Natural gas strategic reserve among EU thoughts for crisis

A series of measures to be announced today by the European Commission to help EU member states counter the energy crisis may include a strategic reserve for natural gas, complementing respective supply contracts, for abnormal periods such as the current energy crisis affecting the world, especially Europe.

EU member state participation in this strategic reserve would be optional. The initiative, still at a preliminary stage, is being examined. No decisions have been taken.

The EU’s energy market integration and transboundary grid interconnections have helped avoid even more extreme developments in the current crisis, Brussels has observed.

Measures taken by member states at a national level will need to comply with EU law and not contravene Europe’s energy transition towards renewables, Brussels has made clear.

The European Commission has defended its views on the causes of the energy crisis, insisting that increased natural gas prices have been primarily responsible, while noting that the EU’s Emission Trading System (ETS), through which carbon emission right prices have been driven higher, has played a lesser role.

RES operator given control of new Energy Transition Fund

DAPEEP, the RES market operator, whose influence in the energy market is growing, will be given control of the new Energy Transition Fund, a move promising to give the operator a key role in efforts to counter energy cost increases when prices are at exorbitant levels, as is the case at present.

A large percentage of the ETF’s revenues will come from CO2 emission right auctions, staged by DAPEEP.

Through its authority over the new ETF, DAPEEP will be in a position to manage state funds, including, for example, planned subsidies for natural gas bills, expected to be derived from the state budget, at least for the final quarter of 2021, sources informed.

In due course, DAPEEP, through the ETF, will also manage funds to be generated by other prospective green surcharges, including an expected expansion of the carbon emission rights system into transportation and buildings.

These new roles promise to further establish the place of DAPEEP in the domestic energy market.

Crisis Management Committee to examine supply security

The Crisis Management Committee is expected to meet within the first fortnight of October to examine the overall situation in the energy market, driving price levels up to exorbitant levels for consumers of all categories.

The committee’s members will discuss the issue of supply adequacy and security for meeting electricity generation needs, primarily.

Electricity, natural gas and CO2 emission prices are skyrocketing, while natural gas shortages are now emerging in EU markets, all as a result of an extraordinary combination of developments in European markets.

For the time being, Greek energy sector authorities – RAE, the Regulatory Authority for Energy; DESFA, the gas grid operator; and IPTO, the power grid operator – have remained reassuring. Yesterday, RAE president Athanasios Dagoumas noted: “We are not in a state of alarm but are vigilant.”

Overall natural gas consumption is expected to increase in 2021. Consumption was 14 percent higher in the first half compared to the equivalent period a year earlier, DESFA data has shown.

Gas demand rose in July and August to meet increased electricity generation needs and is also expected to be elevated this coming winter.

In Greece, approximately 60 percent of natural gas consumption results from electricity generation. The ongoing withdrawal of coal-fired power stations and greater reliance on fluctuating RES output is expected to lead to a further increase in demand for natural gas.

Local authorities have pointed to Greece’s natural gas source diversification, made possible by the Revythoussa LNG terminal and TAP, both offering alternative solutions, as crucial in the effort to manage the current energy crisis.

State subsidies for electricity bills, additional discounts concealed

Power utility PPC and the country’s independent suppliers are set to include state electricity subsidies into electricity bills in ten days’ time, while, from October 1, they plan to follow up with additional discounts to ease the burden of increased energy costs for consumers.

Electricity suppliers are now finalizing adjustments to their information systems for the inclusion of these state subsidies, worth 9 euros per electricity bill and retroactively effective as of September 1.

However, all suppliers are keeping under wraps the details of their additional discounts to be offered.

Market sources expect suppliers to offer discounts with the intention of retaining customers and also capturing greater retail electricity market shares.

Meanwhile, the energy ministry is expected, any day now, to submit a draft bill to parliament for the establishment of an Energy Transition Fund, its purpose being to gather amounts from CO2 emission right auctions for distribution as electricity-bill subsidies.

As a first step, the Energy Transition Fund is expected to collect between 180 and 200 million euros to support households and businesses in the low-voltage category, all facing additional pressure as a result of the sharp increase in energy costs.

 

 

Greece tables hedging fund plan to soften energy crisis

Energy minister Kostas Skrekas has proposed the adoption of a temporary hedging mechanism by EU member states as a means of easing the burden of increased electricity costs on consumers.

The minister’s proposal, which would enable funds to be drawn from the Emissions Trading System through extraordinary auctions offering additional carbon emission rights or prepayment of potential ETS revenue, was tabled at a meeting of EU energy ministers in Ljubljana yesterday.

The ministers assembled in search of a solution to counter the relentless rise in carbon emission right costs.

Skrekas’ proposal is similar to household mitigation measures recently announced by the Greek government for which electricity subsidies will be financed by revenues generated at carbon emission right auctions, through the Energy Transition Fund.

According to estimates by Greek officials, a sum of between 5 and 8 billion euros will be needed to cover the EU’s overall energy support needs this coming winter. Distribution of this amount to member states would take into account respective electricity consumption levels, heating needs and GDPs.

At the Ljubljana meeting, Greece, Spain and Italy were the only member states to propose the adoption of EU-wide measures as an effort to restrict the effects of the energy crisis, seen worsening for households and businesses this coming winter.

 

EU ministers to meet on carbon emission costs, causing alarm

The EU’s energy ministers plan to meet in Ljubljana Wednesday in search of a solution to counter the relentless rise in carbon emission right costs, which, for some time now, have reached elevated levels that hang as a dark cloud over energy consumers, hundreds of suppliers and Europe’s energy transition strategy, breeding increasing Euroscepticism.

Carbon emission rights have been stuck at levels of no less than 60 euros per ton, prompting allegations of manipulation.

Last week, the European Commission submitted to European Parliament the EU’s more ambitious climate-change package, “Fit for 55”, aiming for a 55 percent reduction of carbon emissions by 2030, compared to 1990 levels. It is planned to lead to ETS mechanism revisions.

In response to accumulating messages of alarm from energy consumers and industrial enterprises from all over the continent, European MPs, at Wednesday’s meeting, are expected to push for stricter ETS rules.

Until now, governments of EU member states have been left to act independently for support measures whose extent is being determined by the capabilities of state budgets.

In Italy, the government, facing electricity cost increases of 40 percent, is lowering taxes linked to electricity bills. In France, low-income households stand to receive increased energy-cost coupon amounts, currently worth 150 euros annually.

The situation is far more dramatic in the UK. To date, seven electricity suppliers, under growing market pressure, have disrupted their operations, forcing over 600,000 customers to seek new suppliers. Bulb, one of the UK’s biggest electricity suppliers, serving 1.7 million customers, is on the verge of bankruptcy. A merger with a rival player is seen as the likeliest solution for this company.

 

Brussels fears electricity prices could reignite Euroscepticism

The European Commission is pressing for an antidote to counter the sharp rise in electricity prices around Europe, fearing a prolonged period of escalated prices could spark a new wave of Euroscepticism that would put EU citizens at odds with the continent’s energy transition plan, a key Brussels climate-action strategy.

Allegations of market manipulation and doubled CO2 emission right prices since the beginning of the year, at 59.43 euros per ton yesterday, have reinforced the overall reaction against the EU’s energy policy, placing governments under pressure and fueling unrest.

With fears growing of a resurgence in France’s yellow vest movement, the European Commission is seeking to convince citizens that the Emissions Trading System (ETS), a cornerstone of the EU’s green-energy transition policy, is not the cause of the electricity price rises, instead laying the blame on natural gas and fossil fuels.

European Commission president Ursula von der Leyen, in her State of the Union Address, delivered yesterday, was clearly distressed by the situation, offering strong support for the European Green Deal. But, judging by the overall response, she has not appeased the concerns about rising energy prices.

The president’s thinking was reiterated by her deputy Frans Timmermans, in charge of the European Commission’s climate action portfolio, according to whom, only one-fifth of the electricity price increases can be attributed to the elevated CO2 emission rights prices.

 

 

PPC to partially absorb power costs, Brussels action imminent

Power utility PPC has decided to pursue a policy that will partially absorb electricity market price increases prompted by a volatile combination of unfavorable factors.

The utility plans to limit the impact of carbon emission costs and not pass on the entirety of their effect to consumers.

Competitors will either have to follow suit and subdue price hikes, which will hurt their financial results, or risk suffering market share losses.

The response of PPC’s rivals remains unclear at this stage. Marker players are now trying to estimate the duration of this unfavorable period of elevated prices.

Natural gas prices have surged, driven by Russia’s decision to slow down gas supply to Europe, presumably to pressure Brussels into brushing aside its reservations about a new Nord Stream pipeline from Russia to Germany. Also, CO2 emission costs have continued to rise.

CO2 emission cost futures contracts for December are stuck at levels of between 61 and 62 euros per ton, while analysts forecast levels of 65 euros per ton over the next few months, or possibly longer.

Given these factors, analysts believe it is a matter of time before the European Commission intervenes in an effort to deescalate market price levels by subduing CO2 emission costs and increasing its pressure on Moscow for a return to normal gas supply levels to Europe.

Otherwise, market conditions will become increasingly volatile with social repercussions, especially in countries experiencing extreme price increases that have been even greater than those in Greece.

In Bulgaria, for example, wholesale electricity prices have skyrocketed to more than 100 euros per MWh, well over the country’s usual levels of about 30 euros per MWh.

Combination of events pushing electricity costs higher

Higher-priced electricity, globally, may have arrived to stay given the combination of events such as the sudden rebound of the global economy, which is intensifying demand for fuels, metals and electricity, as well as the European Green Deal, new climate change laws and more ambitious carbon neutrality targets, pushing up CO2 emission right prices.

In Greece, wholesale electricity prices have risen sharply in recent days, to levels above 100 euros per MWh, the heatwave conditions exacerbating the situation. CO2 emission right prices have reached 55 euros per ton, from 32 euros per ton at the beginning of the year. The market clearing price for June is estimated to be 79.33 euros per MWh from 59 euros per MWh in December.

Major electricity suppliers in the Greek market expect the wholesale price to settle at 83-84 euros per MWh in the next month before rising to 85 euros per MWh over the next few months, and reaching 92 euros per MWh towards the end of the year.

Wholesale price clauses included by suppliers in their agreements with consumers for protection against higher prices are well below the aforementioned projections, meaning consumers should soon expect considerably higher electricity costs if these forecasts prove to be accurate.

Even if eventual electricity cost hikes turn out to be milder, RAE, the Regulatory Authority for Energy, and the energy ministry will be bracing for a bigger wave of consumer complaints.

 

RAE effort for universal supplier cost-clause policy facing delay

RAE, the Regulatory Authority for Energy, working on a universal cost-clause policy for all electricity suppliers, to offer consumers greater electricity-bill transparency and price-comparing ability, has extended, until the end of June, a deadline it set for suppliers to deliver related market data details concerning all of 2020 and 2021, until the present.

Independent suppliers, who recently triggered wholesale price-related clauses in electricity bills to protect themselves against elevated wholesale prices, were questioned by the authority and then requested, as early as a month ago, to produce related data but have failed to deliver, instead calling for more time.

Power utility PPC was the first supplier to be summoned for questioning over its decision to trigger a CO2 cost-related clause incorporated into its electricity bills.

RAE had initially planned to stage a public consultation procedure for a universal clause policy within July, after examining the data provided by suppliers, but this plan will now be delayed.

Given the fact that overall business activity slows down severely during the August holiday period, RAE’s proposal is now not expected to be forwarded for consultation any sooner than September.

Taking into account supplier objections expected to surface during the procedure, the new cost-clause policy cannot be expected to be implemented before October.

Consumer complaints over sharp electricity cost increases and lack of transparency in electricity billing have risen considerably in recent times.

Gas, CO2 costs, up over 50%, increasing electricity prices

The pandemic’s gradual remission and tougher climate-change policies have ushered in a period of elevated electricity price levels, both in Greece and internationally, expected to be prolonged, according to many analysts.

Suppliers, one after another, are increasing prices for household and business consumption, passing on to consumers additional costs encountered in the wholesale market through the activation of price-related clauses.

According to Greek energy exchange data, day-ahead market prices currently range between 78 and 80 euros per MWh, nearly double the level of 45 euros per MWh at the beginning of the year.

Similar price increases of about 50 percent have also been recorded in markets abroad during the first half of the year.

Electricity producers operating natural-gas fueled power stations have been impacted by higher gas prices, data provided by the Dutch trading platform TTF has highlighted.

Electricity producers also face considerably higher CO2 emission right prices, currently ranging between 52 and 55 euros per ton from 32 to 34 euros per MWh early this year.

According to many analysts, CO2 emission right prices will continue rising in the years to come and may have doubled by 2030.

Higher natural gas and CO2 emission right prices are impacting electricity producers generating through natural gas-fired power stations. They are required to pay for CO2 emission rights, one-third of levels imposed on lignite-based producers.

Experts agree that toughening EU climate-change measures, to be followed by corresponding US polices, will keep driving energy commodities higher, noting that oil and gas price rises will be subdued as low-cost, cleaner forms of energy further penetrate markets.

 

RAE working on common clause policy for suppliers

Following up on its intervention against power utility PPC’s recent decision to trigger a CO2 emission price-related clause for medium and low-voltage consumers, RAE, the Regulatory Authority for Energy, has now begun questioning independent suppliers over their adoption of a wholesale price-related clause.

The authority, to concurrently investigate the legality of these initiatives, has asked suppliers to forward related data concerning all of 2020 and 2021, up to the present, by the beginning of next week as part of its effort to establish a common clause policy for all suppliers that can clarify the price-comparing ability of consumers.

RAE aims to announce a new set of rules on electricity bill clauses in September, following public consultation, possibly in July.

Once RAE has examined market data expected from independent suppliers, it intends to hold a series of talks with them as of June 21.

PPC, which, just days ago, was asked by RAE to replace its CO2 price-related clause with one linked to wholesale price levels, is doing so, announcing it will also implement a 30 percent discount as of August 5 to offset, as much as possible, a price rise anticipated as a result of its adoption of the wholesale price clause.

PPC adopting wholesale market clause along with 30% discount

Power utility PPC is preparing to replace its CO2 emission right price-related clause with one linked to wholesale electricity market price levels, which, combined with a 30 percent discount, to be applied as an offsetting tool, is ultimately expected to result in a slight overall reduction in electricity bill costs for consumers.

PPC’s new pricing system, set to be implemented on August 5, was adopted following pressure from RAE, the Regulatory Authority for Energy, in its effort to enhance the price-comparing ability of consumers.

Until now, PPC has been the only supplier using a CO2-related clause in its pricing system. All other suppliers have incorporated a wholesale market-related clause into their supply agreements, as protection against increased wholesale costs.

The power utility triggered its CO2-related clause in May in response to rallying CO2 emission right prices, which resulted in electricity bill increases of between 5 and 6 percent for consumers.

This percentage increase in the cost of PPC’s electricity bills is expected to be lowered as a result of the switch to a wholesale market clause and the accompanying 30 percent discount.

PPC asked to replace CO2 clause with wholesale clause

Power utility PPC is facing pressure by RAE, the Regulatory Authority for Energy, to replace its CO2 emission rights price clause with a wholesale electricity price clause adopted by all rival suppliers.

PPC’s decision to activate, early in May, its CO2 emission rights clause in response to rallying CO2 emission right prices has prompted regulatory issues, the authority contends.

PPC was asked, late last month, to explain its decision, as part of a series of meetings organized by the authority with all  suppliers.

RAE, demanding detailed data, is examining whether irregularities exist, the legality of these clauses, and if consumers have been misled.

Independent suppliers have also needed to explain their decisions to activate wholesale price clauses included in  supply agreements. Like CO2 emission right prices, wholesale electricity price levels have also risen.

The authority has received numerous complaints by consumers over costlier electricity bills.

PPC’s low-voltage power bills have risen by levels of between two and three euros since its activation of the CO2-related clause.

Though PPC, the dominant retail player, was the last to activate its clause, it was the first to be summoned by RAE.

CO2 emission right prices have persisted at elevated levels of over 52 euros per ton in recent times, peaking with a record high of 56.65 euros per ton on May 14, before easing slightly in recent days. CO2 emission right prices dropped to 50.14 euros per ton yesterday.

 

Lignite-fired power stations still operating despite elevated cost

Despite their increased operational cost, power utility PPC’s lignite-fired power stations remain essential, on an occasional basis, to ensure electricity supply security by countering various concerns that may arise, including voltage instability at the grid’s northern section.

Power grid operator IPTO needed to bring into the system one or two lignite-fired power stations throughout most of May, despite the high cost entailed, which would normally keep these units sidelined.

No lignite-fired power stations needed to be used for grid sufficiency on May 13 and 16, as is also the case for today.

The northern section of the country’s grid can be susceptible to voltage instability as a result of the international grid interconnections in the wider area, facilitating exports.

Until recently, northern Greece’s west Macedonia region was the country’s energy epicenter, courtesy of PPC’s extensive lignite portfolio in the area.

Regular use of higher-cost lignite-fired generation has increased price levels in the day-ahead and balancing markets, which, by extension, is increasing costs for suppliers.

PPC’s increased CO2 emissions, when the utility’s lignite-fired power stations are brought into operation, is also directly impacting industrial consumers, who are burdened by the resulting additional cost, passed on by the utility.

CO2 costs have risen sharply of late as a result of rallying carbon emission right costs.

PPC aims for EBITDA repeat of €900m, carbon cut ‘on track’

Power utility PPC is aiming for a repeat of last year’s EBITDA performance in 2021, a level of between 800 and 900 million euros, an objective to be supported by the corporation’s declining lignite-based electricity generation, both in terms of volume and energy-mix percentage, the company’s chief executive Giorgos Stassis has told analysts.

As part of its decarbonization effort, PPC plans to withdraw its Megalopoli III lignite-fired power station within the current year.

PPC managed to restrict its lignite-fired generation to 22 percent of total output in the first quarter this year, down from 44 percent a year earlier.

The utility needed to spend 138.5 million euros on CO2 emission rights in the first quarter, up from 119.7 million euros during the equivalent period last year, at an average cost of 31.7 euros per ton.

CO2 emission right prices have since risen further and currently register between 51 and 52 euros per ton.

Assuming CO2 emission right prices average 47 euros per ton in 2Q – this level could end up being be far higher – and PPC’s lignite-based generation remains at the current level, then the corporation’s carbon-cost outlay for this quarter will reach approximately 205 million euros, a 48 percent increase.

PPC, which recently borrowed through sustainability-linked bonds, committing itself to a carbon emission reduction of 40 percent by 2022, is confident this target will be achieved, the corporation’s administration told analysts.

 

Ptolemaida V gas conversion board decision end of June

Power utility PPC is moving swiftly towards a finalized investment decision on a fuel-conversion plan for its prospective Ptolemaida V facility in northern Greece, to begin operating as a lignite-fired power station in 2022 before converting, a few years later, to a natural gas-fired facility equipped with infrastructure also enabling the use of hydrogen.

PPC’s chief executive Giorgos Stassis will present the plan to the company board at a meeting scheduled for the end of June, when it is expected to be approved, sources informed.

The plan will include schedules and financial studies for the conversion of Ptolemaida V, Greece’s last lignite-fired power station in development.

The PPC board is expected to stick to its plan of operating Ptolemaida V as a lignite-fired power station until 2025, instead of 2028, as was initially planned, before making the fuel switch to natural gas.

The country’s ambitious decarbonization targets and rallying CO2 emission right prices, currently at lofty levels ranging between 40 and 44 euros per ton, prompted Stassis, the CEO, to hasten PPC’s withdrawal of lignite units.

Ptolemaida V will be loss-incurring as a lignite-fired facility, the chief executive told analysts, responding to questions, during a recent presentation of the company’s financial results.

PPC also plans to increase the production capacity of Ptolemaida V to 1,000 MW from 660 MW. The facility will be flexible, possessing the ability to swiftly increase output from 300 to 1,000 MW within 30 minutes to an hour.

The facility’s fuel conversion cost is estimated at 250 million euros, sources have informed.

Stassis told analysts Ptolemaida V will be competitive even without support from the Capacity Remuneration Mechanism (CRM), being sought by the government from the European Commission as support for flexibility.

 

Mytilineos considering new gas-fired power units in Balkans

The Mytilineos group is examining the prospect of developing natural gas-fired power stations in Bulgaria and North Macedonia, seeing investment opportunities, like Greece’s other major energy players, in the Balkan region.

EU members Bulgaria and Romania, as well as non-EU members in the Balkan region, such as Albania, North Macedonia and Serbia, are announcing closures of old coal-fired power stations.

This development is creating investment opportunities as older units being withdrawn will, over the next few years, need to be replaced by new facilities, including natural gas-fired power stations.

A month ago, after receiving equipment for a new gas-fired power station unit in Agios Nikolaos, Viotia, northwest of Athens, Mytilineos informed that the company is examining the prospect of developing a similar combined cycle unit in Bulgaria.

Bulgaria, like Greece, is withdrawing its coal-fired power stations and aims to have completed the country’s decarbonization effort by 2025. The neighboring country will need to replace lost capacity through the introduction of natural gas-fired power stations and RES unit investments.

Extremely higher carbon emission right costs have made the withdrawal of coal-fired power stations a priority for Bulgaria and the wider region, one of Europe’s most lignite-dependent areas.

Greece, Bulgaria and Romania, combined, represent nearly ten percent of the EU’s total lignite electricity generation capacity.

Carbon emission right prices relaxed to 49.26 euros per ton yesterday after peaking at 56.65 euros per ton last Friday, following a months-long rally.

Last week, during a meeting with Greek Prime Minister Kyriakos Mitsotakis, North Macedonian leader Zoran Zaev disclosed that his government is discussing the prospect of a new gas-fired power station, in the neighboring country, with Mytilineos.

In Romania, projections for 2030 estimate the installation of 5.2 GW in wind energy units and approximately 5 MW in solar energy units.

Serbia, possibly offering even bigger green energy investment opportunities, aims to replace 4.4 GW of coal-fired generation by 2050. The country is now making plans for 8-10 GW in RES investments.

Brussels green taxes, CBAM to prompt energy market changes

Tax incentives for eco-friendly energy technologies and disincentives for polluting energy sources such as carbon and petroleum products, feature in the European Commission’s imminent package of eco-related taxes, while, for trade relations with non-EU countries, a Carbon Border Adjustment Mechanism will include penalties for a series of imports, including electricity.

The package of tax incentives, to be announced on July 14, will prompt major changes in Europe’s energy market, hastening developments towards a greener economy. Without a doubt, reaction by unhappy players can be expected.

Lignite will become an even more costly energy source as a result of the measures. Gasoline, other auto fuels and heating fuels may be spared of extra levies as existing Greek fuel tax rates are already among Europe’s highest, well over the EU average.

Implementation of the tax measures may take until 2023 as European Parliament and the EU-27’s national parliaments will all need to ratify the package before it can be introduced.

The arrival of these tax measures is expected to immediately lift carbon emission right prices to even higher levels. Already soaring, they exceeded 53 euros per ton yesterday, and, according to analysts, could end up reaching as high as 100 euros per ton, as was noted by power utility PPC’s chief executive Giorgos Stassis, at yesterday’s Delphi Economic Forum.

Beyond the EU borders, the European Commission will introduce a Carbon Border Adjustment Mechanism, to apply for the EU’s relations with non-EU members. This mechanism could spark political tension, even trade wars.

It will aim to protect European industry from unwanted competition in sectors such as the energy, steel, aluminium, cement and fertilizer industries by increasing the cost of imports from non-EU areas and countries without CO2 right markets, such as the west Balkans, Turkey, India and China.

The CBAM is also expected to be introduced in 2023.

Wholesale electricity price ascent a major concern for industry

Wholesale electricity market prices have made further increases in recent times, driven by rising carbon emission right prices, which have exceeded 50 euros per ton.

Over the past few days, not including Sunday, the wholesale market’s day-ahead price rose well above 60 euros per MWh on energy exchange, reaching as high as over 72 euros per MWh last Thursday.

Besides the impact of increased carbon emission right prices, the energy market is also being pressured by higher gas prices, driven by greater usage of natural gas-fueled power stations being anticipated.

Natural gas prices have risen from 16 to 23 euros per MWh over the past few days.

This increase in wholesale electricity prices is directly impacting the retail electricity market, energy-intensive industrial consumers, both in the medium and high-voltage categories, already feeling the effects.

Given the energy market’s current uncertainty, suppliers are limiting the duration of contracts offered to three months.

The industrial sector is voicing concern about ambiguity ahead and rising energy costs that threaten to severely undermine the competitiveness of producers.

The activation, by suppliers, of carbon emission cost clauses included in agreements have increased industrial electricity prices by as much as 20 euros per MWh in recent times.

Though the industrial sector is compensated for this additional cost, compensation calculations are based on the previous year’s price levels, meaning industrial enterprises will end up covering a large percentage of the recent electricity cost increase.

Based on latest calculations, industrial enterprises will be compensated just 9 euros per MWh for the recent 20 euro per MWh hike.

PPC triggering carbon cost clause as CO2 right prices soar

Higher wholesale electricity and carbon emission right prices are applying sustained pressure on the electricity market, forcing suppliers to continue activating related clauses incorporated into customer supply terms.

Over the next 12 months, wholesale electricity price levels are forecast to rise to 89 euros per MWh in the low-voltage category and roughly 79-80 euros per MWh in the medium-voltage category.

In response to an ongoing surge in CO2 emission right prices, power utility PPC recently decided to finally activate a CO2-related clause after holding back for months. The move is seen increasing the cost of PPC’s electricity bills to be issued in May by two to three euros, sources told energypress.

CO2 emission right prices reached a new record level of more than 52 euros per MWh yesterday, rising by nearly 3 percent in a day. They have approximately doubled over the past six months and registered a 23 percent increase in the last month, alone.

In February, PPC had announced it would not trigger a CO2-related clause for low-voltage supply, but has now been forced to do so as a result of this persisting rise in price levels.

The more recent rise in CO2 emission right prices has been attributed to several factors, including a gradual rise in consumption levels as the European economy begins to recover, weather conditions, and a new, more ambitious, EU carbon emission reduction target, set last month, of at last 55 percent by 2030.

Consumers returning to PPC, led by wholesale-linked hikes

Higher wholesale electricity prices, prompting independent suppliers to activate wholesale-cost clauses included in their supply agreements to avoid losses, are tightening up the market by leading disappointed consumers back to the power utility PPC, a clear regression in the effort to establish a broader, more competitive field of players, latest data has indicated.

Consumers opting to leave independent suppliers and return to PPC rose by 56 percent in the first quarter of 2021 compared to the equivalent period a year earlier, market data obtained by energypress has shown.

The number of consumers leaving independent suppliers for any other supplier increased by approximately 40 percent in the first quarter of 2020, the data showed.

This increase in consumer returns to PPC is expected to be reflected in forthcoming market-share data, market officials believe.

Last year, the wholesale market price, represented, at the time, as the system marginal price, ended April last year at 38.02 euros per MWh, whereas this year, in the form of the recently launched target model’s day-ahead market, the wholesale price in April has exceeded 63 euros per MWh.

Increased CO2 emission right costs and elevated TTF and Brent prices are factors that have driven wholesale electricity prices higher. So, too, are higher balancing costs, currently more than double levels of previous years.

Wholesale electricity prices for the next twelve months are seen averaging 89 euros per MWh in the low-voltage category and 79-80 euros per MWh in the medium-voltage category.

PPC, which has never achieved its commitment to lower its market share to less than 50 percent, is offering customers significant discounts at below cost, and, as a result, hampering the market liberalization process and further narrowing the profit margins of independent suppliers, a prominent market official has told energypress.

RAE, the Regulatory Authority for Energy, has the authority and responsibility to take action against suppliers selling electricity at  below cost and protect consumers against misleading offers, the official added.

PPC results for 2020 out today, analyst projections disagree

Power utility PPC’s financial results for 2020, set to be announced later today, are seen confirming the corporation’s ongoing positive course.

The company is expected to report robust 4Q results for 2020, including an EBITDA figure of 238 million euros, according to Pantelakis Securities, given its performance for the nine-month last year.

Operating expenses have been contained, fuel prices plunged, wholesale electricity prices fell, and the utility’s reliance on its loss-incurring lignite units was further diminished during the nine-month period.

For 2020 as a whole, the analyst projects PPC’s EBITDA will reach 938 million euros, a 180 percent increase compared to the 336.6 million euros posted in 2019, as a result of higher tariffs, lower energy purchase costs and reduced CO2 emission right expenses.

The extraordinary market conditions last year were favorable for PPC, the analyst pointed out, as the pandemic-related reduction of electricity demand enabled the utility to stop operating its high-cost lignite-fired power stations for extended periods.

PPC is currently phasing out its lignite facilities, until 2023, as part of the country’s decarbonization effort. CO2 emission right costs have begun rebounding since December.

Pantelakis Securities expects PPC’s sales to fall by 10 percent in 4Q to a level of 1.191 billion euros, while net profit for the fourth quarter is estimated at 39 million euros.

For 2020 as a whole, total turnover is expected to fall by 4 percent, year-on-year, to 4.71 billion euros and net profit is anticipated to be 53 million euros.

PPC’s net debt for 2020 is seen slipping to 3.5 billion euros from 3.68 billion euros at the end of 2019.

Optima Bank sees a less favorable picture for PPC’s 2020 results, projecting losses of 79 million euros, well below losses of 1.68 billion euros in 2019, and a total turnover reduction of 5.5 percent, to 4.655 billion euros.

 

PPC compensation mechanism, market test talks at crucial stage

The European Commission is expected to show its cards next week on Greece’s quest for lignite compensation mechanisms supporting power utility PPC and the results of a market test concerning the utility’s availability of lignite-produced electricity to third parties.

These issues are expected to be discussed in detail by energy ministry and Directorate-General for Competition officials during a virtual meeting next week, following correspondence as well as a virtual meeting, on March 8, between energy minister Kostas Skrekas and the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition.

State-controlled PPC has requested a strategic reserve mechanism for its lignite-fired power stations, still needed but nowadays loss-incurring as a result of higher CO2 emission right costs, as well as compensation for its premature closures of these units, currently being phased out until 2023.

All still appears to be vague on PPC’s market test for third-party access to its lignite-based electricity. The test was completed some time ago, failing to attract any real interest from rival suppliers.

The percentage of lignite-based electricity made available by PPC, initially set at 50 percent of total lignite-fired output and then lowered to 40 percent, is viewed, by third parties, as too small for any real gains.  Brussels has yet to comment on the market test’s result.