CO2 emission rights

RES generation in EU captures record share of energy mix

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Renewable energy generation captured a record-high 35 percent share of the EU’s energy mix in the fourth quarter of 2019, up from 31 percent a year earlier, primarily as a result of record generation levels registered by the hydropower and wind energy sectors, latest European Commission data has shown.

Hydropower production rose significantly, by over 16 TWh year to year, while major gains were achieved by the wind energy sector, whose onshore wind farms grew by 9 TWh, or 9 percent year to year, and offshore wind farms registered a record year-to-year increase of 3.3 TWh, 18 percent.

Overall RES generation in December totaled 105 TWh, a new record level for the month, as a result of favorable conditions for wind farms and record hydropower production levels.

On the contrary, the energy mix share of fossil fuel fell to 39 percent in the fourth quarter of 2019, down from 42 percent a year earlier.

Greenhouse gas emissions in EU electricity generation fell by approximately 12 percent in 2019 as a result of the increase in RES production and a turn from coal to gas.

CO2 emission right costs increased by 57 percent year to year, to 25 euros per ton, according to the European Commission data.

 

 

Natural gas, LNG, CO2 right, wholesale power prices down

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Besides lower oil prices in international markets over the past few days as a result of the coronavirus spread and price war between Saudi Arabia and Russia, energy commodities across the board are under great pressure, which has led to price reductions for natural gas, CO2 emission rights and electricity.

Lower oil and gas prices are offering relief for the economy and enterprises. However, there are two sides to this story, positive and negative. On the one hand, the price drops are creating opportunities for suppliers and consumers, while, on the other, natural gas futures indicate a decline until the end of the third quarter this year, meaning markets anticipate a downward trajectory in Chinese consumption and no sign of an economic rebound until at least September.

Prices at the Dutch trading platform TTF, a key index for LNG, slid to a three-month low on Monday, registering 8.627 dollars per MMBTU, before edging up to 8.993 dollars per MMBTU yesterday. This index has fallen 39.4 percent since the end of December’s three-month peak of 14.2 dollars per MMBTU.

Besides shaping LNG prices, according to new pricing formulas adopted at Gazprom, the TTF also greatly influences the rise of Russian pipeline gas.

CO2 emission right prices have fallen by 13.6 percent between December and early February, from 26.74 euros per ton to 23.11 euros per ton. A slight rise has been registered this week, to 23.25 euros per ton on Monday and 24.07 euros per ton on Tuesday. Lower prices on this front are favorable for lignite-fired power stations as well as energy-intensive industries.

Prices have also fallen in Greece’s wholesale electricity market. In the day-ahead market, the System Marginal Price (SMP) fell from 49.2 euros per MWh on Friday to 41.42 euros per MWh on Monday before edging up to 43.12 euros per MWh yesterday. A rise to 50.44 euros per MWh is expected today.

 

Authority wants to end virtually all power bill price clauses

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RAE, the Regulatory Authority for Energy, has prepared a plan aiming to abolish all price-related clauses included in electricity bills except for one linked with fluctuations of the System Marginal Price (SMP), or the wholesale electricity price, sources have informed.

The overall objective of this plan, which could be forwarded for public consultation within the next few days, is to offer full transparency to consumers on procedures determining their electricity bill costs.

An existing clause enabling electricity suppliers to revise prices in accordance with CO2 emission cost levels would need to be abolished if the plan is implemented. Power utility PPC has already triggered this clause in reaction to rising CO2-related costs.

The existing SMP clause, currently triggered by all suppliers except for PPC, will be subject to strict rules, enabling consumers to know the cost of their bills with simplicity and precision by  factoring the SMP price into a formula for an immediate result, according to the RAE plan.

The complexity of the current billing system makes it difficult for consumers to make safe comparisons of supplier offers.

RES sector seen dominating electricity generation by 2050

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The renewable energy sector is forecast to be in a clearly dominant position by 2050, especially in electricity generation, projections involving various scenarios agree.

The RES sector’s share reaches levels of 82 percent in 2050, driven by favorable policies anticipated for the sector, according to projections.

A reduction of renewable energy investment costs combined with a continual increase in CO2 emission right costs, within the ETS framework, is anticipated in all projections, justifying the spectacularly increased presence of the renewable sector in electricity generation over the coming decades.

Projections for considerably higher CO2 emission right costs between 2030 and 2050 result from the Market Stability Reserve (MSR), implemented automatically until 2050, according to EU law.

The anticipated ascent of the renewable energy sector in electricity generation is also expected to sharply boost other RES domains concerning heating, cooling and transport.

 

 

Higher-cost lignite sidelining gas units a Greek market paradox

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Greece’s wholesale electricity market is still adjusting as, despite sharp rises in CO2 emission right costs, lignite continues to play a leading market role. Contributions from lower-cost gas-fueled generators remain subdued.

A recent drop in temperatures around the country has led to wholesale electricity market demand peaks of more than 7,500 MW since the beginning of December, up from previous demand peaks ranging from 6,000 to 6,100 MW.

According to the energy exchange’s day-ahead market data, virtually all of the power utility’s coal generators are contributing to distribution without operating at full capacity. Instead, they are running at minimum levels. This is reducing the need for gas-fueled generators.

Yesterday, PPC’s Agios Dimitrios III, IV and V, Kardia III and IV, Amynteo I and Meliti all operated at minimum levels, while the contribution of gas-fueled generators was kept to a minimum. Sidelined units included Heron, ENTHES, Aliveri and Komotini, while Protergia and Korinthos Power units contributed only during peak demand hours.

The picture for today remains unchanged with the System Marginal Price (SMP), representing the wholesale price, at 63 euros per MWh, as was the case yesterday. Before the recent increase in demand, SMP levels ranged between 50 and 55 euros per MWh.

Power grid operator IPTO, offering an explanation for the ongoing dominance of coal over gas, despite the rising demand in the wholesale market, noted that turning off and withdrawing a lignite-fired power station – except for telethermal units – costs more than leaving a gas-fired power station sidelined without distribution input.

For PPC, the objective is to maintain the SMP at low levels as the utility is required to purchase energy from the pool given its big market share in supply and smaller share in production.

PPC implements CO2 cost clause, tariffs still unchanged

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Power utility PPC has implemented a clause enabling tariff hikes if CO2 emission right costs exceed limits, and vice versa, beginning November 1, as had been announced by state-controlled corporation and the energy ministry.

Even so, no tariff hikes are seen in the next few months, according to sources at PPC and the ministry, but cost increases cannot be ruled out after winter.

For the time being, PPC’s tariff prices remain unchanged at levels set on September 1.

Meanwhile, RAE, the Regulatory Authority for Energy, is soon expected to reach decisions on various cost-related clauses adopted by electricity suppliers. Public consultation was staged last Spring to examine the level of transparency of surcharges included on electricity bills.

The authority is expected to soon decided on a standard formula for CO2-related clauses, sources informed.

RAE is also examining whether PPC’s CO2 clause breaches any supply code rules, sources added.

Additional energy costs a big concern for mid-voltage manufacturers

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CO2 emission cost charges have developed into a major concern for mid-voltage manufacturers following recent market changes such as electricity tariff hikes and a reduced punctuality discount, offered when bills are paid on time.

The operating details of a CO2 emission cost adjustment mechanism, prompting charges that do not reflect actual costs, are seen as the main problem by manufacturers.

These charges are revised when CO2 emission right cost increases are greater than 10 percent and remain unchanged when the emission charge change is less than 10 percent.

As a result, the current system is leading to charges that do not reflect actual costs.

Electricity tariff changes for medium-voltage manufacturers, especially the termination of a CO2 emission cost discount, have increased their energy costs by 11 to 12 percent, making them less competitive.

The majority of these manufacturers are exporters and risk losing foreign markets, which would decrease production levels and place jobs at risk.

The issue is a concern for some 30 Greek manufacturers employing thousands and needing to overcome energy costs that represent between 30 and 40 percent of total production cost.

“Authorities need to understand that a measure prompting 10 percent electricity price increases or decreases is of little significance to an enterprise whose electricity cost represents just 2 percent of production cost, for example, but, on the other hand, is huge for an enterprise whose electricity cost represents 40 percent of production cost,” a leading industrialist told energypress.

Expanded NECP committee set for inaugural meeting Thursday

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An expanded special committee formed late last month and tasked with preparing a new National Energy and Climate Plan, expected to feature more ambitious RES targets, is scheduled to hold its first official meeting this Thursday.

The committee will need to complete its task swiftly so that Greece’s revised NECP can be forwarded to the European Commission following official approval from KYSOIP, the Government Council for Economic Policy, by the end of the year.

Besides ministerial secretary-generals, the expanded committee, headed by deputy energy minister Gerassimos Thomas, now also includes the chief official at RAE, the Regulatory Authority for Energy, as well as civil, chamber and specialized energy and climate representation.

The new NECP, to feature the government’s energy policy priorities, will also take into account European Commission recommendations forwarded in June, in response to an initial plan submitted by Greece to Brussels early this year.

Promising guidance to the public and private sectors for energy and climate initiatives up to 2030, the new plan will incorporate national commitments announced by Prime Minister Kyriakos Mitsotakis at the recent UN climate action summit in New York.

Greece’s decarbonization, required as a result of new market conditions prompted by increased CO2 emission right costs; utilization of the country’s RES potential; and energy efficiency improvement will constitute the main aspects of the new NECP, Thomas, the deputy energy minister, has noted.

PPC retail dominance, lower production has cost plenty

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Power utility PPC is paying the price for a paradoxical and distorted business model combining retail electricity market dominance with a low share of electricity generation – a structure created by the state-controlled corporation and supported by a succession of governments over the years – latest financial results have indicated.

The power utility’s retail electricity market share remains dominant, at 73.9 percent, but its share of electricity production is far lower, at 43.4 percent.

The inability of the power utility’s power stations to generate sufficient electricity needed to cover its retail needs has forced the corporation to make high-cost wholesale energy purchases.

This, combined with NOME auctions, obligating PPC to offer lower-cost electricity to rival suppliers over the past three years; high-priced CO2 emission rights, needed as a result of the utility’s considerable lignite-based production; a sharp drop in hydropower output; as well as a sharp price increase of fuel and gas, all contributed to the disappointing first-half results.

PPC’s overall cost for fuel, gas, CO2 emission rights and lignite surcharges increased by a total amount of 494.1 million euros, or 42.3 percent, in the first half compared to the equivalent period a year earlier, the first-half results showed.

McKinsey’s new PPC business plan to feature major changes

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Consulting firm McKinsey, set to prepare a new five-year business plan for power utility PPC, will base its proposals on three key factors: CO2 emission right costs;  lignite-fired units that should remain active or withdrawn; and the resulting impact of these decisions on the grid’s sufficiency.

The study, whose preparation will soon get underway, is expected to end up featuring major changes compared to a previous set of proposals as PPC’s current financial condition has deteriorated compared to early in 2018, when the previous business plan was delivered.

It had called for an improvement of the corporation’s operating profit by 500 million euros over a five-year period. The current demands are far more challenging.

The previous business plan, which was based on eight fronts, placed emphasis on renewable energy investments, new business activities, international expansion and overall investments totaling 3.9 billion euros, approximately half of which would have been channeled into networks and the RES sector. A 23 percent share of the investments was planned for the construction of a new lignite-fired power station, Ptolemaida V. Major changes are now expected along all these fronts.

A tougher stance on unpaid receivables; a plan entailing the partial sale of DEDDIE/HEDNO, the distribution network operator; and pricing policy adjustments are expected to feature in the new plan.

McKinsey’s examination to determine which lignite-fired power stations must keep operating or be withdrawn is expected to generate a voluntary retirement list of 2,000 employees.

If so, severance pay costs for PPC will amount to 30 million euros, as employees are currently entitled to 15,000-euro payments for early retirement.

 

 

Households, businesses to cover bulk of PPC rescue plan’s cost

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Households and businesses using low and medium-voltage electricity will shoulder most of the weight of a rescue plan prepared for troubled power utility PPC as these consumer groups  will end up covering 350 million of 490 million euros in additional revenues to be generated by the plan’s revised pricing policy.

Of this 350 million-euro amount to be covered by households and businesses, 250 million will stem from tariff hikes; 68 million will result from a punctuality discount reduction for low-voltage consumers; 16 million from a punctuality discount cut for medium-voltage consumers; and 16 million euros from the termination of a punctuality discount offered for CO2 emission right costs in the medium-voltage category.

PPC’s electricity tariff hikes, just introduced, include a 16.8 increase to 0.11 euro per kWh for consumption up to 2,000 kWh. A 16.5 percent tariff hike has been imposed on consumption of 2,000 kWh and over, taking the rate to 0.11946 euro per kWh.  Nighttime tariff rates have been increased by 19.4 percent to 0.07897 euro per kWh.

A RES-supporting ETMEAR surcharge included on electricity bills has been reduced by 25 percent to 0.017 euros for low-voltage household consumers to partially offset the tariff hikes.

The aforementioned rate revisions, along with a VAT reduction from 13 to 6 percent on electricity bills, will result in annual electricity cost increases of between 30 and 60 euros for consumers requiring 3,300 kWh.

Sharp rise in wholesale, CO2 right costs behind tariff hikes

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Increased System Marginal Prices (SMP), or wholesale electricity prices, and CO2 emission right costs are key factors behind the power utility PPC’s substantially higher operating costs, negative impact on the corporation’s financial results, and the resulting need to increase electricity tariffs, the utility’s new chief executive Giorgos Stassis is expected to underline at a board meeting tomorrow.

PPC’s pricing strategy and policy is shaped by a series of factors concerning the overall production and trade cost estimates of the vertically integrated company, the chief executive’s address is expected to stress.

The wholesale electricity price average for 2019 is estimated at 67.15 euros per MWh, up from 60.33 euros per MWh in 2018 and 54.70 euros per MWh in 2017, according to official industry data. A further rise, to 70.33 euros per MWh, is expected in 2020.

The CO2 emission right cost average for 2019 is projected to be 25.70 euros per MWh, a sharp rise from 14.68 euros per MWh in 2018 and 5.84 euros per MWh in 2017, according to the industry data. This cost is expected to escalate further, to 30.25 euros per MWh, in 2020.

Details of PPC’s CO2 rights clause enable ‘tariff hikes only’

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Technical details of a clause triggering electricity tariff hikes when CO2 emission right costs increase to certain levels will not enable price adjustments in the opposite direction, for tariff reductions should emission right costs deescalate, power utility PPC’s chief executive Giorgos Stassis is expected to explain to the company board at a meeting tomorrow.

“This clause will not apply for any other situation [other than CO2 emission right cost increases],” the utility’s boss’s address is expected to note.

The resulting extra charges will not be subject to any discount offered by PPC, not even the remaining 5 percent of its punctuality discount, being lowered from 10 percent.

PPC, under financial pressure, is adopting a series of measures designed to boost the  company’s revenues.

EVIKEN, the Association of Industrial Energy Consumers, has criticized the power utility for lack of transparency in its calculations of the CO2 emission right costs clause for the medium and high-voltage categories.

Adding to the negative reaction, it is believed that RAE, the Regulatory Authority for Energy, has forwarded a related letter to PPC contending its CO2 emission right costs formula is not fully substantiated.

 

Independent suppliers adjusting policies in view of PPC hikes

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The country’s independent electricity suppliers, sensing opportunity for retail market share gains amid greater competition as a result of power utility PPC’s imminent tariff hikes, are looking at making price adjustments to capitalize on these changes.

The upcoming electricity tariff hikes by PPC, still the dominant player, will bring to an end distorted market conditions prompted by the utility’s refusal to adjust its pricing policy to considerably higher wholesale electricity costs.

Though the final price comparisons of packages – including surcharges and taxes – to be offered by suppliers will ultimately differ very little, as PPC intends to partially offset its tariff hikes with surcharge reductions, the independent suppliers will be keen to focus on tariff prices, specifically, and take advantage of the power utility’s hefty tariff increases.

PPC’s tariff hikes will range from 21.5 to 24.5 percent. This promises considerable leeway for independent suppliers to shape more aggressive pricing policies in the retail battle against the power utility.

PPC’s anticipated adoption of a clause triggering further tariff hikes should CO2 emission right costs exceed certain levels, and vice versa, is another favorable development for the independent suppliers as the stigma associated with their preceding implementation of this measure will be diluted.

The ambiguous immediate future of NOME auctions is a negative factor that spoils the otherwise favorable scene for independent suppliers. This ambiguity injects an element of risk to the plans of independent players for pricing policy adjustments.

It remains unclear if the year’s final NOME auction, scheduled for October, will take place. Energy minister Costis Hatzidakis has noted he intends to negotiate the  termination of NOME auctions with the European Commission.

State-controlled PPC would prefer that the October session does not take place, whereas independent suppliers see this disputed session as one more opportunity to stock up on lower-cost wholesale electricity, even at higher starting prices, for a certain period, which would further boost their level of competitiveness.

 

PPC tariff hike over 15%, to be partially offset by surcharge cut

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Electricity tariffs at power utility PPC, financially pressured and in need of a cash inflow boost, will be increased by over 15 percent and partially offset by a reduction of a RES-supporting ETMEAR surcharge included on electricity bills, the state-controlled corporation’s administration and the energy ministry have decided, reliable sources have informed.

Still a tightly kept secret, the details of PPC’s tricky equation, aiming for a significant increase in revenues while limiting the burden on consumers and also protecting RES production payments, will be presented tomorrow at Greek Parliament’s Committee on Production and Trade.

Besides sizable tariff hikes, PPC’s revised pricing policy is expected to include a clause triggering further tariff increases should CO2 emission right costs escalate in international markets – and vice versa.

In addition, a punctuality discount offered by PPC to customers paying electricity bills on time is expected to be roughly halved from its current level of 10 percent as part of the effort to boost revenues.

Meanwhile, as a means of softening the overall impact on consumers, the RES-supporting ETMEAR surcharge included in electricity bills is expected to be reduced to roughly 17 euros per MWh from the current level of 22.67 euros per MWh, a 25 percent reduction.

Decisions will be made official at a PPC board meeting this Friday and implemented September 1.

PPC, needing cash inflow, to scrap 10% punctuality discount

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Power utility PPC, shaping a more aggressive pricing policy as a result of its need to boost cash inflow, is preparing to abolish most or all of its 10 percent punctuality discount, offered to customers paying their electricity bills on time.

The power utility is also looking to adjust tariffs for various consumption categories, while the implementation of a clause triggering price hikes when CO2 emission right costs exceed certain levels is now seen as a certainty.

State-controlled PPC needs to have finalized its rescue plan by early September, ahead of an upcoming report from Ernst & Young, the utility’s certified auditor, on September 24.

The government wants a reduction of a RES-supporting ETMEAR surcharge included on electricity bills in order to offset electricity price hikes.

PPC’s recently appointed CEO, Giorgos Stassis, who will be officially approved at an extraordinary shareholders’ meeting tomorrow, faces the challenging task of ensuring greater cash inflow for the utility while concurrently reducing surcharges.

Stassis could offer some clarification, during tomorrow’s meeting, on various models being examined by the government.

New PPC board, approved this week, needs to move fast

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Power utility PPC’s shareholders will approve the corporation’s new CEO, Giorgos Stassis this Thursday, initiating a crucial period for the struggling corporation, Greece’s biggest, in need of life-saving measures from the state-controlled company’s administration and government.

The details of PPC’s rescue plan must be finalized by September 15, ahead of a report from Ernst & Young, the utility’s certified auditor, expected on September 24. The report will feature observations on the utility’s first-half results. In the lead-up, PPC needs to convince of its potential for a rebound to avoid further unfavorable news from the auditor.

Details of measures aiming to accumulate a sum of 750 million euros for PPC have yet to be finalized, sources informed.

The measures will include an electricity tariff increase as well as the endorsement of a clause triggering hikes when CO2 emission right levels exceed upper limits.

The government wants to offset the tariff hike, expected to be about 10 percent, with a reduction of a RES-supporting ETMEAR surcharge included on electricity bills.

PPC is also expected to securitize unpaid receivables of between 1.5 to 1.7 billion euros, the target being to rake in 400 million euros. The first of two securitization packages is expected to be issued in September or October.

PPC is also anticipating 195 million euros in public service compensation (YKO) returns for 2011. A legislative amendment enabling RAE, Regulatory Authority for Energy, to proceed with the details is needed. Also, the government must decide whether the national budget or electricity consumers will cover the cost of this measure.

 

 

 

New PPC boss announcement imminent, market waiting

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The announcement of power utility PPC’s new chief executive, which could be made today, will signal the completion of a first wave of action taken towards rescuing the utility from further trouble.

Over the weekend, the newly appointed energy minister Costis Hatzidakis told local media PPC’s new boss has been selected, and also endorsed by Prime Minister Kyriakos Mitsotakis.

Standard procedures by the privatization fund, controlling the Greek State’s 51 percent stake of PPC, are pending.

Hatzidakis described the still-unnamed new PPC chief executive – to succeed Manolis Panagiotakis, who submitted his resignation shortly after the conservative New Democracy party won the July 7 legislative election – as an experienced manager who fits the technical demands of the position.

A brave restructuring plan will need to be implemented at PPC, a loss-incurring corporation threatening the country’s energy system.

Investors are eagerly awaiting the announcement of PPC’s new boss. Their endorsement of the new chief executive’s ability to rescue the power utility would prompt a rebound of the corporation’s battered company share to more realistic levels. The company share has risen sharply in recent days but remains well under older levels.

In other weekend comments, Hatzidakis stressed Greece needs to gradually move on towards a post-lignite era.

PPC’s old lignite-fired power stations are responsible for the bulk of the corporation’s operating losses as a result of sharply increased CO2 emission right costs, which have escalated to levels of nearly 30 euros per ton, no longer feasible.

 

Price-comparison site in September, RAE insists on fixed-tariffs option

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A price-comparison platform for electricity and natural gas supply packages currently being prepared by RAE, the Regulatory Authority for Energy, is expected to be up and running in September, sources have informed.

Preparations for the new platform, to help consumers make supplier choices, are believed to be an advanced stage.

Suppliers have been given access to the platform to upload their packages and conduct checks, sources noted.

Meanwhile, RAE has completed public consultation ahead of a plan, which, if introduced, would require suppliers to offer consumers fixed tariffs, at a slightly higher price, as an alternative to existing flexible tariffs.

In recent times, independent suppliers have had to trigger price-adjusting clauses as a means of covering elevated wholesale electricity prices, including higher CO2 emission right costs. This has prompted complaints by consumers caught unaware by such terms.

RAE supports the idea of offering consumers fixed tariffs.

NOME starting price rise to at least €56 per MWh expected

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A study prepared by RAE, the Regulatory Authority for Energy, proposes a NOME auction starting price increase to just over 56 euros per MWh, a significant rise from the current level of 36.34 euros per MWh, primarily as a result of a sharp rise in CO2 emission right costs.

The new NOME starting price could even reach as much as 58 euros per MWh if a two-euro lignite surcharge ends up being added. This will be decided by finance minister Euclid Tsakalotos and energy minister Giorgos Stathakis.

RAE has forwarded its NOME study to the two ministers.

CO2 emission right costs have risen from five euros per ton approximately a year-and-a-half ago to 25 euros per ton.

If a ministerial decision is delivered swiftly then a new NOME starting price will apply for the next auction on July 17, to offer participants 500 MWh/h as well as at the ensuing October 16 session offering 767 MWH/h.

NOME auctions were introduced about three years ago as a means of offering independent players access to the main power utility PPC’s lower-cost lignite and hydropower sources.

PPC gov’t-backed pricing control causing financial woes

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Rising CO2 emission right costs over the past year and a half have been a major concern for Greek state-controlled power utility PPC, one of Europe’s most exposed industries to coal-related production cost increases as a result of the many lignite-fired power stations operated by the corporation.

However, rather than increase electricity tariffs to cover these coal-related cost increases, as electricity producers who are far less exposed to coal have done, PPC has maintained, even lowered, prices as a result of intervention by the energy ministry, its objective being to avoid the political cost of higher energy costs.

This has led to a deterioration of PPC’s financial standing, as was recently made clear by a leaked government email.

Over the past couple of years or so, PPC offered consumers a 15 percent punctuality discount for electricity bills paid on time. This discount was recently reduced to 10 percent.

Last September, PPC turned to international consulting support for preparation of a bond issue as well as guidance to improve cash flow.

The power utility was advised to increase electricity tariffs but the prospect that was publically rejected by energy minister Giorgos Stathakis.

The minister also rejected a request by PPC chief executive Manolis Panagiotakis for an electricity bill clause that would have triggered higher tariffs in cases when CO2 emission right costs exceed certain levels.

The government-sponsored price suppression and reduction at PPC is  causing financial woes at the company. Revenues are consistently falling short of production and operating costs.