Continued energy subsidies a tough equation, fewer funds, higher prices

Government officials face a growing challenge in their effort to continue subsidizing electricity and natural gas for household and business consumers as funds backing this support are decreasing at a time when energy prices have continued rising.

According to sources, the government is looking to extend its subsidy package for households and businesses to also cover April.

Wholesale electricity prices have continued their ascent during the first ten days of March, well above levels in February, while reduced CO2 emission right prices are restricting cash injections into the Energy Transition Fund, funding the subsidies.

The wholesale electricity price average for the first ten days of March is 322 euros per MWh, well over February’s average of 211.71 euros per MWh. During this period, CO2 emission right prices have dropped to 60 euros per ton from 80 euros per ton.

Prime Minister Kyriakos Mitsotakis has called for a price ceiling to be imposed on the Dutch TTF gas exchange.

Energy markets are forecast to remain volatile as a result of Russia’s invasion of Ukraine.

Gov’t utilizes EU terms to offer PPC lignite units more time

The government has utilized flexible terms in European law, expiring tomorrow, concerning high-polluting power stations to secure a further extension for power utility PPC’s lignite-fired power stations, through additional operating hours, which, in some cases, could stretch as far forward as 2025.

Even so, the power utility insists this initiative will not change the corporation’s withdrawal plan for its lignite-fired power stations, according to which all existing units will be withdrawn by the end of 2023.

PPC, in an announcement, has informed that the additional operating hours secured for lignite-fired power stations will be used within the time limits of respective withdrawal plans that exist for units.

The power utility has avoided using its lignite-fired power stations to full capacity, even though they have developed into lower-cost options than natural gas-fueled power stations.

Under the current market conditions, wholesale electricity prices may have been lower if PPC used its lignite-fired power stations more frequently.

Greater use has been avoided by PPC as these units remain loss-incurring for the power utility given the increasing prices of CO2 emission rights and a variety of technical difficulties, sources told energypress.

 

CO2, natural gas prices soaring, no end in sight for energy crisis

CO2 emission right prices climbed to a new record level yesterday, peaking at over 90 euros per ton before retreating to approximately 80 euros per ton, while, similarly, natural gas prices once again rose to over 100 euros per MWh after having eased to levels of up to 85 euros per MWh late in November.

These latest price trends dispel any projections of an imminent end in the energy crisis as both CO2 emission right prices and natural gas prices are pivotal factors in the determination of wholesale electricity prices.

The energy crisis appears set to remain for at least this winter, which will hurt economies and increase inflation rates, reemerging as a serious concern in the EU after many years.

Wholesale electricity prices remain well over 200 euros per MWh throughout Europe.

In Greece, today’s wholesale electricity price is 231.83 euros per MWh, with the December average for the country currently at 226.99 euros per MWh, slightly below the November average.

The highest price in Europe for today was registered in Switzerland, at 270.25 euros per MWh, followed by Italy at 256.32 euros per MWh, France at 247.19 euros per MWh, Serbia at 246.45 euros per MWh, and Croatia and Slovenia, both registering 244.25 euros per MWh.

 

Electricity bills now hit by record CO2 prices, at over €81 per ton

CO2 emission right prices are soaring, breaking one record after another to exceed levels of 81 euros per ton and looking likely to rise even higher, which comes as a new round of upward pressure for household and business electricity bills, already severely impacted by the surge in natural gas prices.

CO2 emission right prices have now doubled since April, when prices were at levels of about 40 euros per ton.

CO2 emission right prices are now approaching the levels reached by natural gas on the Dutch TTF platform, seen reaching levels of between 80 and 90 euros per MWh in the short term.

Though electricity price levels have slightly deescalated so far in December, to 217.26 euros per MWh from 230 euros per MWh five days earlier, will make little difference to retail prices, analysts have noted.

Energy company officials believe a a drop in electricity prices is possible in spring, but not all the way down to pre-energy crisis levels.

These officials are also anticipating energy crises to become a regular occurrence that will keep pressuring households and businesses.

 

PPC ’21 operating profit virtually unchanged at €800-850m

Power utility PPC is headed for an operating profit of between 800 and 850 million euros for 2021, marginally below the previous year’s level, despite the impact of the energy crisis on outlays in the third quarter, the corporation’s administration has informed analysts during a presentation of results for the nine-month period.

PPC’s outlays for natural gas, energy and CO2 emission right purchases rose by an overall 629 million euros in the first nine months, to a level 37 percent higher than the total registered for the equivalent period in 2020, PPC officials reported.

Natural gas outlays were up 119.8 percent, reaching 452.7 million euros from 206 million euros.

PPC’s outlays for liquid fuels increased by 14.7 percent in the first nine months to 410.2 million euros, compared to the equivalent period in 2020, as a result of higher prices for mazut (8.9%), diesel (8.4%) and increased generation powered by liquid fuels.

The corporation’s CO2 emission right outlays surpassed all other expenses, reaching 539.4 million euros in the nine-month period of 2021 from 263.1 million euros during the same period a year earlier.

 

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.