Austria: Which company structure is best for renewable energy communities?

Introduction

The energy industry has been wondering when the Renewable Expansion Act (EAG), which has been announced several times and brings billions of euros in funding for renewable energies – will finally be passed in Parliament. Since the publication of the draft assessment in October 2020 (for further details please see "Sparking change: Renewable Energy Expansion Act published for evaluation"), the main content of the act has been known to the public.

The EAG aims to achieve the ambitious government goal of making Austria climate-neutral by 2040. By 2030, 100% of electricity generated should come from renewable energy sources (eg, wind, sun or water).

These goals cannot be achieved without regional acceptance because photovoltaic (PV) systems and wind farms will inevitably change the landscape. Therefore, the population should be directly and actively involved in the energy transition. This is where energy communities come in, and they thus play a central role in the draft EAG.

What is an energy community?

Energy communities are associations of several people, companies or public bodies that jointly generate energy from renewable sources (for further details please see "Energy communities – is a business licence required?"). The self-generated energy can later be used, stored or sold.

The aim is for citizens and companies to generate green electricity themselves and become 'prosumers'. Energy communities are not only socially but also legally exciting. Due to these new players on the energy market, lawyers are also breaking new ground.

Open and voluntary

Energy communities must be organised as a corporation whose main purpose cannot be to make a profit. Therefore, the energy generated should primarily be consumed by the community and only excess quantities may be sold. Participation in an energy community must also be open and voluntary.

This means that people can join and leave an energy community at any time. This begs the question of which company structure is best suited for energy communities. Much depends on this choice because energy communities will not become a mass phenomenon unless the organisational effort, liability regime and costs are attractive.

An energy community can be founded as:

• a stock corporation;
• a limited liability company (GmbH);
• a cooperative; or
• an association.

According to the draft EAG, founders can choose from all legal corporate forms; the establishment of a stock corporation is just as permissible as the establishment of an association. However, not all company forms are practical. For instance, a stock corporation would be far too expensive for a small energy community comprising private PV systems.

Flexible membership

Due to the voluntary nature of participation in an energy community, membership must be flexible. However, in the case of a GmbH, membership is bound by strict formal requirements (notarial act). On the other hand, participants in associations and cooperatives can join and leave through a written declaration.

Both types of company are ideally oriented – namely, they are not (or at least not primarily) oriented towards making a profit. This comes closest to the legislature's ideal. However, the more active an energy community is economically (eg, through the sale of excess quantities), the less suitable the legal form of the association will be.

Whether energy communities have come to stay will largely depend on their economic attractiveness. This will also be determined by the right choice of company structure.

This article was first published on International Law Office, 03.05.2021.
authors: Paul Nimmerfall and Bernd Rajal