Repowering Communities case study: Upper Austria

Austrian regions (Länder) play a significant role in energy, particularly regarding building efficiency and heating, including district heating. Upper Austria is one of nine regions, covering 12,000km2, with 1.4 million inhabitants. It is highly industrialised, with significant heavy industry (manufacture of steel and machinery).

Since the early 1990s, the regional government has been actively and effectively promoting energy efficiency and renewable energy, particularly renewable heat: biomass, solar thermal and heat pumps. Like many politicians, Upper Austrian politicians have been enthusiastic about setting targets. However, unlike many politicians, they have also implemented policies to help achieve their ambitions, so most targets have been met. A third of Upper Austria’s total energy use now comes from renewable sources. Almost half of its heat comes from renewables.

Biomass has been strongly promoted across Austria. The prime objective has been to support agriculture. Most Austrian farmers own both farmland and forests, but, in mountainous areas, agriculture is not particularly profitable.

The federal framework

Upper Austria has not been alone in promoting renewables in Austria. Some other regional governments have followed similar policies (though none has been as successful) and the federal government has been supportive by setting good laws, having a sensible tax system and providing some of the money for subsidies.

In 1996, Austria introduced an energy tax on the use of gas (€0.0435/cubic metre) and electricity (€0.003/kWh). The tax applies to small-scale as well as industrial users. Part of the revenue is given to the Länder and local government for energy efficiency and renewables.

Austria has a reduced rate of VAT (10% rather than the general 20%) on wood used for pellet heating. Other than this, Austrians have to pay the full VAT rate on domestic energy use.

In 1997, the federal government established the Promotion Instrument for Electricity from Renewables (PIER), which provides both a capital subsidy and a feed-in tariff for biomass, wind and solar electricity. Feed-in tariffs are fixed by the federal provinces or the regional electricity utilities. All feed-in tariffs have seasonal (winter/summer) and time-of-day differentiations (day/night & weekend).

To comply with the EU Renewables Directive, in 2002, Austria passed the Green Electricity Act. This extended feed-in tariffs to small hydro, and fixed minimum percentages of electricity to come from renewables for 2008: 4% from “new” green electricity (without small hydro) and 9% electricity from small hydro.

Recently adopted has been the catchily-named “Vereinbarung gemäß Art. 15a B-VG zwischen dem Bund und den Ländern über Maßnahmen im Gebäude-sektor zum Zweck der Reduktion des Ausstoßes an Treibhausgasen” agreement between the federal government and the regional governments about measures in the buildings sector with the aim of reducing the emissions of greenhouse gases – usually referred to as the “15 a Vereinbarungen”. This consists of agreements between the nine regions and the federal government on legislative issues, which tries to ensure a joint approach. It sets building regulations for new build and major renovations, and makes it a condition of any subsidy that projects include efficient heat pumps, district heating from high efficiency CHP or biomass/biogas, or solar thermal.

Federal money

The federal government gives subsidies for renewable heat, through federal money for the extension of district heating ended in 1996. Subsidies for solar thermal and heat pumps come from the regional governments. Some regions, including Upper Austria, have also received money from EU funds for renewable schemes including biomass.

Programmes to extend district heating using biomass are managed by the Länder, but the national ministry of agriculture provides around half of the money. Subsidies of up to 30% of the eligible costs of biomass installations are available from the federal government (with regional governments offering up to a third of the cost as additional subsidy).

In 1988, the ministry spent €950,000 on biomass district heating; in 1993 this had risen to €7.3 million. In 1999, €11 million was provided by the ministry, €7.3 million from the Länder and €5.1 million from EU regional funds.

Farmers have also been offered money – subsidies and low interest loans – to encourage them to install biomass facilities and connect them to district heating (in addition to the money they get through the EU Common Agricultural Policy for growing the biomass). Farmers or farmers’ cooperatives have been able to get a higher percentage of installation costs than have private companies. This has led to some energy companies seeking to enter the heat market, to set up co-operatives with farmers.

The federal government has also given grants of €800 to householders for biomass heating. In the 1990s, it spent around €5 million a year helping SMEs with R&D on biomass.

Upper Austrian activity

Key events in Upper Austria:

1981   Grants for solar thermal installations introduced. (They have been has been available without interruption ever since.)

1991   The regional government set up a regional energy agency to provide free advice and information to private households (subsequently expanded to include all energy users and many energy producers).

1993   First regional energy strategy and action plan, which included active promotion of renewables and target to increase renewables to 30% of energy for domestic use. Specific focus on solar thermal and biomass. Creation of regional biomass funds.

1998   Energy Contracting Programme: financial support to energy efficiency and renewables, with work carried out by an Energy Services Company (ESCO). So there is no investment by the building owner.

2002   New regional energy strategy – Energy 21. Targets to be met by 2010: doubling the share of biomass and solar thermal; 1 million m2 of installed solar thermal; increasing energy efficiency by 10%; reducing energy consumption for space and water heating by 20%.

2007   Adoption of “turning point scenario”, with targets for 2030:

  • 100 % space heating from renewable energy sources.
  • 3 million m² of solar panels by the year 2030.
  • 39 % less heat demand.
  • 100 % electricity from renewable energy sources.
  • 41% less fossil transport fuels.
  • A 65% reduction in CO2.

Regional Energy Agency

This was set up to provide advice and information to private households, especially to set up and manage an energy advice service. The target group for advice was subsequently expanded to include all energy users and many energy producers.

The agency now holds 15,000 energy advice sessions every year for homeowners, business or public bodies that are considering a building related energy investment. In most advice sessions, space heating and the use of renewable heat are discussed.

Since 1992, the agency has been running a training programme for energy advisers, teaching them how to calculate a buildings heat demand, how it could be reduced, how renewable heat could be provided and how much it would cost to do either or both of these things. Those who complete the course are qualified to carry out advice sessions when a house is being constructed or renovated. The advice is offered either to householders or to municipalities, and is independent of any energy company or product. The agency also offers energy advice to business. 75% of the consultancy cost is paid by Upper Austria and the national government, leaving the company with a bill of only €100 to €300.

Energy Contracting Programme

This offers financial support to energy efficiency, with work carried out by an Energy Services Company (ESCO). Therefore, there was no investment by the building owner. The ESCO guarantees that it will reduce energy costs by a certain percentage every year. It is in charge of financing, installing and, where necessary, operating and maintaining energy saving measures and systems. The money saved by lower energy use is initially shared between the ESCO and the building owner. Once the cost of installation is recouped – which takes 10 to 15 years – the saving goes entirely to the building owner (unless there is an ongoing cost of operation and maintenance).

Upper Austria was the first region to use a third-party financing approach for energy efficiency. At first, the Energy Contracting Programme was restricted to public buildings, and to energy efficiency rather than renewables. It was expanded to businesses and to renewables in 2002. The programme offers financial support up to 6% of the energy investment, or up to 13.5% of the investment costs for renewable heat (up to a maximum of €100,000).

Besides money, the programme offers advice and information. People applying are given advice by the Energy Agency. There are events, publications and a website for businesses and communities. Round table talks and seminars are held to share lessons learnt and increase the skill and effectiveness of ESCOs.

Building regulations

In 2002, the regional building law was amended to require all buildings used for public purposes being constructed or renovated to install solar thermal or other renewable energy systems, including a district heating system fuelled by biomass, waste heat or ‘deep’ geothermal. This has been strongly enforced by the regional government. Exceptions are allowed if renewables are not economically feasible, but these do not occur very often.

In 2008, as part of its implementation of the EU Energy Performance of Buildings Directive, the requirement for ‘alternative energy systems’ was extended to all buildings larger than 1,000m², whatever their use.

This was not particularly controversial. There was much more disagreement and discussion before the introduction in 2009 of a regulation for houses, requiring them to have as their main source of heat biomass (pellets, wood chips and log wood), solar thermal, heat pumps, district heating from a high-efficiency CHP or using biomass or industrial waste heat. Direct electric heating for all new buildings is banned.

Subsidies for biomass

Upper Austria has been one of the leading Länder, along with Lower Austria, Salzburg and Styria, in promoting biomass district heating. However, only Upper Austria has set up biomass funds. These were created in 1993 with €3.6 million to cover low interest loans to cover the financing gap of the first one or two years of the operation of a biomass district heating plant when all the investment has been made but the income from the heat sales is not yet great.

Extension of district heating was at first mainly focussed on quite large plants that were able to supply whole villages. Since the mid-1990s, the focus has shifted to smaller plants and networks, supplying a few large buildings. This is easier to organise and more economic. Public buildings, such as schools, are often among the largest heat-users in villages, so the connection of all public buildings has been a priority for district heat expansion.

However, households are still given subsidies to connect to district heating. All can get a subsidy of €880, rising to €1,200 if more than 50% of the heat comes from biomass, together with money to remove the old boiler.

Those households not near a district heating system are encouraged to switch from coal, oil or gas to pellet and wood chips. The grant for this is 30% of investment costs, up to a maximum of €3,700.

Much of the increase in biomass heat came from wood pellet systems replacing oil heating systems. In 1997, over a third of new heating installations were oil boilers. By 2007, less than 1% were oil, and over three quarters wood pellet systems. (see Res-h-policy: Regional Report: The RES-H/C market in Upper Austria).

Subsidies for solar thermal

Buildings being constructed or renovated are eligible for subsidies for solar thermal, up to a maximum of €3,800. Since 2008, no subsidies are available for construction projects that do not include solar thermal. In addition, the Energy Contracting Programme and low interest loans cover solar thermal (see Solar Book: Solar Thermal Energy in Upper Austria).

Subsidies for heat pumps

Heat pumps are mostly installed in single-family homes, about 50% for space heating and 50% for hot water. A subsidy of €2,200 is available for efficient heat pumps; €1,500 for less efficient ones. Those within 35m of a district heat network using biomass can still get a subsidy for a heat pump, but this is reduced to €1,200.


The Upper Austrian government has certainly succeeded in spending a lot of money on subsidies, or “investing in future industries and climate protection”. In 2007, €14.1 million went on subsidising 3,800 small biomass installations (in homes and farm buildings), 3,500 solar thermal systems, 2,800 heat pumps and 680 connections to district heating. In 2008, this increased to €18.2 million, with 5,000 solar thermal systems and 3,900 heat pumps.

Energy from renewables has increased by over two-thirds in Upper Austria since 1990. By 2007, 32% of total energy used in Upper Austria was renewable: 14% hydro, 13.5% biomass, and 4.5% wind and solar. (This compared with 26% of the total energy use in Austria being from renewables.) The proportion of heat from renewables was 45% in Upper Austria.


Over 40% of municipalities used biomass for heating, coming from over 35,000 biomass heating installations. Most of these were small scale, automatic wood pellet heating systems, mostly in single-family homes. Only 280 were connected to district heating, some through farmer’s co-operatives. The use of biomass for heating saved over a million tonnes of CO2 every year.

Pellet systems have replaced conventional oil heating systems. Between 1997 and 2007, new oil boilers dropped from 36% of total installations to less than 1%. Pellet systems increased from which increased from 32% of the new installations in 1999 to 76% in 2007.

As well as the grants, the price of fuel has helped biomass expansion. In September 2008, pellets cost around 3.5 cents/kWh, compared to 6.3 cents for gas and 9.1 cents for heating oil (see Cleantech Investor: Spotlight on: Austrian biomass heating).

Solar thermal

In 2008, 93,000m² of solar thermal panels were installed in Upper Austria. In 2009, the total installed in Upper Austria passed one million metres², meeting the 2010 target a year early and saving about 100,000 tons of CO2. Many public buildings, particularly hospitals, nursing homes, sports centres and schools, are equipped with a solar thermal system. The regional government had installed 26 systems with a total surface of 1,308m² on its own buildings. A solar cooling system was installed on the new regional administrative office in the town of Rohrbach.

The target now is three million metres² of solar panels by the year 2030.

Heat pumps

By 2008, there were 30,000 heat pumps installed in Upper Austria.

Upper Austria also has other renewables: 450 grid-connected PV, 30 biogas and sewage gas plants, 500 microhydro schemes and five geothermal plants that, in total, generate about 50MW.

Energy Contracting Programme

Since the start of the Energy Contracting Programme, more than 100 projects have been implemented, with a total investment of about €35 million. The projects include:

  • Freistadt – seven municipality buildings were retrofitted, including school buildings, the kindergarten and sports facilities. Street lighting was improved and made more efficient. Almost a quarter of the former energy costs for heating and electricity are now saved, resulting in lower energy costs of €66,205 annually.
  • The first biomass tri-generation (electricity, heating and cooling) plant in Austria was built in Ried/Upper Austria for companies making ski and aeroplane components. About 26,000MWh heat, 1,000MWh cooling and 2,500MWh electricity are generated annually. The cost of installation was €3,634,000.
  • The municipality of Bad Goisern decided to make its street lighting more efficient. €188,000 was invested by an ESCO in new 842 street lamps, 681 street lighting points and 29 control points. The guaranteed energy saving is 30% and energy consumption has been reduced by over a third. The municipality now pays €21,000 a year public street lighting instead of €36,000.

Business and employment

Partly as a result of the regional governments activities, Upper Austria now hosts the Oekoenergie-Cluster (eco-energy cluster) – a network of green energy companies with more than 4,500 employees and an annual turnover of more than €1.5 billion. Currently, the network has about 150 partners in Upper Austria and about 40 in South Bohemia (the neighbouring region). Renewable heating companies are prominent in the network, including a number of leading European producers of biomass boilers, solar thermal collectors and heat pumps. The network is managed by the Energy Agency on behalf of the regional government.

Public opinion

It is perhaps not surprising that there is widespread support for a policy of extensive subsidies. However, this is money that is not then available for other things and leads to higher levels of taxation, so support is not inevitable. Austria is one of the more equal (in income terms) societies in Europe, similar to Scandinavia. So there is less opposition to tax and spend programmes than there is in more unequal countries like the UK or US. The Upper Austrian government has maximised public support for energy efficiency and renewables by presenting its programmes not only as ‘green’ initiatives’, but also social and economic ones:

One important driver in renewable heating policy is that it is not only seen as energy and environment policy but very much as agricultural (biomass heating), economic (job creation through the production and installation of renewable heating equipment) and social policy (solar thermal). This allows for a wider political support, both inside the government, but also from outside stakeholders (e.g. the farming community) and the availability of higher financial resources (especially from agricultural policies).

(See O.Ö. Energiesparverband.)

That is not to say that the green elements have been ignored, or are unimportant:

“A survey among residents showed that the top motivation for residents connecting to the new biomass district heating was environmental protection (mentioned by 95%). 75% of the responding residents declared an important aspect for them was also the support of local farmers and local self-sufficiency. 87 % responded that the convenience of District-Heating was an important motivation.

(See The Deployment of Biomass-District-Heating in Austria by Christian Rakos.)

The key message seems to be that, if it is made convenient and affordable to do the right thing for the climate, most people are ready to do it.

Tags: , , ,  

Leave a comment

(all comments are subject to moderation)

Comments are closed.