After completion of the relevant consultation, the Parliament passed Law No. 4414 / 09.08.2016 under the title “New support scheme for electricity stations from Renewable Energy Sources and Combined Heat and Power High Performance -Provisions for legal and functional separation of supply and distribution industries in the market of natural gas and other provisions” (Gov. Gazette A’139 / 09.08.2016), which regulates, among other highly important issues for the Greek energy market, the new support scheme for electricity produced by Renewable energy Sources (RES) and Combined Heat and power High Performance (CHP) stations.
The new regime falls within the broader ambit of the EU common policy towards tackling climate change. In the context of achieving national and EU targets for the penetration of renewables in the energy market, the new scheme adopts the requirements of section 3.3 of the “EU Guidelines for State aid in the field of environment and energy for 2014-2020 ” aiming to support the further development of RES in Greece.
Reforms in the RES Special Account
Τhe normative intervention undertaken by the legislator to correct the lingering structural dysfunction of the financing of the RES support mechanism, as articulated in Article 23 of the Law, is οf fundamental importance. The said provision establishes a new source of revenue of the RES Special Account that reflects the cost which is avoided by the Suppliers due to the presence and penetration of RES in the energy market (“merit order effect”). This legislative section is based on the reasoning that the financing of the RES Special Account administered by LAGIE is realized in a distorted way, resulting to Suppliers paying reduced amounts that do not reflect the actual economic value contributed by RES Producers. In this way, Suppliers receive a substantial benefit from the Special Account, which in essence, according to the perception of the legislator, constitutes an indirect subsidy of their cost (which is part of the variable component of the tariffs they offer to their customers). In other words, the deficit of the RES Special Account, which Law No. 4254/2014 (introducing the so-called “New Deal”) sought to address through the retroactive cut of the guaranteed compensation of RES producers, is causally linked to the benefits earned by the Suppliers, who do not bear the obligation to contribute in uplifing a deficit systemically linked to their economic advantage. The reasoning behind this legislation is extremely important because it automatically undermines the legal and regulatory foundations of Law No. 4254/2014.
In particular, the Explanatory Statement of the Law recognizes the ‘structural inability to resolve the Daily Ahead Scheduling (DAS)”, owed to the decrease of the System Marginal Price (SMP), due to the participation of RES / CHP power stations in the DAS, which is not taken into account when determining the charges owed by Suppliers, with a consequence to create a deficit in the RES Special Account.
Through the provisions of Article 23, Suppliers are asked now to assume the related costs through two new charges that take into account the benefits resulting from the existence of RES during the liquidation of the electricity market, without placing any further burden on consumers by increasing the Special Emissions Reduction Tax for Gas Emissions (ETMEAR).
The new regime provides two new sources of revenues for the RES Special Account. One source of revenue derives from the cost levied on each charge representative in the wholesale electricity market for the part corresponding to the energy supplied to all consumers of the Interconnected System and Network, excluding exports. The second source of revenue derives from the cost that may be applied each year, starting from 2018, to charge load representatives for the energy absorbed for consumers they represent within the interconnected system, with a purpose to progressively reduce the amount to be recovered from consumers through the ETMEAR tax.
Article 23 also provides that the modification of the Electricity Exchange Code and the Grid Code for determining the methodology parameters will be introduced by decision of RAE, applicable from 01/10/2016. This decision is also of great importance since the methodology to be applied should not over- or under compensate the RES Account.
Changes in the electricity sales process from RES
The new law seeks to establish a framework for a smooth transition from the old system of fixed retail prices (feed-in-tariffs) to the new system of differential increments and tendering (feed-in-premium).
The new regime is based on the development of a new support mechanism for the operation of RES (operating aid), which provides a premium in addition to the price shaped in the wholesale electricity market. This increase will be granted for the validity support period of RES and CHP of each power station and will take the form of a differential value (FiP), taking into consideration the revenue resulting from their participation in the electricity market.
The incremental increase was adopted on a station category level (sliding premium) and not as a steady increase (fixed premium), so that the financial assistance mechanism is not affected by variations of the future price in the wholesale market. This way attempts to ensure control and a predetermined size of the total income received by certain stations from RES and CHP, targeted to minimize both the phenomena of overcompensation and undercompensation of electricity produced from RES and CHP stations.
More specifically, the RES and CHP power stations put into operation in the Interconnected System from 1.1.2016 are included in the support scheme in the form of operating aid and on the basis of a Price Differential Compensation (Differential Increment) for the electricity they produce. The differential premium is calculated on a monthly basis, whereas the validation, billing and settlement of transactions involving the differential increase processes will be determined by a decision to be issued by the Minister of Environment and Energy, which is expected to be issued within three months from the entry into force of this Act.
The adoption of this differential increment allows a relatively “smooth” transition to the new scheme, taking into account that the support system via fixed guaranteed price (FiT) will be active until December 31, 2016.
Conducting competitive tendering procedures for power stations from RES and CHP
Furthermore, from 1.1.2017, the support system enters into force in the form of operating aid for RES and CHP power stations, through a competitive bidding process. The Minister of Environment and Energy decision, issued upon RAE’s opinion, will set the installed power per technology and / or the category of the electricity from RES stations which is tendered through competitive bidding processes. The RES and CHP stations selected through the competitive bidding process will be endorsed in the support system of operating aid and will conclude Operational Support Contracts of Differential Increment for the electricity produced from RES and CHP (CEMR), as well as Functional Support Contracts of Fixed Price (S.E.S.T.). The competitive tendering procedure will be announced by RAE and the condition for participation will be the payment of a fee, payable in favor of RAE.
Especially, for the year 2016, a RAE decision for launching the pilot competitive bidding process for photovoltaic systems will be issued within three months from the entry into force of the law.
During the transitional period, a mechanism seeking to optimize the hourly electricity infusion forecast of RES and CHP stations during their participation in Day Ahead Market will apply. In the absence of the intraday market, such a mechanism is considered desirable in order to reduce deviations from the forecasts of the DAS and the requirements of service use, but also so as to gradually operate as a preparation for the RES and CHP stations with respect to services and obligations to be undertaken with the implementation of the new electricity market model.
Concerning RES projects that have signed purchase agreements by the end of 2015, it is projected that they will retain the old tariffs, as long as they are constructed and operating (normally or under a test period) until 30/06/2018.
For further information contact:
Metaxas & Associates (Attorneys At Law)
54 Asklipiou Str.
114 71 Athens,
Tel.: +30 210 33 90 748
Fax.: +30 210 33 90 749