Luxembourg

1. Brief overview of the renewables sector 

Luxembourg has made progress towards strengthening its energy supply security, developing sustainable energy supplies and integrating its markets into the central-west European region. Luxembourg promotes resource-efficient energy supply and has made eco-innovation and clean energy technologies priorities for research and development. 

Luxembourg’s policy on renewable energy sources (RES) is guided by the following key legal elements:

  • Law of 5 August 1993 (the Law of 1993) provides the legal basis for deployment and renewable energy usage in Luxembourg. It establishes mandatory energy use norms and standards for buildings. It also creates a legal basis for the introduction of financial support mechanisms for the deployment of renewable energies in Luxembourg, such as feed-in tariffs, grants, and tax reliefs. These activities can benefit from state aid.
  • The National Renewable Action Plan of July 2010 – in line with EU Directive 2009 / 28 / EC, Luxembourg’s 2020 renewable energy targets are:
    • Overall target: 11% share of gross final energy consumption generated from RES.
    • Heating and cooling: 8.5% of heat consumption met by renewable sources.
    • Electricity: 12% of electricity demand met by electricity generated from RES.
    • Transport: 10% of energy demand met by RES.
  • Luxembourg has specific policies and schemes to achieve these targets, including:
    • Feed-in tariff system
    • Removal of administrative barriers
    • Energy efficiency and energy saving measures in new and existing buildings
    • Organisation of training in RES installation, servicing, management and certification
    • Renewable building obligations
    • Information programmes aimed at the general public, business and household owners, and potential investors
    • Financial support for research and development
    • Comprehensive framework of fiscal incentives.

The Grand Ducal Regulation of August 2014 on the production of electricity based on renewable energy sources (the Grand Ducal Regulation of 2014) – establishes a system of certificates guaranteeing the renewable origin of the electricity produced. It outlines the method for calculating feed-in tariff (FIT) levels for renewable energy. It also introduces an additional bonus for commercialised heat generated by combined heat and power based on biomass, biogas and wood waste.

Several policies aim at promoting the development, installation and use of RES-installations, including a training programme for RES-installers; a general research, development and demonstration program; and support schemes for RES-H infrastructures.

General investments

Luxembourg awards investment grants in relation to all renewable electricity generation technologies. Luxembourg regulations identify several types of investment that are eligible for grants, including: investments in energy saving; investments in high-efficiency cogeneration; and investments in the production of energy from RES.

Any individual or company holding a business permit to carry out an industrial, commercial or artisanal activity as a main or secondary activity within Luxembourg may be eligible for these investment grants.

Aiming to support environmental protection and the rational use of resources, Luxembourg grants subsidies for companies investing in RES. Luxembourg attracts foreign investments with a full range of adapted investment incentives for investing in the efficient use of energy. Financial support may be granted in the form of medium- and long-term loans by the National Credit and Investment Corporation.

Luxembourg’s income tax law provides for a special depreciation method to encourage investments in assets contributing to energy efficiency in buildings, some exemptions from income tax (e.g. for the sale of electricity generated from PV sources) or tax deduction (e.g. for biofuel).

Luxembourg’s electricity market regulation has a compensation mechanism for any company involved in electrical activity (i.e. production, transport, distribution, supply or trading). The mechanism operates in the general economic interest as well as in the interest of consumers.

2. Recent developments in the renewables sector

The Luxembourg government’s programme makes energy transition a key priority. The new Grand Ducal Regulation of 24 April 2017 promotes RES and energy efficiency. It amends some elements of the Grand Ducal Regulation of 1 August 2014.

3. Forthcoming developments / opportunities in the renewables sector

Luxembourg intends to meet its renewable energy and climate targets mainly through efforts at the EU and international levels. Luxembourg adopted challenging energy and climate targets for 2020 within the EU framework.

In the context of the EU objective of achieving a reduction of 80% to 95% of greenhouse gas emissions by 2050, and discussions around the 2030 climate and energy framework, Luxembourg’s white paper process is an opportunity to further work on a new integrated energy and climate strategy.

Given the regional integration of its gas and electricity markets, Luxembourg is also likely to be impacted by the decarbonisation policies of neighbouring countries, as it imports most of its energy needs.

Looking ahead, Luxembourg should seize opportunities for promoting a smart green economy, competitive retail markets, smart transport and mobility solutions, and regional integration of the short- and longer-term electricity markets, with a view to maximising energy security benefits while minimising costs to consumers.

Developing a long-term vision for the energy system up to 2030-2050 in consultation with all key institutions would provide Luxembourg with the opportunity to play an active and valuable role in enhancing energy security, and meet the decarbonisation challenges faced not only in Luxembourg but in the region. The regional element is vital, as it will encourage resource efficiency, and the interoperability of technologies and infrastructure, including in the transport sector. Two key institutions have a major role to play: the Ministry of the Economy, which has overall responsibility for energy policy including renewable energy; and Myenergy, a common agency of the Ministry of the Economy, which manages the promotion of the use of renewable energy resources.

Jérôme Guillot
Julien Leclere