Austria
Member country
Energy system of Austria
Policies
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Key recommendations
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Austria has set highly ambitious energy and climate goals, notably net zero emissions by 2040 and a 100% renewable share in the national annual electricity balance by 2030. However, progress to date indicates that the pace of reduction is insufficient to meet these targets. This shortfall, combined with the discontinuation of critical support programmes due to budget constraints, has created uncertainty among key stakeholders. Without a robust alignment between targets, delivery mechanisms and available financial resources, Austria risks undermining its credibility and the effectiveness of its energy transition policies.
To address these challenges, Austria must ensure that its climate and energy targets are underpinned by realistic delivery strategies and adequate funding. This requires a comprehensive reassessment of energy demand, infrastructure development, projected financial capacity and workforce capacity. Policy makers should ensure that targets and action plans are based on current data, and that each segment of the energy system – generation, infrastructure and end use – has specific, actionable measures supported by appropriate resources.
Funding mechanisms for decarbonisation should be streamlined and consolidated to maximise impact and predictability, especially for sectors requiring long-term investment. Funding is currently spread across various programmes with differing rules and timelines, creating complexity and inefficiency for beneficiaries. Combining these into fewer, larger multi-year schemes with clear objectives and harmonised criteria would reduce administrative burdens and improve predictability. Streamlined governance and financial frameworks would benefit investors, accelerate projects and make public spending more efficient. Engaging stakeholders in a transparent process and providing clear signals about future support would foster greater confidence and commitment, ultimately accelerating progress.
In practical terms, better alignment involves integrating financial planning with policy design so that the scale and timing of support match the roll-out of low-carbon technologies and nature-based solutions. Regular monitoring of key indicators such as the deployment rates of renewables and the efficiency of energy use would enable policy makers to adjust delivery mechanisms as needed. By aligning targets with real‑world constraints, financial resources and delivery mechanisms, Austria can create a more predictable and effective pathway to its climate goals, benefiting both the economy and society.
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The urgent adoption of relevant primary and secondary legislation is imperative to establish a robust enabling framework and governance structure for Austria’s energy transition. While strategic documents such as the National Energy and Climate Plan outline much-needed measures, delays in enacting legislation have created uncertainty and undermined progress towards reaching Austria’s energy and climate objectives. The recent adoption of the Electricity Market Act is a major step towards creating a flexible, consumer-friendly, lower cost electricity system. Austria should now prioritise secondary legislation to implement the Act, and the timely adoption of other pending laws, including the draft Renewable Energy Acceleration Act and the forthcoming Gas and Hydrogen Market Act. Ensuring that E-Control and other relevant institutions are sufficiently resourced is critical for the effective implementation of new legal provisions.
Timely legislative and regulatory action is essential for providing clarity to market participants, ensuring the continuity of support schemes, and signalling the government’s commitment to decarbonisation and energy security. The rapid implementation of the strategic gas reserve during the recent energy crisis demonstrates how swift, co-ordinated legislative action and consensus building can deliver tangible results.
This recommendation means prioritising the passage of key primary and secondary legislation that will unlock system flexibility, empower consumers and accelerate renewable energy development. This includes measures to streamline permitting and approval procedures, particularly for wind and other large-scale renewable projects, and to enhance competition and consumer protection in electricity and district heating markets.
To achieve the decarbonisation targets in the most cost-effective manner, it is important to have a comprehensive approach to planning to take advantage of synergies across all parts of the energy system, including electricity, heating, cooling, gas, and hydrogen and CO2 networks and storage. Austria has developed an integrated energy infrastructure plan, marking a positive move toward a cross-sectoral approach. However, fragmented governance and divided responsibilities between federal and regional authorities have impeded progress in integrated planning and infrastructure development. By consolidating oversight at the federal level and updating governance structures through the new Climate Law, Austria can streamline permitting, harmonise policy implementation and facilitate rapid deployment of renewables and flexible resources.
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Fostering affordable prices in Austria’s energy sector requires bold action. Austria would benefit from pursuing ongoing reforms to facilitate renewables deployment, enhance system flexibility and reduce network costs. It is also important to invigorate competition in the electricity market and strengthen regulatory oversight of the district heating sector. The electricity market is currently characterised by high concentration and dominance by incumbent utilities. This lack of effective competition curtails innovation and limits the development of new products and services for consumers. Regional tariff structures and cross-shareholding arrangements further dampen market dynamism. At the same time, while the district heating sector (which is a natural monopoly) offers the potential for efficient decarbonisation and system flexibility, it is hampered by persistent consumer complaints about transparency and pricing. Without meaningful reforms, these market characteristics risk undermining consumer trust, stifling cost reductions and impeding the broader energy transition.
For the electricity market, policy makers could introduce stricter rules to address cross-shareholding among utilities, thereby reducing potential conflicts of interest and promoting genuine competition. The Electricity Market Act provisions to encourage supplier switching, an area where current uptake remains low despite the potential for significant savings, should be implemented and enforced. Ensuring that electricity tariffs and retail offers are transparent, easily comparable and accessible across regions will empower consumers to take informed choices.
In the district heating sector, regulatory reforms should focus on improving pricing transparency and strengthening consumer protection, including clearer disclosure of tariff structures and the establishment of mechanisms for consumer feedback and dispute resolution. A transition toward performance-based regulation could reward efficiency and low-carbon investments. Other targeted regulatory interventions, including benchmarking of district heating tariffs and the publication of performance data, can also drive efficiency and accountability within the sector. The creation of more competitive and consumer-oriented electricity and heat markets should be accompanied by parallel progress in energy efficiency and targeted support measures to protect the most vulnerable consumers, such as those introduced by the Electricity Market Act.
Austria would also benefit from a framework aligning municipal district heating plans with its climate-neutrality target, which would include milestones for renewable heat shares in district heating and enhanced support for geothermal, solar heat and sustainable biomass. The government could also introduce regulatory incentives and streamlined permitting for industrial and data centre waste heat integration into district heating networks.
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Space heating is Austria’s largest single energy consuming end use, making it central to achieving the decarbonisation and energy security goals. In 2024, natural gas still supplied more than 20% of space heating demand, despite consumption being around one-quarter below levels prior to Russia’s invasion of Ukraine in 2022. This has made it ever more urgent to replace outdated heating systems with low-carbon alternatives, including modern heat pumps; renewable sources such as biomass, geothermal and solar heat; and district heating.
However, the current expected pace of replacement of around 30 000 gas heating systems per year falls short of the estimated 80 000 replacements required to meet Austria’s ambitious climate targets. Under this accelerated transition, the economic life of gas distribution networks could be limited to less than a decade, underscoring the need for a strategic and co-ordinated approach to manage transition risks.
To address these challenges, this recommendation calls for adopting integrated heating and cooling plans at the national and municipal levels. These plans should prioritise the rapid phase-out of fossil heating systems by streamlining permitting and approval procedures for heat pump and district heating installations, particularly in dense urban areas where district heating is the most efficient and scalable. Regulatory reforms must strengthen signals against the replacement of old fossil systems with new ones in existing buildings. Energy efficiency measures should be integrated with heating system replacement, thus reducing energy demand and optimising heating performance. Furthermore, targeted interventions are needed to resolve persistent barriers such as the landlord-tenant dilemma, which currently impedes deep energy renovations and heating system upgrades in the rental sector. This could include financial incentives for landlords and mechanisms to facilitate consensus in multi-owner residential buildings. The heating plans should be co‑ordinated with long-term decommissioning strategies for gas networks to avoid stranded assets and manage the transition costs effectively. Greater transparency and consumer protection can also help drive confidence and uptake in district heating.
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Improving the conditions to reward flexibility is essential for ensuring a cost-effective and resilient electricity system in Austria. As the share of variable renewable energy such as wind and solar continues to rise, the system faces growing challenges from mismatches between generation and demand, particularly across seasons and during peak hours.
To address these challenges, the Electricity Market Act has introduced a significant reform of Austria’s power sector. Austria should now prioritise the implementation of targeted measures that reward flexible behaviour across all consumer segments and asset types. Practical actions include the expansion of dynamic and time-of-use tariffs, leveraged by the high number of smart meters, to better reflect real-time system conditions and provide clear price signals for consumers and small flexibility providers. Local flexibility markets should be further developed to incentivise flexibility in grid-constrained areas and grid connection fees could be adjusted to encourage the deployment of storage and other flexibility assets at optimal locations. Existing flexibility markets, such as those for redispatch services, must be continuously improved to enable broader participation by large-scale and distributed assets.
In parallel, regulatory frameworks should be adapted to facilitate revenue-stacking from flexibility and electricity markets, ensuring that flexibility providers can access multiple value streams. While the ElWG introduces a common flexibility platform and clearer aggregator rights, full interoperability between TSO and DSO products and harmonised settlement systems will be essential before multi-service revenue stacking becomes widely feasible. The removal of double charging for storage facilities is a positive step. It is also important to enforce the requirement for system
operators to consider non-wire alternatives in their grid planning. These steps will not only defer or avoid costly grid expansion but also enhance system stability and reduce overall costs for end users.Finally, strengthening market signals for consumers and operators of flexibility assets will support system-friendly behaviour. E-Control’s planned reform of grid tariffs, including the introduction of seasonal and local grid tariffs, is a positive development. However, additional reforms are needed to ensure that interruptible power demand tariffs and other flexibility incentives offer sufficient long-term signals to shift demand and reduce peak loads. If subsidies for home battery storage continue, they should include strict criteria that benefit the system. Austria could also incentivise smart charging for electric vehicles (EVs) and promote pilot projects and regulatory frameworks for vehicle-to-grid technologies, particularly targeting public fleets and commercial vehicles, and encourage the use of charging infrastructure at optimal times and locations. Additionally, consumer education on the benefits of participation in demand-response programmes is vital.
By fostering a regulatory environment that rewards flexibility, Austria can unlock the full value of its significant stock of potential flexibility assets – heat pumps, EVs, and residential and industrial battery storage – ultimately supporting the efficient integration of renewables and the long-term decarbonisation of its power sector.
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The future deployment of solar photovoltaics and wind in Austria must be accompanied by a strong framework to efficiently integrate new generation assets into the power system. A system-friendly integration allows achieving the lowest possible system cost by reducing grid reinforcements and expansion and additional investments in dispatchable capacity. The timely implementation and expansion of provisions in Austria’s Electricity Market Act for new variable renewable energy (VRE) plants – such as remote control, dynamic set-point management, dynamic feed-in management and clear curtailment protocols – are crucial steps towards system-friendly operation.
Targeted measures such as system-friendly contracts for difference, locational signals in renewable support schemes, auctions and connection agreements, hybrid auctions (e.g. solar PV + wind + battery), flexible tariffs, and peak capping can further optimise grid use. Applying the European Commission’s guidance on the design of two-way contracts for difference can cost-effectively integrate renewables and guide better investment decisions. As the EU Net Zero Industry Act requires the introduction of “non-price criteria” in member states’ renewable energy auctions, Austria could consider opting for energy system integration criteria. Reforming the grid connection process to prioritise strategically aligned projects will help Austria achieve a balanced, efficient and resilient renewable expansion.
Austria’s solar PV growth is largely due to rooftop installations, which often receive upfront investment support but lack incentives for system-friendly integration. Current grants encourage capacity expansion without influencing feed-in timing or grid‑friendly operation, potentially increasing grid strain without additional operational or locational signals. Timely implementation of complementary signals, such as time‑of-use tariffs, can encourage behaviours that are beneficial to the power system.
A system-optimised strategy should incorporate technical standards that enable flexibility from new VRE plants. The Electricity Market Act represents a positive step to achieve this. Ensuring non-discriminatory market access for VRE plants across all relevant electricity markets, including spot, redispatch, ancillary services and local flexibility markets, creates additional revenue opportunities for VRE plants. Market rules should be reviewed to remove barriers such as minimum bid sizes and aggregation limits, ensuring non-discriminatory access for all flexibility providers, including independent aggregators and distributed resources.
In addition, strengthening data and digitalisation initiatives is vital to support flexibility and effective co-ordination across energy systems. Accurate, high-resolution forecasting of VRE output, net load and power flows is critical for secure operation and efficient market outcomes. This should not be left solely to market participants, as the benefits of improved forecasting accrue across the system, while individual actors cannot capture the full value of their investments. Austria should continue to enhance centralised and decentralised forecasting requirements, ensuring that all grid‑connected VRE plants provide real-time data to system operators.
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Austria’s ambition to achieve a 100% renewable share in the national annual electricity balance by 2030 hinges on a substantial increase in wind power generation. However, wind energy remains underutilised. This underperformance is primarily attributable to siting and zoning challenges, even though lengthy and complex permitting procedures pose a major challenge to the swift deployment of new wind projects. Accelerating wind energy deployment is essential not only for meeting the 2030 target, but also for supporting Austria’s broader electrification strategy, which includes the expansion of heat pumps, e-mobility and industrial loads such as hydrogen production via electrolysis. Furthermore, scaling up wind, in tandem with adequate storage solutions, is critical to addressing seasonal supply constraints and enhancing system resilience.
To realise these objectives, Austria should deploy a suite of practical measures that remove barriers and create favourable investment conditions for wind energy projects. First, all available legal mechanisms must be actively used to ensure that designated areas for wind development at regional levels are implemented without delay, as is already done by Lower Austria, Styria and Burgenland. This includes making public land within these zones rapidly accessible for wind projects through standardised, transparent, long-term lease agreements.
Second, streamlining the permitting process is vital to reduce lead times and provide certainty for investors. To build on recent improvements, Austria could consider developing a spatial energy planning framework that would encourage provincial authorities to take into account the country-level energy system needs in their planning decisions. Establishing a one-stop shop for permitting, aligned with the European Commission’s Grids Package proposal, can centralise administrative procedures, simplify compliance and accelerate project approvals, thereby encouraging more rapid deployment. Finally, fostering stakeholder engagement and clarifying governance arrangements will help address local concerns and secure public support, further smoothing the path for wind energy expansion.
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Austria’s energy-intensive industries have faced a major economic shock from the surge in energy costs following Russia’s invasion of Ukraine and the phase-out of Russian gas imports. Overall value added in these industries is now around 7% lower than 2019 levels, with the most energy-intensive sectors hit the hardest. While the government has provided substantial support through temporary relief measures and funding for industrial transformation away from fossil fuels, structural change takes time and the outlook remains challenging. The new Industrial Strategy extends the current indirect EU Emissions Trading System cost compensation until 2029 and provides a special electricity price for energy-intensive industry of 0.05 EUR/kWh until 2028 based on the German approach. This responds to an emerging industrial energy subsidy race between countries as higher tariffs intersect with higher carbon prices and the European Union’s Carbon Border Adjustment Mechanism.
To support the fiscal and environmental sustainability of these measures, the government should continue to ensure that public assistance to industry is targeted; timebound; and reinvested in efficiency, electrification and other low-carbon transition pathways. As public resources are limited, government support should be carefully targeted, taking into account the beneficiaries’ economic importance, employment value and strategic relevance for supply-chain security. This includes prioritising sectors where intervention can deliver the greatest climate impact, competitiveness benefits and long-term value for public money.
In addition to lower electricity prices, the government could consider complementary structural measures, such as targeted grid-cost exemptions, co-ordinating with neighbouring countries to avoid subsidy races and setting market rules that allow more of the value of low-cost renewables to reach end users. Predictable, time-limited support linked to clear decarbonisation outcomes can safeguard Austria’s industrial base, drive innovation, and deliver climate and economic benefits while helping prevent further deindustrialisation.
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Austria has an impressive track record of successful technological innovation in energy-intensive industry which has transformed production processes worldwide. Today, with its strong funding support for research and development and many transformative innovations at advanced stages of development, Austria is well-positioned not only to achieve its own ambitious decarbonisation goals but to help reshape the global industrial technology landscape.
To better leverage its innovation ecosystem and accelerate the deployment of innovative industrial decarbonisation solutions, the government of Austria should establish clear, sector-specific regulation that provides planning and investment certainty. The new Industrial Strategy’s plan to lift the ban on carbon capture and storage and encourage the utilisation of captured CO2 as a raw material offers new important potential pathways for hard-to-abate energy-intensive industries.
Finally, any public support should be embedded in a clear transition pathway, with defined milestones and exit strategies to ensure that subsidies support market creation and learning-by-doing rather than becoming a long-term burden on public finances. Well-designed public-private partnerships and time-limited transformation funds can help scale Austrian-led technologies from hydrogen-based steelmaking to carbon capture, utilisation and storage in cement while maintaining fiscal discipline. By aligning strategic prioritisation, regulation and innovation support, Austria can achieve industrial climate neutrality while strengthening its global competitiveness in clean industrial technologies.
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Building demand for low-emissions hydrogen in hard-to-abate industries such as steel, chemicals and refining is key to Austria’s ambitious national climate goals. It also supports energy diversification in the context of the permanent ban on imports of Russian gas while creating opportunities to repurpose parts of Austria’s existing gas infrastructure that has historically served as a hub for Central Europe. International experience suggests that hydrogen infrastructure best advances at scale once long-term offtake is secured.
A near-term priority is the timely transposition and operationalisation of RED III targets relevant to industry and transport. This should be accompanied by a transparent 2026‑2030 trajectory with interim milestones, compliance mechanisms and verification rules. Given the current cost gap between low-emissions hydrogen and fossil alternatives, Austria should anchor early offtake with contracting and derisking instruments, such as carbon contracts for difference, fixed premiums or targeted industrial decarbonisation grants drawing on national and EU funding sources.
Hydrogen infrastructure planning should proceed in parallel, but be phased and conditional on confirmed demand. Development of a Hydrogen Start Network should focus on clearly identified industrial clusters such as Linz, Styria and the Vienna region, while maintaining flexibility on the timing, scale and extent of network expansion. Cross-border connections, including potential links to southern corridors, should be advanced in close co-ordination with Austria’s neighbouring countries, including through the Pentalateral Energy Forum, and aligned with common standards and timelines, scaling up only as regional demand materialises.