IPTO’s Adequacy Report for reserve mechanism, CRM near

Power grid operator IPTO is close to completing its updated grid Adequacy Report, expected to be ready within December for delivery to the European Commission. The report is needed to determine the shape of Greece’s proposals for a Strategic Reserve Mechanism and a Capacity Remuneration Mechanism (CRM).

The way towards completing the Adequacy Report was paved by the recent establishment of three required indices –  CONE (Cost of New Entry), VOLL (Value of Lost Load) and Reliability Standard – by RAE, the Regulatory Authority for Energy, and the energy ministry. These indices need to be factored into calculations before the Adequacy Report can be completed.

Plans for two new gas-fueled power stations, one by a TERNA-Motor Oil partnership, the other by the Copelouzos group, have emerged since assumptions made for IPTO’s study, which had been put to public consultation.

The launch of the two new units over the next few years is expected to greatly contribute to the grid’s reliability.

Strategic reserve necessary, exchange reacts satisfactorily

The end of the Greek energy system’s reliance on lignite, being phased out to help the global climate change effort, needs to be accompanied by a strategic reserve mechanism, which would maintain certain generation capacities outside the electricity market for operation during emergency cases until the ongoing transition to cleaner energy sources has been completed, the extreme heatwave conditions around the country over the past few days have highlighted.

Record-level electricity consumption, combined with power line damages caused by major fires, pushed the grid to the limit, raising fears of widespread power outages.

The government, currently seeking the establishment of a strategic reserve mechanism as part of a Capacity Remuneration Mechanism (CRM), needing European Commission approval, will need to highlight the heatwave-related events that have occurred in Greece over the past ten days.

Sidelined lignite-fired power stations needed to be brought back into action to help the grid meet electricity demand. They offered crucial production contributions representing between 14 and 18 percent of the energy mix.

Lignite-generated output also played a key part in the effort to maintain energy sufficiency last winter, in February, during heavy snowfall that damaged power infrastructure.

The energy exchange has performed rationally during the heatwave conditions, proving its ability to respond to the market’s demand and supply. Day-ahead market price levels rose sharply during the heatwave’s peak and are now subsiding.

 

 

EVIKEN expresses support for strategic reserve, opposes CRM

EVIKEN, the Association of Industrial Energy Consumers, has expressed support for the establishment of a strategic reserve mechanism but opposes a Capacity Remuneration Mechanism (CRM).

There is no immediate need for a CRM as current remuneration available to natural gas-fueled power stations through the balancing market ensures their profitability, EVIKEN members supported.

Both mechanisms have been included in the Market Reform Plan shaped by the government.

EVIKEN has rejected a related study’s findings contending that natural gas-fueled power stations are currently incurring losses.

The industrial energy consumers group called for measures that would transform the market so that it can operate at standards set by other European markets before talks can begin to seek additional remuneration for energy producers.

Target model restrictions to be lifted, according to reform plan

Existing restrictions in the country’s wholesale electricity markets, or target model, will gradually be lifted over the next year or two, at the latest, according to a Market Reform Plan submitted by the Greek government to the European Commission.

The plan to is intended to determine whether the country’s natural gas-fired electricity producers can fully recover costs in a liberalized market.

Greek officials are seeking to prove that, once all wholesale market restrictions have been lifted, natural gas-fired power stations will need Brussels-approved support mechanisms in the form of a strategic reserve, until the end of 2022, and a permanent Capacity Remuneration Mechanism (CRM) from 2023 onwards.

The Greek government forwarded a draft of the country’s Market Reform Plan to the European Commission in mid-June, while Brussels has since responded with an initial set of questions seeking clarification.

The first wholesale electricity market restriction expected to be lifted, probably within the next few months, concerns a 20 percent limit on futures contracts established by suppliers with a market share exceeding 4 percent.

Following up, officials are then expected to lift upper and lower limits imposed on offers.

 

IPTO factors Balkans into adequacy report calculations

IPTO is taking into account current and potential grid capacities of neighboring Balkan markets for its preparation of an updated adequacy report, a study to serve as a base for various new plans, including the shaping of Greece’s requests for a Capacity Remuneration Mechanism (CRM) and Strategic Reserve, an updated National Energy and Climate Plan (NECP), and private-sector investment decisions for new natural gas-fired power stations.

IPTO is also factoring into its adequacy report calculations the heightened investment interest and activity in Greece’s RES sector, energy storage, now that this domain appears set for initiation, as well as the introduction of new elements to mechanisms and energy exchange markets, including the demand response system, remunerating major-scale electricity consumers when the operator asks them to shift their energy usage or stop consumption during high-demand peak hours, so as to balance the electricity system’s needs.

Electricity grids in the Balkans are being revamped, creating unprecedented electricity export opportunities for Greek exporters. The EU’s intention to impose a carbon border tax on electricity imports from non-EU countries adds to Greece’s export potential to the Balkans, as well as more new natural gas-fired power stations than the quantity included in the current NECP.

Given the developments, Greece now probably needs four new natural gas-fired power stations, including power utility PPC’s Ptolemaida V.

Private-sector firms are pushing ahead their plans for the development of such units, as was highlighted by a related joint announcement last Friday from GEK Terna and Motor Oil.

 

Energy ministry pushing ahead with CRM despite Brussels doubts

The government is pushing to deliver, as soon as possible, to Brussels its plan for a Capacity Remuneration Mechanism (CRM), a challenging endeavor given the strict stance maintained by the European Commission’s Vice-President Margrethe Vestager during her meeting with energy minister Kostas Skrekas last month.

RAE, the Regulatory Authority for Energy, assisting the government’s effort with swift progress on preliminary procedures, has commissioned consulting firm E3-Modelling, a decision based on its specialized skills, to prepare an implementation plan, required by Brussels, in order to help eliminate regulatory distortions or market failures.

Vestager, at her meeting with minister Kostas Skrekas in May, made clear that Greece will need to incorporate its strategic reserve model – remunerating units made available by electricity producers for grid back-up services – into a wider Capacity Remuneration Mechanism.

The Brussels deputy, also the Commissioner for Competition, has demanded a new grid sufficiency study and the reserve mechanism’s restructuring from scratch, aligned with EU directives.

Besides remunerating power utility PPC facilities for grid back-up services, the mechanism will also need to incorporate a demand response system.

Brussels officials have indicated the Greek plan will need to have a short duration.

The E3-Modelling company’s team includes Pantelis Kapros, Professor of Energy Economics at the National Technical University of Athens, who possesses a high level of expertise in European energy market reforms, as well as other officials with the necessary expertise, to help the authority complete its task within the limited time given by the government.

Strategic reserve milestones set for next two months

A series of milestones have been set until autumn in preparation for Greece’s prospective Strategic Reserve Mechanism, which, if achieved, will enable its launch towards the end of the year.

The timeline and milestones leading to the possible launch of a Strategic reserve mechanism, keeping certain generation capacities outside the electricity market for operation only in emergencies, was discussed in detail during an online meeting yesterday between energy minister Kostas Skrekas and European Commission authorities.

Strategic reserves can be necessary to ensure security of electricity supply when electricity markets are undergoing transitions and reforms and are meant to insure against the risk of a severe supply crisis during such transitions.

Three main prerequisites will need to be satisfied by the end of July, the first being the completion of a market reform plan, intended to intensify competition in the wholesale electricity market.

The plan’s preparations will include the involvement of Pantelis Kapros, Professor of Energy Economics at the National Technical University of Athens, according to sources.

A new adequacy report, or updated study on grid sufficiency proving the need for the introduction of a Strategic Reserve mechanism, will also be needed.

Thirdly, the energy ministry will need to have fully responded, within the next month, to an extensive set of questions forwarded by European Commission officials on the prospective mechanism.

If these steps go well, an indefinite prospect at present, then a clearer picture on the mechanism’s details should have emerged by early autumn.

Any Strategic Reserve formula reached will need to be applied for a brief period so that an ensuing Capacity Remuneration Mechanism, to support new natural gas-fueled power stations, can immediately follow, the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, appears to have made clear to Skrekas, the energy minister, at a recent meeting.

Meanwhile, power utility PPC’s updated decarbonization plan is aiming for a withdrawal of all its lignite-fired power stations by 2025, at the very latest.

 

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.

 

PPC lignite electricity packages through futures market

State-controlled power utility PPC will soon begin offering rival suppliers lignite-generated electricity packages through the target model’s futures market, energy minister Kostas Skrekas and the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, have agreed at a meeting yesterday.

Vestager, during the session, also made clear that the balancing cost of a mechanism concerning power purchase agreements (PPAs) between industrial producers and RES producers cannot be subsidized, but, instead, will need to be aligned with terms that apply for other EU member states.

Athens expects to submit its PPA plan to Brussels in June for approval.

Also next month, the government plans to submit its support framework proposal for energy storage units.

As for the country’s Strategic Reserve Mechanism, the European Commission’s deputy requested a new proposal from Athens, in line with new EU directives.

Under the Strategic Reserve Mechanism, PPC and all other electricity producers opting to withdraw units from the market for back-up services, would be remunerated for sidelining these units for periods determined by IPTO, the power grid operator.

Vestager stressed that the country’s Strategic Reserve Mechanism cannot coincide with the wider Capacity Remuneration Mechanism (CRM).

The Brussels deputy also pointed out that a compensation request made by Greece for PPC’s redevelopment of lignite areas, part of the decarbonization effort, is legally baseless and cannot be pursued further.

Brussels insists on PPC sale of lignite power packages to rivals

Power utility PPC must soon start offering rival suppliers portions of its lignite-based electricity production, as specified in an antitrust agreement, despite subdued interest by possible buyers expressed in a February market test, the European Commission insists.

The subject, which has remained stagnant for months following slow development over the past 13 years or so – ever since legal action was taken against PPC in 2008 over its lignite monopoly – will be one of the topics to be discussed at a meeting today between energy minister Kostas Skrekas and the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition.

Given Brussels’ insistence, the energy ministry has devoted considerable time over the past few weeks to shape a lignite electricity sale plan, based on a January agreement between the minister and the country’s creditor institutions, that could finally settle the dispute.

The January agreement calls for the sale of energy packages, either quarterly or annually, representing, in 2021, 50 percent of the previous year’s lignite-based production.

The percentage of PPC’s lignite-based electricity quantities to be offered to rival suppliers in 2022 and 2023 should be reduced to 40 percent of the previous year’s output, according to the agreement.

These amounts are seen as insufficient to make any real impact on the retail electricity market’s standings.

Other issues to be discussed at today’s meeting between Skrekas and Vestager include Brussels’ support for a grid back-up model as part of a wider Capacity Remuneration Mechanism (CRM). Athens favors a separate Strategic Reserve Mechanism to remunerate units that are made available by electricity producers for grid back-up services.

Skrekas is also striving to establish a mechanism that would subsidize RES producers for power purchase agreements (PPAs) with energy-intensive industrial enterprises.

Brussels favors uniting Strategic Reserve Mechanism, CRM

The European Commission is supporting the incorporation of a grid back-up model as part of a wider Capacity Remuneration Mechanism (CRM), energypress sources have informed.

A Greek government proposal for a separate Strategic Reserve Mechanism remunerating units made available by electricity producers for grid back-up services – an idea that has been backed by the energy ministry for quite some time now – does not appear likely to be approved by the European Commission, latest online talks between technocrats in Athens and Brussels have indicated.

Under the Strategic Reserve Mechanism, power utility PPC and all other electricity producers opting to withdraw units from the market for back-up services, would be remunerated for sidelining these units for periods determined by IPTO, the power grid operator.

Instead, the European Commission has tabled a proposal for the establishment of a single system that would include both a Capacity Remuneration Mechanism and a Strategic Reserve Mechanism, as two distinct components, respectively remunerating units active in the market and those maintained as reserves and used only when IPTO requires their services.

Athens and Brussels technocrats are holding these mechanism talks ahead of a forthcoming visit to Athens by the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, scheduled for May 13.

Mechanisms, competition on Vestager agenda, here May 13

Energy minister Kostas Skrekas intends to present his case for the introduction of five support mechanisms encouraging energy-sector investments in Greece’s ongoing transition towards carbon neutrality to the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, on the occasion of the official’s upcoming visit to Athens, scheduled for May 13.

Vestager will be in the Greek capital with an agenda featuring two pending competition issues concerning state-controlled power utility PPC.

Greece has faced charges for PPC’s monopoly of the country’s lignite sources but an agreement was reached to end the case by introducing a mechanism offering the power utility’s rivals access to lignite-generated electricity.

A market test for this mechanism was completed some time ago but failed 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.

The second PPC-related matter to be discussed during Vestager’s visit concerns a recently initiated investigation by Brussels seeking to determine whether the power utility has engaged in activities impeding market competition.

Private-sector investors are pushing for a capacity remuneration mechanism (CRM) in order to go ahead with the development of natural gas-fueled power stations, needed as Greece heads towards a post-lignite era. Skrekas, the energy minister, has repeatedly said a CRM will be launched in June.

The minister also supports a strategic reserve mechanism to compensate PPC’s lignite-fired power stations, still needed for back-up services but nowadays loss-incurring as a result of higher CO2 emission right costs.

In addition, the government is seeking compensation for the premature closure of PPC’s lignite-fired power stations and related mines, being phased out until 2023.

The minister also supports a support framework for hybrid units on non-interconnected islands combining RES electricity generation and energy storage.

Skrekas is also striving to establish a mechanism that would subsidize RES producers for power purchase agreements (PPAs) with energy-intensive industrial enterprises as well as suppliers selling to major-scale consumers.