises (SME) and stipulates the grid level 1 connection of the Haidach storage facility.
The Federal Energy Efficiency Act came into force in mid-June 2023. What this means is that the EU Directive 2018/2002 (EED II) will be implemented nationally by simply amending the 2014 Federal Energy Efficiency Act. The intended focus is the continuation of final energy audits and energy management systems for large companies and the Federal Government's voluntary commitment to energy efficiency measures corresponding to an annual renovation rate of 3%. In line with this, the intent is to achieve cumulative final savings of 650 petajoules (PJ) by 2030 thanks to strategic measures by the Federal Government and the federal states in order to reduce final energy consumption to 920 PJ by 2030, although this is an indicative target value.
In order to fully implement the Internal Electricity Market Directive, the governing parties are looking to put into effect a far-reaching amendment to the Electricity Industry and Organisation Act (ElWOG). Despite repeated announcements by the Ministry, a review process of the Electricity Industry Act (ElWG) has not yet been initiated, making it doubtful that a resolution will be passed in this government term.
1) 1) Sources: IHS (Institute for Advanced Studies): Fall Forecast of the Austrian Economy, 2022 – 2023, 17 October 2023. IMF (International Monetary Fund): World Economic Outlook Database (imf.org), 19 October 2023.