Island interconnections to slash public service expenses

The Greek government’s anticipated response to a RAE (Regulatory Authority for Energy) proposal calling for the country’s electricity-related social policy to be funded through a special consumption tax (EFK) imposed on fuel rather than the present public service compensation (YKO) surcharges added to electricity bills will indicate the administration’s preference as to who should foot the bill.

The tax-funded energy social policy proposal made by RAE would require approval from both the Greek government and European Commission if it is to be implemented.

The public service compensation accumulated through electricity bills in Greece is primarily used to subsidize high-cost electricity production on the country’s non-interconnected islands.

A new EU directive advising EU members states imposing public service compensation surcharges to instead finance energy-linked social policy costs through their state budgets is sure to generate wide debate in Greece.

Unlike other European countries whose territories include islands, Greece has yet to develop interconnection projects for lower-cost electricity supply to its numerous islands. Once interconnection projects serving these needs are completed, Greece’s annual public service compensation costs stand to drop from approximately 600 million euros at present to no more than 150 million euros.

An interconnection project to link the Cyclades with Greece’s mainland is expected to be completed by 2018, while Crete’s interconnection may be completed between 2020 and 2022, at best. The Dodecanese and northern Aegean island interconnections will then need to be developed, meaning that completion of the overall project will require anywhere between 10 to 15 more years.

In Spain, the most comparable European example to Greece in terms of geographical make-up, energy-related social policy costs are shared by the national budget and consumers. Though a late starter, Spain, from 2011 onwards, managed to develop interconnection projects covering many of its island complexes, thereby greatly reducing the country’s public service compensation costs.

Also in 2011, Italy developed an interconnection project linking Sardinia with the mainland, a move that also drastically reduced public service compensation charges for consumers. Other European countries whose territories include islands, such as Germany, the UK and the Scandinavian countries, developed their needed interconnection problems long ago.