Public Service Compensation revisions creating new deficit

Recent legislative revisions to Public Service Compensation (YKO) categories and charges will reduce revenues needed to fully balance this account, used to cover high-cost electricity generation on non-interconnected islands and also subsidize power supply to low-income households.

Under the new system, higher YKO surcharge rates applying to higher consumption level categories are not imposed on entire electricity amounts consumed, as was the case under the previous formula, but to consumption amounts exceeding category upper limits.

This change is expected to deprive the YKO account of tens of millions of euros, annually.

The Cyclades are being interconnected to the mainland electricity grid this year, a development that promises to lessen the demands of the YKO account and subdue any developing deficit. Even so, the YKO account deficit will not be fully covered and transformed into a surplus figure until other Greek island interconnections are completed, especially that of Crete, the country’s largest and most populous island.

The YKO account benefits to be offered by the Cyclades interconnection are believed to be worth 100 million euros, annually, according to a 2014 estimate.

Cyclades link project open to non-EU bids, SGCC strategically placed

A revision by IPTO, Greece’s power grid operator, to the terms of an international tender concerning a Cyclades islands interconnection has opened up the process to non-EU firms that have signed government procurement agreements (GPAs) with the World Trade Organization (WTO).

Even so, market officials consider the emergence of bids from companies based in countries such as China, Brazil and India, obvious candidates as a result of the revision, an unlikely prospect given the interest in such projects of China’s SGCC, which acquired a 24 percent stake in IPTO earlier this year.

SGCC’s strategic partersnhip with IPTO is expected to repel bids, including from other Chinese companies specializing in submarine cable interconnections, for this IPTO project and similar upcoming endeavors.

The revised terms concern the second phase of a Cyclades islands interconnection project to link Paros with Naxos and Naxos with Mykonos. The project is budgeted at 42 million euros, not including VAT.

The revision of the tender’s terms includes a deadline extension for offers, now reset for January 12.

IPTO plans to stage a series of tenders for major submarine interconnection projects over the next few years, beginning in 2018, which makes for lucrative prospects.

A third phase of the Cyclades interconnection concerns the development of a link between coastal Lavrio, southeast of Athens, and Syros, budgeted at 150.5 million euros and scheduled for completion in 2022.

Other upcoming interconnection projects planned include a small-scale Cretan interconnection linking Hania with the Peloponnese, budgeted at 322.7 million euros. Its tender is expected to be completed in 2018.

A tender for the large-scale Cretan interconnection, budgeted at 713 million euros, is planned to take place somewhere between 2019 and 2020.

Development of the EurAsia Interconnector, to link the Greek, Cypriot and Israeli grids, budgeted at 3.5 billion euros, is also being pursued.

The agenda also includes the EuroAfrica Interconnector, planned to link the Greek, Cypriot and Egyptian electricity grids. Offiical estimates for this project’s cost have yet to be released, but it should be in the range of the budget calculated for the Euroasia Interconnector. A 320-kilometer submarine crossing whose development is planned to commence in 2019, its budget is estimated at 2.4 billion euros. The Euroasia Interconnector has already been classified as a Project of Common Interest (PCI), enabling EU funding.

Major developments can be expected in the interconnection domain. Without a doubt, SGCC, as IPTO’s strategic partner, has already secured the pole position.

 

 

RAE pushing for more specific interconnection project targets

IPTO, the country’s power grid operator, is facing RAE (Regulatory Authority for Energy) pressure to establish more specific targets for the development of submarine island interconnection projects, especially those concerning Crete and the Cyclades, which are included in the operator’s ten-year plan (2018-2027), sources have informed.

RAE wants realistic target dates to be set, which, if missed, would lead to penalties, unless the delays are justified by certain circumstances, such as legal proceedings, for example.

The energy authority is increasing the pressure to avoid further delays, a common occurence at IPTO with major projects in the past.

Completion of the interconnection projects would reduce energy generation costs, a benefit that would be rolled over to consumers, currently covering high-cost electricity generation on the non-interconnected islands through Public Service Compensation (YKO) surcharges imposed on electricity bills.

Binding targets for IPTO are expected to come into effect in 2018 and include the Cretan interconnection project, to be developed over two stages (minor and major interconnections) and the Cyclades interconnection (second and third stages).

The new IPTO board, established following SGCC’s (State Grid Corporation of China) recent acquisition of a 24 percent stake, has already accelerated the pace at which the interconnection project is being handled by the operator, according to sources.

Prior to the arrival of IPTO’s Chinese strategic partner, RAE’s leadership often threatened to transfer the island interconnection projects to other companies. These threats are no longer being made.

According to IPTO’s current ten-year development plan, the minor Cretan interconnection (140-180 MW) is expected to link the island, Greece’s largest, with the Peloponnese by 2020, while the major interconnection (700 MW) is planned to link Crete with the wider Athens area by December, 2023. However, the operator has noted that Cretan electricity demand will not be fully integrated into the country’s grid until 2025, a prospect that has raised concerns.

Progress of the minor Cretan interconnection has been hampered as a result of legal action taken by residents of the Lakonia region’s Malea peninsula, where the submarine cable running from Crete is planned to reach the Peloponnese. Local residents are demanding revisions, including an alternate location, and have taken their case to the Council of State, Greece’s Supreme Administrative Court.

 

Retail electricity competition ‘needs production competition’

The absence of fair competition in the electricity market, at a production level, will also deprive the market of true competition at a retail level, Dinos Benroubi, the chief official at independent electricity supplier Protergia, stressed last night during a roundtable discussion titled the Impact of Fluctuating Oil and Energy Prices on the National Economy, organized by the Greek Energy Forum, an international thinktank.

Benroubi, who noted that annual electricity costs for the country’s household and industrial sectors amount to 6.5 billion euros, also addressed the hefty grid-connection costs faced by Greece’s electricity consumers.

The Protergia official asserted that only half the electricity bill amount paid by consumers concerns production costs. Transmission and distribution costs represent another part of the overall cost, while about a third concerns other surcharges, Benroubi remarked.

The public service compensation (YKO) surcharge added to electricity bills, an amount paid by mainlanders in order to equate electricity costs for the country’s islanders, as Benroubi explained, needs to be resolved through the interconnection of the Greek islands with the mainland, he highlighted.

Though the benefits promised by this interconnection would cover its investment cost in no more than three years, development of its two sub-projects, concerning the Cyclades and Crete, is being severely delayed, Benroubi noted.

The Protergia head also stressed that Greece needs to focus on pursuing EU goals concerning decarbonization, RES targets, energy efficiency, energy storage and a trend towards presuming [electricity production by electricity consumers through PV generation, etc]. Instead, Benroubi added, the focus is on maintaining a state-controlled monopoly holding an 87 percent share of the retail electricity market and battling to regain lost ground, Benroubi added, referring to the main power utility PPC.

 

Cyclades interconnection stations delayed until summer

IPTO, the power grid operator, estimates that between six and eight months of additional time will be needed to complete four sub-stations that make up part of the Cyclades interconnection project. Completion of all four sub-stations had originally been scheduled for the end of this year.

The delay has been attributed to various obstacles encountered by local sub-contractors. On Syros, the sub-contractor faced difficulties in finding an appropriate spot to dump project-related waste, which caused months of delay. The matter has now been resolved, according to IPTO.

The Lavrio sub-station, the most fundamental of all four, faced similar problems to the Syros project.

The Mykonos part of the project needed to overcome archaeological obstacles, which caused delays.

An objective to deliver the completed sub-stations within the summer of 2017 has now been set.