The European Commission has approved, under EU State aid rules, an Austrian scheme to safeguard security of electricity supply.
The scheme will support security of electricity supply for a period of 5 years starting in October 2026. It is an extension and update of the existing network reserve that was approved in 2021 and will end in 2026. Among various technical changes, the new scheme includes monthly contracts and other updates designed to increase participation of smaller resources, in particular electricity consumers that can provide demand response by reducing energy use.
The scheme will support electricity capacity that remains in reserve outside the market and is ready to be activated by the system operators whenever there is insufficient transmission capacity to match generation and demand ('transmission congestion').
Where there is transmission congestion, system operators turn off capacity in oversupplied parts of the bidding zone, and turn on capacity in parts of the bidding zone where there is a deficit.
Under the scheme, one of the Austrian transmission system operators, Austrian Power Grid AG (APG), will pay operators of power plants that have notified their intention to close down their plants, but which are relevant to keep the electricity system in balance, for remaining available to the network. The scheme will also be open to electricity storage facilities and demand-response providers. The subsidised capacity must remain available and be located in parts of Austria or neighbouring countries where it can help manage transmission congestion. The aid will take the form of direct grants paid per megawatt of available capacity held in the reserve, as well as payments to cover operating costs when capacity is activated. The costs of the scheme will be recovered from consumers in locations where there is a capacity shortfall, via network charges on consumer bills.
The aid will be granted via a competitive bidding process, unless the Austrian energy regulator identifies that such a bidding process would be insufficiently competitive, in which case the aid would be allocated based on each beneficiary's specific costs.
The Commission's assessment
The Commission assessed the scheme under EU State aid rules, in particular Article 107(3) of the Treaty on the Functioning of the European Union ('TFEU'), which enables Member States to support the development of certain economic activities subject to certain conditions, and the Guidelines on State aid for climate, environmental protection and energy ('CEEAG').
The Commission found that:
- The scheme was designed following a public consultation and targets a clearly identified and properly quantified security of supply objective.
- The scheme is necessary and appropriate to achieve the objective pursued.
- The scheme is proportionate as the aid will be provided via a well-designed, open and non-discriminatory competitive bidding process or an alternative regulated approach. In addition, distortions of energy markets are minimised, as the capacity funded is held outside of the electricity markets.
- Austria will evaluate the scheme and is investing in additional transmission infrastructure and implementing various reforms designed to limit future network congestion needs.
- The scheme brings about positive effects that outweigh any potential distortion of competition and trade in the EU.
On this basis, the Commission approved the Austrian scheme under EU State aid rules.
Background
The Commission's 2022 CEEAG provide guidance on how the Commission assesses the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.
The Guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the European Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU's goals and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and cater for the increased importance of climate protection. They include sections on energy efficiency measures, aid for clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity, as well as measures to ensure security of energy supply, subject to certain conditions.
Electricity transmission congestion occurs when generation in one location cannot be transported to another location where there is demand. Electricity transmission lines in Europe are increasingly congested due to a combination of the maintenance of large bidding zones (geographic areas in which a single electricity price is formed, assuming no transmission constraints) and increasing shares of variable renewable electricity generation which require additional transmission to be transported.
Demand response is a change in the power consumption of an electricity consumer. A reduction in electricity consumption can have the same effect as an increase in electricity generation, in terms of achieving a balance between electricity supply and demand, so demand response can play an important role in measures for security of electricity supply.
The European electricity market is arranged in bidding zones, which are geographical areas in which electricity trading takes place, ignoring transmission limits. Austria comprises a single bidding zone. Once the market has cleared, system operators need to ensure that the result of the market can be put into operation. If there is transmission congestion, the system operators generally need to turn off capacity in oversupplied parts of the bidding zone and turn on capacity in other parts of the bidding zone. The EU Electricity Regulation establishes rules to ensure the functioning of the internal market for electricity and includes a bidding zone review process that may in future lead to a reduced need for active congestion management and measures like the network reserve.
