Electricity market unsettled by absence of new CATs

The absence of the country’s new Capacity Assurance Mechanism, sidelined amid the political developments of recent weeks, has already led to a number of serious repercussions for the electricity market.

The European Commission has offered its approval to a plan submitted by the previous Greek administration for the new mechanism, or CATs (Capacity Availability Tickets), which has undergone two rounds of public consultation. However, the new leftist-Syriza-led coalition government’s intentions on the matter remain unknown.

The previous mechanism expired on December 31, 2014. Since then, Greece’s electricity market has operated based on a back-up system. But this is causing repercussions.

Firstly, it requires that specific agreements be reached between suppliers and producers. No such deals have been established, which could lead to hefty penalties of up to 50 million euros per month.

Also, the delayed implementation of a new mechanism could prompt the European Commission to take an unfavorable turn on a legal case filed by a private-sector company on the extent to which the old CATs distributed by Greece to producers – both PPC and independent producers – between 2005 and 2014 represented illegal state aid. According to energypress sources, the European Commission had made clear to the previous Greek administration that the implementation of a new CAT system, based on the plan it had approved, stood as a valid reason for the legal case to be shelved.

The contrary, however, would leave all possibilities open. If the old CATs are regarded as state aid, then the consequences would be dire, as PPC, which received about two-thirds of the total funds offered, and independent producers would be expected to return hundreds of millions of euros, for each year, from 2005 onwards.

Another consequence of the delayed new CAT system is the financial pressure this is applying to independent producers, who are faced by closure under the strain. Even if implemented, the new CAT system would trouble independent producers during its ten-month transitionary period. Not having any Capacity Assurance Mechanism at all in place makes their financial standing seemingly impossible. PPC also stands to lose considerable amounts without a new CAT system up and running.

Independent electricity producers, backed by SEV, the Hellenic Association of Industrialists, have already begun taking action and plan to soon present their case to the new government.

Details of the new and approved CAT system include payments of 45,000 euros per MW for natural gas-fueled electricity stations and hydropower stations ensuring grid flexibilility. The new model will not include CATs rewarding power adequacy availability, meaning that lignite-fired stations will not be eligible.

Also, as previously reported by energypress, the overall cost of the new CAT system will be significantly reduced to 225 million euros, annually, from 570 million euros at present. A 55 percent share of the new CATs will concern PPC, the Public Power Corporation, while the other 45 percent will support independent producers.

Furthermore, according to the plan, revisable CATs will cease applying on November 1 and will be replaced by auctions for flexibility availability purchases.