Revised lignite remedies called for in latest energy reform talks

A team of Brussels technocrats, in Athens for further energy-reform talks officially beginning today, will be entering these sessions fully aligned with rigorous formalities included in a related surveillance report.

This intention for a hard-line approach by the technocrats was made evident during preceding informal talks yesterday.

A surveillance report contains a series of positions that are not in harmony with the Greek government’s views. Most significantly, the government’s presentation of an accelerated decarbonization process as a remedy for main power utility PPC’s lignite monopoly has not been accepted.

However, the technocrats talking part in the talks do not have the authority to step beyond boundaries set by official progress reports. The European Commission has kept separate  Greece’s decarbonization process from PPC’s dominant position in lignite-related matters, calling for revised remedies.

The latest round of talks are expected to be based on the submission of revised measures.

Though the Greek government’s approach may differ to that of the European Commission, Athens insists both sides have set the same objective, this being to achieve full liberalization in the energy market and adopt reforms designed to intensify competition.

The government is confident its aggressive decarbonization policy, expected to begin soon with a first round of lignite unit withdrawals within 2020, will serve the European Commission goal to remedy PPC’s dominant position in the lignite sector.

PPC’s new products in spring, Brussels reform talks influential

New retail electricity packages being prepared by power utility PPC, currently seeking to reshape and modernize, are expected to be ready for launch early in spring.

The utility’s recently appointed deputy chief, Giorgos Karakousis, who assumed his post in November, is busy putting together a new commercial policy to feature packages for households and businesses.

Concurrent negotiations between the government and the European Commission on wider electricity market reforms in Greece will influence the shape of these new PPC packages.

The state-controlled power utility, in the eyes of Brussels, has continued maintaining a monopoly in the lignite sector, offering lower-cost electricity, as well as a dominant market position.

Talks between energy ministry and European Commission officials are focused on generating greater competition in Greece’s electricity market.

The outcome of these negotiations will determine the extent of PPC’s permitted retail market presence in the high, mid and low-voltage categories. These commitments will serve as a guideline for PPC’s forthcoming packages.

During his presentation, last month, of PPC’s new business plan, chief executive Giorgos Stassis did not rule out the possibility of additional services concerning energy efficiency at households and businesses.

In other European markets, electricity supply packages are often combined with house insurance policies as well as energy-saving equipment.



Work needed for Athens-EC convergence on energy reforms

Greek and European Commission positions on energy reforms for further market liberalization remain at opposite ends, despite January being previously billed as a key month, and will require great effort if agreements are to be reached, government sources have informed ahead of a series of meetings in Athens. Both Athens and Brussels want further market liberalization but their approaches differ.

A first round of meetings is scheduled to begin next week with the arrival of Brussels technocrats for preliminary talks with government and market officials. Top-level lender representatives will then follow up a week later.

The Greek government’s basic position is centered around a swift decarbonization process at state-controlled power utility PPC, which would eliminate the need for third-party access to PPC’s monopolized lignite sources, offering lower-cost electricity.

A government proposal for the establishment of SPV partnerships with private-sector companies that would facilitate purchases of high-voltage lignite-generated PPC electricity by industrial enterprises has only been entertained by the power utility, limiting the measure’s prospects for a market share reduction at PPC, still dominant.

In preceding negotiations, the country’s lenders have indicated that decarbonization alone does not suffice. The views of the lenders on the government’s SPV proposal also differ.

The European Commission’s Directorate-General for Competition has called for wider participation in the SPV that would effectively also take on board independent electricity suppliers, not just energy-intensive industrial enterprises, for purchases of lower-cost lignite-generated electricity produced by PPC.

Opposing views are seen requiring more work for convergence, which could be achieved by the end of the first half. The implementation of the target model promises to serve as a catalyst.

Two more rounds of talks in Athens are scheduled for March and May.

Drastic changes to reshape energy sector by end of 2020

Major developments in Greece’s energy sector, from lignite to natural gas, renewable energy, energy efficiency, as well as the geopolitical effects, promise a drastic reshape of the sector over the next year.

A first batch of power utility PPC’s existing lignite-fired power stations will have ceased operating as part of a plan for a full withdrawal by the end of 2023. PPC will have a reduced number of employees on its payroll. This will have positively impacted the utility’s profit figures.

Also, a first round of major renewable energy projects expected to be launched by PPC subsidiary PPC Renewables through partnerships, as part of the parent company’s wider turn to green energy, will intensify competition in the renewable energy market.

Furthermore, this time next year, assets currently belonging to gas utility DEPA, both in trade and infrastructure, may have been transferred to new owners. This development promises to reshape the entrepreneurial map as the private sector’s dominance will be absolute.

In the retail market, the number of players is expected to have diminished as a result of a new round of takeovers and mergers, amid heightened competition, as was also the case in telecommunications in the recent past.

In addition, Greece’s energy exchange will have clocked up several months of operations by the end of the year. Its arrival will intensify competition, remove market distortions and allow dormant potential to be realized through coupling with neighboring markets.

By the end of 2020, the TAP gas pipeline will have begun delivering its first orders of Azeri gas to Europe, the Greek-Bulgarian IGB gas pipeline will be nearing completion, while procedures leading to the development of the Alexandroupoli FSRU and an underground gas storage facility in the offshore area south of Kavala will have made progress.

Without a doubt, Greece’s energy sector appears to be waking up to the new reality, leaving behind anachronistic perceptions and embracing the green energy revolution. The country is now adopting new ways implemented by the overwhelming majority of European territories two decades earlier.


Brussels pressuring for wider access to PPC lignite power

The European Commission’s Directorate-General for Competition has proposed wider participation in a Special Purpose Vehicle plan tabled by the energy ministry that would effectively also take on board independent electricity suppliers, not just energy-intensive industrial enterprises, for purchases of lower-cost lignite-generated electricity produced by power utility PPC.

Energy ministry officials began talks aiming for further electricity market liberalization in Greece in the lead-up to the Christmas break. These are expected to continue following the festive season and end by mid-January.

The energy ministry officials went into the talks having proposed the establishment of an SPV that would exclusively facilitate lignite-generated electricity purchases made by energy-intensive industrial enterprises.

This is seen as a plan that could contribute to the power utility’s market share contraction in the high-voltage category and also support emission cost savings.

Greece’s pledge for a thorough plan promising to fully liberalize the electricity market and break PPC’s ongoing dominance has been under the spotlight during these talks.

Going into the negotiations, Brussels made note of Greece’s non-compliance with a European Court ruling on PPC’s lignite monopoly.

The European Commission has remained relentless in its demand for corrective anti-monopoly measures on lignite, including, according to sources, the establishment of auctions along the lines of the NOME auctions recently abolished by the Greek government.

Brussels insists the SPV would need to be supplied electricity by PPC through auctions. Greek officials have sought to avoid discussing such a prospect given the government’s recent decision to end NOME auctions, arguing these have cost PPC plenty without delivering results in terms of market share contraction at the utility.

A proposal entailing hydropower sourced electricity supply to the SPV, in addition to lignite-generated electricity, has also been tabled at these talks. This would help limit emission costs if suppliers also enter the SPV.

The European Commission may have applauded the government’s recent decision for a swifter decarbonization process, but it has remained adamant on the necessity for third-party access to lignite – until 2023, when all of PPC’s existing lignite units are planned to have been withdrawn – as well as hydropower  if full market liberalization is to be achieved.


Ministry preparing market liberalization plan for January

The energy ministry, working following a latest report by the European Commission, has yet to decide on the details of corrective antitrust measures it is expected to present to Brussels in January, energypress sources informed.

Market officials, seeking greater electricity market liberalization, are looking forward to measures.

The ministry is striving to revise the negotiating base with Brussels. Athens believes the country’s decarbonization package, aiming for the closure of the bulk of power utility PPC’s carbon generators by 2023, and the rest by 2028, will successfully counter a European Court decision against PPC’s lignite monopoly.

The Greek lignite withdrawal effort includes a plan to close the Megalopoli and Amynteo coal generators by summer.

The energy ministry measures should emerge as a prelude to negotiations with Brussels that month.

The Greek government will, under no circumstances, accept a return of NOME auctions, as these are deemed to have generated considerable losses for PPC without any result in terms of the utility’s market share contraction to 50 percent, as had been agreed to by the previous government, sources noted.

Brussels has consistently opposed the Greek government’s recent decision to terminate NOME auctions.

Stricter PPC hiring supervision among energy draft bill changes

A number of observations made during public consultation for an energy-sector draft bill concerning the energy market’s liberalization, power utility PPC’s modernization, gas utility DEPA’s privatization and RES support, including stricter recruitment control at PPC, have been incorporated into the bill.

The draft bill, submitted to Parliament last Friday, will now be distributed to parliamentary committees for discussion before being transferred to the house for ratification towards the end of the month.

The stricter recruitment control at state-controlled PPC will require inspections and approvals by ASEP, the Supreme Council for Civil Personnel Selection, during hiring procedures, not afterwards.

In another important draft bill revision, gas utility DEPA’s possible stake in the prospective Alexandroupoli FSRU would be held by DEPA Trade, a new DEPA entity being formed as part of the gas utility’s privatization. Previously, this stake was planned for the utility’s international projects division.

Furthermore, the new shareholders to acquire the Greek State’s 65 percent of DEPA Infrastructure, the gas utility’s other new entity in the making, will need to maintain this stake for at least five years.

Also, a universal electricity supply service covering the electricity needs of blacklisted consumers not wanted by suppliers for repeatedly failing to meet electricity bill payments, will require the market’s top five suppliers – up from three – to cover this sector’s market needs for two years if a competitive procedure for the service fails to produce a result.

Independent suppliers, repelled by market irregularities, have shunned this universal service since its introduction in Greece in 2011. This has forced PPC to step in, by law, as the dominant player.

The aim is to transform the universal service, offering electricity at considerably elevated rates, into an attractive market for local suppliers, as is the case in other European markets.

Energy sector draft bill to be presented at cabinet meeting tomorrow

The key aspects of a new institutional framework to bring about energy market revisions will be presented by energy minister Costis Hatzidakis at a Ministerial Council meeting tomorrow.

Power utility PPC’s detachment from bailout-related restrictions imposed on public sector enterprises; a plan for the partial privatization of distribution network operator DEDDIE/HEDNO, a PPC subsidiary; and details concerning gas utility DEPA’s upcoming privatization represent the new framework’s most significant components.

Details of moves intended to accelerate the RES sector’s penetration in energy production and consumption are also included in the framework.

The energy ministry will also forward its plan to the country’s lenders, including the European Commission. It will also be forwarded for public consultation, sources believe.

Once these stages have been cleared, a draft bill is expected to reach Greek Parliament in the second half of November, the aim being to complete its ratification by the end of that month.


Energy deputy in Brussels electricity market talks, NOME auctions end near

Deputy energy minister Gerassimos Thomas, representing Greece at tomorrow’s council of EU energy ministers in Brussels, where climate change targets between 2030 and 2050 will be discussed, intends to combine the visit with a series of meetings with European Commission energy and competition officials for talks on latest government plans striving for greater competition in Greece’s electricity market.

Talks concerning the Greek government’s plans to intensify electricity market competition have yet to officially commence, as was noted just days ago by recently appointed energy minister Costis Hatzidakis. He is preparing for his first meeting with the country’s lender representatives in Athens this Wednesday.

The government’s electricity market agenda is comprised of five key measures – swifter decarbonization; partial privatization of distribution network operator DEDDIE/HEDNO; power utility PPC’s detachment from Greek State bailout-related procedures; greater emphasis on renewable energy; and termination of NOME auctions.

The measure abolishing NOME auctions will be submitted to Greek Parliament within the next few days, Hatzidakis, the energy minister, told local media yesterday. The plan will be attached to a multi-bill for development, now undergoing public consultation, sources informed.

NOME auctions were introduced in Greece about three years ago to offer PPC rivals lower-cost wholesale electricity. Hatzidakis argues the auctions ended up forcing the power utility to offer below-cost electricity, inflicting an accumulation of financial damage worth approximately 600 million euros.

At the council of EU energy ministers in Brussels tomorrow, his deputy, Thomas, will present the Greek government’s ambitious agenda for cleaner energy.

He also plans to hold talks with Finnish minister of economic affairs Katri Kulumni, Spain’s energy minister José Dominguez Abascal, and Italy’s economic development minister Stefano Patuanelli, amongst others, sources informed.

First round of new ministry, lender talks this Wednesday

The current financial standing of state-controlled power utility PPC, effort  to reduce the power corporation’s market share, competition in the electricity market, target model progress, and prospective energy utility privatizations will all feature on the agenda of the recently appointed energy ministry’s first official meeting with the country’s lender representatives, scheduled for this Wednesday in Athens, sources have informed.

Energy minister Costis Hatzidakis will participate in the meeting but the country’s lenders will not be represented at the highest level, the sources added. The energy minister’s participation at the meeting Wednesday highlights the political significance of the PPC rescue effort for the government, the sources noted.

Finalized decisions are not expected during Wednesday’s negotiations. Talks are expected to run until mid-November. A Greek post-bailout  appraisal has been deferred until then as a result of European Commission personnel changes following the European elections last May.

This Wednesday, the energy ministry will inform the country’s lenders on the results of a first round of measures taken by the new Greek government to prevent PPC’s collapse.

A government decision to abandon NOME auctions, introduced about three years ago to offer lower-cost wholesale electricity to independent players, will also be officially announced at Wednesday’s meeting. This measure has cost PPC approximately 600 million euros since its launch, according to Hatzidakis, the energy minister.

The energy ministry officials will also seek a revision of a PPC market share contraction agreement, included in the bailout terms, requiring the utility to reduce its retail market share to less than 50 percent by the end of this year. It is not yet clear if the lenders will accept this request and, if so, what the replacement plan could be.

The key aspects of a government plan for swifter decarbonization, including the closure of PPC’s Amynteo and Megalopoli III power stations; planned efforts for no further target model delays; as well as privatization plans concerning gas utility DEPA and Hellenic Petroleum ELPE will also be discussed Wednesday.

Brussels hears out Greek plan for electricity market reforms

The recently elected conservative New Democracy government’s plan for energy market reforms, especially in the electricity sector, has been closely listened to by leading European Commission officials over two days of talks in Brussels, generating cautious optimism for acceptance amid the government’s ranks.

Deputy energy minister Gerassimos Thomas spearheaded a Greek team to present the government’s proposals that include the termination of NOME auctions; withdrawal of lignite-fired power stations; reinforcement of the RES sector; and restructuring at power utility PPC.

The plan was presented to various Brussels officials, including the European Commissioner for Climate Action and Energy Miguel Arias Canete; the Director-General of the Directorate for Energy Ditte Juul Jørgensen; as well as to the office of new European Commission president Ursula von der Leyen.

The main aim of the Greek officials was to underline PPC’s poor financial standing as a systemic threat, stress the need for further electricity market reforms, and highlight the government’s commitment over these matters.

The Greek proposals did not prompt any negative reaction, at least for the time being. On the contrary, they could represent the beginning of a positive course as the proposed measures are in line with EU policies on lignite unit withdrawals, emphasis on renewable energy and other matters.

Prime Minister Kyriakos Mitsotakis may have set the tone by presenting a green agenda during recent talks with key European officials.

European Commission technocrats will soon be in Athens for negotiations concerning the Greek economy’s post-bailout monitoring. These talks could stretch beyond October given the recent change of guard at the European Commission.

Energy ministry officials believe negotiations concerning the government plan to abolish Greece’s NOME auctions will have been completed prior to October 16, when the year’s final session is scheduled to take place, and therefore enable energy minister Costis Hatzidakis to scrap this particular session and the auctions in general, as the minister has declared he intends to do.

The NOME auctions, introduced by the previous Syriza government, are seen as a loss-incurring measure for PPC, obligated to offer below-cost wholesale electricity to independent suppliers since 2015.

Energy deputy in Brussels for electricity market negotiations

Deputy energy minister Gerassimos Thomas (photo) and the ministry’s secretary-general Alexandra Sdoukou are both in Brussels to negotiate measures for the electricity market’s liberalization.

The Greek officials are scheduled to remain until September 5 for meetings with the European Commissioner for Climate Action and Energy Miguel Arias Canete and other Brussels officials, the intention being to pave the way for ensuing negotiations concerning the Greek economy’s post-bailout monitoring.

Thomas, the energy deputy, will present the recently elected Greek government’s plan for the energy sector, including its decision to abolish NOME auctions. They are seen as a loss-incurring measure for power utility PPC, obligated to offer below-cost wholesale electricity to independent suppliers since 2015.

Government plans entailing a partial privatization of distribution network operator DEDDIE and closure of old lignite-fired power stations run by PPC are also on the Brussels agenda.

In exchange for the termination of NOME auctions, which were introduced to reduce PPC’s retail electricity market dominance, the Greek officials will present a lignite unit withdrawal schedule that includes PPC’s Amynteo, Megalopoli III and Kardia power stations.

The European Commission’s overall position remains unknown.

The Greek government intends to renegotiate an older term committing PPC to reduce its retail electricity market share to less than 50 percent by the end of this year, sources informed. Athens will aim for a softer target of between 60 and 65 percent, the sources added.

More clarity on where the two sides stand is expected next week, when a team of Brussels technocrats is expected in Athens for further negotiations.

Energy deputy: ‘OTE should serve as an example for PPC’

The electricity market’s liberalization will help the power utility PPC restructure, as was the case with the Hellenic Telecommunications Organization OTE, the newly elected centre-right New Democracy government’s deputy energy minister Gerassimos Thomas supports.

The official, backed by experience as a deputy at the European Commission’s Directorate-General for Energy, has not specified what action should be taken if PPC’s current bailout-required disinvestment of lignite units fails to deliver.

But he is in favor of a national policy for the energy system’s decarbonization that would take initiatives and move a step ahead of bailout requirements rather than simply observe them.

It remains to be seen if further measures – beyond PPC’s lignite units disinvestment and the NOME auctions – will be needed for the electricity market’s liberalization, Thomas had commented late last year, adding, at the time, that the country has spent the last 8 years relying on the bailout program as its guide. Irrespective of this, the country needs to look at where it is heading and take initiatives as the market is changing completely, he added.

Thomas is a firm supporter of renewable energy and is expected to give priority to this sector.

On the NOME auctions, the official believes that their failure, so far, to break PPC’s market dominance must first be analyzed before any further action is taken.



Brussels delivers strictest energy-sector report in years

The European Commission’s latest report on the country’s energy-sector commitments is the strictest to have emerged in recent years and certainly the toughest during the Syriza party’s four-year mandate, now into its final year.

All energy-sector deadlines the country has committed itself to are behind schedule, prompting ambiguities regarding the sector’s course, the report notes. It observes increased delays in the implementation of reforms over the past few months and a slowdown in commitments agreed to at a Eurogroup level.

The report also makes note of the energy-sector challenges to face the country’s next administration. The government has called for snap elections, scheduled to take place on July 7.

Greece is held responsible for main power utility PPC’s delayed disinvestment of lignite units. The report also blames the country for the delayed market coupling procedures with Italy and Bulgaria.

RAE, the Regulatory Authority for Energy, has been held accountable, is blamed for its export restrictions imposed on electricity amounts acquired at Greece’s NOME auctions, as the results of this action are seen as unclear.

The report also calls for PPC to increase electricity tariffs for cost recovery and needed investments.

Also, RES sector procedures are deemed as too complex and time-consuming, a disincentive for investments.


Lender representatives visiting Athens in a pre-election mood

Pending energy market reforms, including privatizations, PPC’s disinvestment of lignite units, and other market liberalization measures, will be discussed between government officials and the country’s lender representatives, visiting Athens to begin a post-bailout review this week.

Long-term decisions on various matters will most likely need to be made following Greece’s elections, due in autumn, once the political climate has settled. This delay, though, could end up prompting tougher demands by the lenders, including the European Commission.

PPC’s sale of lignite units, relaunched following a failed previous effort, is expected to dominate the talks. The disinvestment’s deadline for binding bids has been extended to May 28, which virtually coincides with the European elections, making the prospect of the sale procedure’s punctuality uncertain.

The lenders are expected to push for financial restructuring measures at state-controlled PPC, which has just posted disappointing results for 2018. Some of these measures will entail political cost.

The lender representatives will also push for decisions on slow-moving energy-sector privatizations. The sale procedure for gas utility DEPA has fallen behind schedule while uncertainties have crept into the the ELPE (Hellenic Petroleum) privatization.

The target model as well as Crete’s urgently-needed electricity grid interconnection with Athens will also be on the agenda. The latter has led to a control-related dispute between Greek power grid operator IPTO and Euroasia Interconnector, a consortium of Cypriot interests heading a wider PCI-status Greek-Cypriot-Israeli electricity grid interconnection project.

DG Energy boss in Athens to inspect on reforms, wider EU commitments

Klaus-Dieter Borchardt, Director of the European Commission’s Directorate-General for Energy, is currently in Athens for a series of meetings with local authorities to inspect on energy-sector reforms included in the bailout agreement, and, beyond the Greek progam, ensure the country is on the right track for EU energy policy commitments leading to the European energy market’s unification, as presented in the target model.

The DG Energy top official’s two-day agenda, concluding today, includes meetings with officials at IPTO, the power grid operator, RAE, Regulatory Authority for Energy, the main power utility PPC, and the Athens Energy Exchange.

Borchard is focused on ensuring the country’s ongoing and prospective energy-sector reforms will be implemented following the Greek program’s conclusion next month, according to certain local officials who have held talks with the visiting authority.

The DG Energy boss also appears to be applying pressure for the maintenance of schedules, by all local energy institutions, as presented in a binding road map resulting from the country’s EU membership, which stretches beyond the Greek bailout agreement.

Prior to his arrival in Athens, Borchard was in Bulgaria.


Industrial energy consumers fear EU measure will derail liberalization

By Antonios Konteleon

Board member of the Hellenic Union of Industrial Consumers of Energy

Industrial consumers of energy throughout Europe have, in general, been staunch supporters of the liberalization of the electricity market. It is even more so in Greece:  The overregulated and rigid quasi-market for electricity in Greece has, over the years, resulted in much higher market prices than the EU average, crippling the competitiveness of the industry at large.

So when the implementation of the Target Model was included in the 3rd Memorandum between Greece and its creditors in August 2015 as a prerequisite for the disbursing of financial assistance, industrial consumers of energy considered it a great step forward, the official noted, adding the step could at least partially redress the hardship suffered by the Greek industry during the years of the crisis.

UNICEN, the Union of Industrial Consumers of Energy, publicly expressed its support for this policy and urged the Greek authorities to proceed as fast as possible along this route.

Developments since August 2015 have raised grave concerns about whether the new market design will actually be implemented in a meaningful way in Greece. The issue raises concerns that are in fact of interest not only to Greece but to the European Energy Market at large. There are two reasons:

First, the creation of a real Energy Union requires a coupling of all markets — so whatever happens in one country has repercussions in all.

Second, the legislative process in Greece for policies, stipulated in the aforementioned Memorandum, is monitored closely by the EU and its technical teams in Athens. It may sound inconceivable that serious market distortions are allowed in legislation that is prepared in close cooperation with EU Commission representatives — nevertheless it may just be so in the case of Greece.

After a long delay, the Market Operator has prepared a draft Code of Day-Ahead Market, and submitted it to public consultation in January 2018. To our great surprise, the document included various impediments to real and open competition among market players.

The most shocking of these, is the provision for a minimum generators’ bidding price in the day- ahead market. The bidding price, as per the draft code, should never be below the variable production cost of the bidder. These provisions will definitely increase the day-ahead market price, and hence the energy cost in Greece. They will also undermine the Greek market coupling with the Italian day-ahead market, which shall be implemented at the time of the go-live of the new day-ahead market in Greece.

Given the above, consumers of energy are deeply worried that the process of electricity market liberalization in Greece might be hijacked by those who would like to see the current status quo extended into the future. It is not difficult to envisage a structure that will bear the name of the “Target Model”, but would contain so many constraints and caveats, that the protection of the producers’ oligopoly now in operation, would in fact be continued indefinitely.

One would expect that even if the National Regulator (RAE) were to accept such stipulations in the Codes, the European Commission would intervene in favor of the consumers’ interest. This is indeed our hope. Nevertheless, given the experience of the past few years, consumers remain skeptical about whether there will be such an intervention. The reason for this skepticism is the fact that the EU authorities have shown themselves to be predominantly preoccupied with the reduction of the dominant position of the erstwhile state monopoly (PPC), with significantly less attention given to other distortions of the market. They repeatedly expressed their concern about the profitability of PPC’s competitors, without similar worries or actions regarding the high cost borne by consumers of energy. The body of energy related legislation adopted in Greece over the years of the implementation of the financial aid programs — which has been drafted in close cooperation between the Greek authorities and EU officials — clearly reflects these preoccupations.

The justification that the Market Operator provides for the bidding floor is — once again — the need to constrain the dominant player. But it is at least paradoxical to try to constrain a dominant player by increasing the level of prices and delay progress towards the achievement of the Greek market coupling! Even though we agree that the state owned dominant player should be kept in check for a market to be created, extreme caution should be taken in the overall market conditions: replacing a state monopoly with a state supported oligopoly is definitely not in line with the Energy Union principles. Let us hope the European Commission will rise up to the situation. (Source: Politico)





IPTO: The day after the ownership unbundling

The following speech, published in its entirety, was delivered by Manos Manousakis, chief executive at IPTO, Greece’s power grid operator, at the Athens Energy Forum yesterday. 

Ladies and Gentlemen,

It is an honor and a pleasure to be one of the speakers of this year’s Athens Energy Forum, which is taking place against the backdrop of the radical transformation of the Greek energy market, which is being liberalized.

At the same time, the Greek market is gearing up to meet the main challenges arising from the implementation of the EU Energy Policy, namely:

  1. The increased penetration of Renewable Energy Sources in the Transmission System and Distribution Grid
  2. The de-carbonization of electricity production and
  3. The integration of the wholesale electricity markets of the EU member states through the introduction of the target model

I will start by briefly explaining the new ownership status and the benefits that stem from it.

As most of you probably know, in June 2017 the ownership unbundling of IPTO [locally acronymed ADMIE] took place.

The Greek State owns a controlling shareholding stake of 51%.

State Grid of China, the world’s largest utility company, is IPTO’s second biggest investor with a 24% stake and active participation in its management.

The company further diversified its investor base following the listing of its affiliate company IPTO Holding in the Athens Stock Exchange.

The strategic partnership between the Greek State and State Grid has already started to show results, through the improvement of the financial and operational ability.

With this structure, IPTO aims to exemplify the way a company under state control can modernize itself and improve its efficiency, in order to play a leading role in the new energy landscape.

In this context, the company has set two main objectives for 2018:

First, faster project delivery.

Second, successful implementation of the target model and specifically of the balancing market, which falls under IPTO’s responsibility.

The new administrative model of the company will facilitate the achievement of these objectives.

One milestone of the restructuring process, which took place at the end of 2017, was a voluntary exit scheme which was successfully completed a few days ago. The participation far exceeded management’s expectations.

Through this scheme, IPTO aimed to make room for younger, highly skilled employees who are sorely needed.

Another important element is that the active management of IPTO’s assets has been placed at the heart of its new organizational model.

The ambitious targets for RES penetration into the energy mix require the upgrade of the infrastructures for the electricity transmission and the ‘smartening’ of the grids.

All the modern TSOs in Europe (RTE from France, ELIA from Belgium, 50 Hertz from Germany etc.) consider asset management as one of their main functions.

IPTO is now following their example with the creation of a new Asset Management Unit.

The main mission of this Unit is the optimal exploitation of the company’s assets, the extraction of maximum value from their use.

In this regard, I would like to point out that IPTO is implementing a broad asset renovation program and the first tenders will be published in the near future.

With this new improved administrative structure, IPTO will be better prepared to pursue its first objective, which is the timely execution of the major interconnection projects that are foreseen in the company’s business plan.

We are talking about investments of 1 billion euros until 2021.

The company is prioritizing the Cyclades and Crete Interconnections.

The first phase of the Cyclades interconnection, which entails the interconnection of Syros, Paros and Mykonos to the mainland transmission system, is already in the test phase of electrification.

As a result, both the security of electricity supply and the environmental footprint of those islands will be upgraded.

The dated, fuel oil power plants [on islands] will soon cease to operate.

IPTO is also placing great emphasis on the Crete Interconnections which are of pivotal importance to the Greek economy.

Why? Because they will secure the energy supply of the country’s largest island and drastically reduce the cost of electricity for all Greek consumers.

In the course of the implementation of these projects, the company will benefit from the technical expertise of State Grid, which is spearheading China’s effort to transition to clean energy.

State Grid is a world leader in developing Ultra High Voltage Transmission Lines and building smart grids that promote the utilization of RES.

It boasts the largest installed capacity of wind and solar production in the world.

It is obvious that IPTO has a lot to earn from its know-how.

At a recent international conference, a State Grid executive stated that the company’s goal is to turn Greece into an electricity hub via interconnections to the Balkans, Africa and Asia.

It should be noted that according to a recent study of an Expert Group the development of new transnational electricity interconnections is becoming an EU priority, as the current interconnection target of 10% is not considered ambitious enough and it will be increased to 15% by 2030.

Europe is heading towards a well-integrated energy market.

Electricity interconnections are the physical component of making this market truly European by connecting Member States’ networks, thus offering:

-capacity for electricity trade

-improved security of supply

-integration of the growing share of renewable electricity production.

In this direction, IPTO is prioritizing the development of a second electricity transmission line between Greece and Bulgaria. This project has already been included in the list of Projects of Common Interest for the European Union.

Having mentioned the integration of the EU energy market, I would like to move on to the second objective of IPTO for this year, which is the setting up of the Balancing Market, the part of the target model for which the company is responsible.

I will try not to go into the highly technical details.

Let me just say that the Balancing Market is the last of the four Target Model markets.

However, its role is very important since it reflects the actual cost of balancing electricity supply and demand, close to real time.

A well designed Balancing Market is not only important to provide the TSO with sufficient Balancing Services at all times in order to safeguard secure system operation.

It is also essential to ensure an efficient functioning of the overall electricity market.

Consequently, they affect Participants’ decisions in the forward market timeline.

The basic principles of the Balancing Market design are:

-Central Dispatch System

-Unit based participation in the market

The Balancing Market consists of:

A Balancing Energy Market,

Balancing Reserve Market

Imbalances Market, which is an ex post market for settlement of imbalances

IPTO performed a Public Consultation on the Balancing Market Code between December 2017 and January 2018.

Participants’ comments were received and the most recent update is that a second version of the Code was sent to the Regulatory Authority for Energy for the subsequent phase two of the Public Consultation, which is going to be performed by the Authority.

I hope I gave you an oversight of the day after the ownership unbundling of IPTO.

Let me conclude my speech by saying that the future will be electric, de-carbonized and interconnected. IPTO will play an important role in this process.

Thank you

Brussels, troubled by target model delays, sending experts for support

The European Commission, showing signs of disaffection over delays in the implementation of regulation revisions linked to the target model, crucial to the country’s electricity market reforms, has decided to send a team of technocrats to Athens for technical support in an effort to swiften procedures, energypress sources have informed.

A two-month delay in code reforms being processed by LAGIE, the Electricity Market Operator, and IPTO, the power grid operator, following a related legislative approval in December, has prompted these concerns in Brussels.

According to sources in Brussels, the European Commission fears these delays could derail proceedings concerning the target model, aiming to harmonize Greece’s electricity wholesale market with EU standards.

The visiting technocrats will offer their expertise in an effort to push ahead the related developments currently seen drifting between LAGIE, IPTO, as well as RAE, the Regulatory Authority for Energy.

Brussels officials believe this intervention is necessary in order to prevent reaching a situation, a few months from now, that would require target model deadlines to be rescheduled.

Late last month, LAGIE announced the results of a public consultation procedure for the target model codes, which need to be adjusted to the demands of legislation concerning the energy exchange.

IPTO has already informed that the electricity balancing market – to ensure the security of supply at the least cost and deliver environmental benefits by reducing the need for back-up generation – cannot operate before spring in 2019. IPTO will be responsible for the balancing market once it is launched.

RAE recently decided to appoint a consultant to appraise codes concerning the intraday and day-ahead markets, currently being processed by LAGIE, as well as codes concerning the balancing market, being prepared by IPTO.


Market reforms, demand response enter flexibility mechanism talks

Officials of RAE, the Regulatory Authority for Energy, currently engaged in talks with represnentatives of the European Commission’s Directorate-General for Energy and Directorate-General for Competition, in the Greek capital to attend “The Athens Conference on European Energy Law amd Policy”, are grappling with electricity market reform issues, which need to be resolved before any new capacity mechanisms are successfully implemented.

Electricity market reforms need to be implemented to ensure fair payment for gas-fired power units through an effective flexibility remuneration mechanism before RAE’s proposed mechanism can be further discussed.

A maximum remuneration amount of 25,000 euros per MW set by RAE, significantly less than the 45,000 euros per MW offered to producers through the previous mechanism, stands as a core issue.

The absence of the demand response mechanism, and, by extension, major-scale consumers, including industrial, from the new model, is another major issue. RAE will need to convince Brussels officials of this intention.

The European Commission has insisted on including the demand response mechanism (interruptability) in the temporary flexibility remuneration mechanism (CATs), but RAE has not made any such provisions.

RAE contends that there are no immediate prospects for the implementation of a flexibility remuneration mechanism that includes a demand response mechanism.


Creditors increasing pressure for ‘Little PPC’ solution

The country’s creditors appear to be pushing for a clear-cut and binding commitment from Greece on alternative electricity market structural measures should the recently introduced NOME auctions – providing third parties with access to the main power utility PPC’s low-cost lignite and hydropower sources as a measure to help break the utility’s market dominance – fail to produce results.

Energy ministry officials have acknowledged that the part-privatization of PPC, locally dubbed “Little PPC”, or a variation of this proposal, will most likely be brought back to the negotiating table and adopted as a bailout review condition if the auctions, launched last October, do not reduce the utility’s still-dominant market share. Two sesssions have been staged so far but PPC’s market share appears to be remainiing resilient.

Though legislation of such an alternative measure is not expected to be immediately demanded, the ministry officials believe Greece will need to produce a highly detailed plan which the country will need to commit itself to. The overall developments of the bailout’s ongoing second review will also influence the pressure to be applied by the creditors for electricity market action.

The creditors are persisting with a revised plan for a compounding NOME approach through which electricity amounts offered by PPC as of next September must also be added to the following year’s amount on a continual basis until 2019. This demand is expected to force PPC to provide 46 percent of its annual electricity production to the NOME auctions by 2019.

Greek officials disagree with this compounding approach and want the initial plan to remain valid. It calls for PPC to provide 8 percent of total annual electricity production in 2016, 12 percent in 2017 and 13 percent in 2018 and 2019. Greek officials believe such amounts suffice to drive down the utility’s electricity market share to less than 50 percent by 2020.




NOME results expected to reignite ‘Little PPC’ plan talks

Though still too early to judge, as three more NOME auctions are scheduled for this year, in March, July and October, yesterday’s auction, the second to be staged following the inaugural session last October, took the procedure’s intention, which is to help liberalize the electricity market and generate competition, a major step back.

Yesterday’s NOME results will surely reignite talks for the need of alternative structural measures. The part-privatization of PPC, which would offer investors a “Little PPC”, as the plan has been locally dubbed, can be expected to be brought back to the negotiating table by the country’s lenders.

The main power utility PPC, whose market dominance and the need to diminish this prompted the NOME auction’s introduction, ended up being the main beneficiary of yesterday’s session.

The utility secured lofty earnings from the electricity offered at the auction as a result of the competitive bidding that drove up price levels. Earnings for the utility reached 52.2 million euros, 4.69 million euros above the electricity amount’s value, estimated at 47.5 milliion euros considering the starting price of 37.37 euros per MWh.

These higher-cost electricity purchases made by independent suppliers make it difficult for them to offer consumers attractive packages. As explained by market officials, at such elevated price levels, even a one-cent difference can prove to be the difference between making a profit and incurring losses.

Some officials noted that such prices make commercial efforts sustainable only if the System Marginal Price (SMP) and wholesale price levels remain high. Otherwise, a large part of the electricity purchased at yesterday’s NOME auction will most likely end up being exported.

The arrival of the NOME auctions bought into play a bailout-required measure aiming to break PPC’s dominance by offering other traders access to the utility’s low-cost lignite and hydropower sources.

However, yesterday’s NOME auction results could make more difficult the Greek government’s effort to reach an agreement with the country’s lenders on the current bailout review’s energy sector requirements.

No major market share shifts can be expected as independent suppliers will not be able to launch aggressive pricing policies based on the auction price levels reached. This makes the bailout objective of a reduced PPC market share more difficult to achieve.

PPC’s proposal to carve out sections of its clientele for the establishment and sale of new companies has gained some credibility. However, this proposal is being viewed with some reservation as delays have already emerged.

Of the 14 participants at yesterday’s session, 12 made successful bids to secure orders. Two bidders failed to acquire electricity amounts. One of these failed bids, concerning an amount of 1 MWh, is believed to have been made by the industrial firm Viohalko. (Some industrial firms have acquired supply licenses so as to be able to take part in the NOME auctions). The other bid, made for a 13 MWh amount, is believed to have been made by Volton, a newcomer to the electricity supply market.

The market’s three major independent suppliers, Protergia, Elpedison and Heron, all vertically integrated, are believed to have acquired the biggest electricity amounts, 31 MWh, 33 MWh and 20 MWh, at prices of 41.05 euros per MWh and 41.06 euros per MWh.

Cement producer Titan is believed to have secured a 1 MWh amount for 41.06 euros per MWh.

The remaining amounts, ranging between 3 MWh and 16 MWh, were bought by Watt & Volt, Green, Volterra, NRG, ELTA, OTE and the newly arrived KEN.




New electricity distribution charter set to be announced

A charter mapping out regulations for Greece’s electricity distribution market has finally been completed, fifteen years after the electricity market’s liberalization process was launched.

The development, expected to be announced imminently according to energypress sources, promises to greatly redefine distribution conditions and practices in the electricity market.

The charter has alrdeay been endorsed by the board at RAE, the Regulatory Authority for Energy, and is now set to be published in the government gazette.

The charter sets a strict operating framework for HEDNO, the Hellenic Electricity Distribution Network Operator, locally acronymed DEDDIE.

Regulations concerning network maintenance and development, consumer connections to the network, ties with electricity suppliers, renewable energy (RES) facility connection issues, electricity theft, illegal connections and electricity supply quality are among the issues included in the electricity distribution charter.

The hunt for cases of electricity theft, as well as the consequnces for offenders, is expected to be intensified through the new charter.


Electricity market liberalization offers new trends, innovations

A series of innovations that are changing the way households and enterprises manage energy consumption and offering benefits to consumers as well as suppliers are beginning to make their presence felt in Greece as part of the energy market’s ongoing liberalization.

The energy market’s liberalization process, as already seen in more mature markets, stretches beyond mere tariff price offers made by various electricity suppliers to also cover the fields of energy savings and efficiency. New players usually introduce technical innovations in these fields to change the rules of the game.

Rather than focus entirely on offering the lowest electricity tariffs, emerging suppliers offer clients wider packages leading to energy efficiency improvements, lower consumption and financial benefits.

Professional clients such as retail chain networks stand to gain considerably, while the potential benefits for households are not negligible. IT systems are applied to help steer clients towards greater energy efficiency.

Results in more advanced energy markets abroad have shown that consumer energy savings range between 3 and 5 percent.

Such figures mean that a retail chain consuming 250,000 KWh annually, for example, can save between 80,000 and 180,000 euros in a year. Savings figures such as these would swiftly cover investments needed to transform to new ways.

The prospective installation of digital power meters in Greece will fundamentally change energy consumption patterns through monitoring, consumption control and demand response systems.

Even so, certain independent suppliers are not waiting for the country’s grid operaror to install digital meters to the system, but, instead, are offering clients the opportunity to have digital systems installed within their properties as an addition to the current conventional meters. This upgrade would allow households to improve energy efficiency.


PPC market abuse appeal rejection to up EC demands

The European Court’s rejection of an appeal made by main power utility PPC against an older European Commission decision that had condemned the utility for abuse of its dominant position in the lignite market increases the likelihood of greater concessions the utility will need to make.

Based on this latest development, the core issue is no longer about PPC providing third parties access to energy produced by the utility’s low-cost lignite and hydropower sources, as is being carried out through the just-introduced NOME auctions, but giving competitors direct access to these sources prior to energy production.

Older European Commission demands for the sale of certain PPC power stations and coal mines, a taboo subject until now, can be expected to be brought back to the negotiating table by Greece’s creditors, which include the European Commission.

The role to be played by the bailout-required NOME auctions in the Greek electricity market’s ongoing liberalization stands to be diminished. Greater emphasis will now most likely be placed on the sale of PPC energy production units and sources. The sidelined but not forgotten “Little PPC” plan, entailing the utility’s part-privatization, or a variation of it, will be brought back to the fore by the European Commission.

The European Court’s rejection of the PPC appeal was discussed at a meeting yesterday between Greek energy minister Giorgos Stathakis and creditor representatives. According to sources, Greek officials now contend that the verdict lessens the significance of the NOME auctions. Local officials and the creditor representatives are currently locked in negotiations over the level of electricity amounts that need to be offered through the NOME process. The creditors are pushing for increased amounts. A diminished NOME role in the electricity market’s liberalization can be expected to be offset by stricter demands on PPC.

The NOME auctions are seen as a transitionary tool until PPC’s retail electricity market share has fallen to below 50 percent, which is expected by 2020. Looking ahead, if PPC starts regaining a part of its lost market share following 2020 the European Commission can certainly be expected to demand the sale of PPC units. This could also be the case in the immediate future if the NOME auctions fail to produce the needed results.

The European Commission’s decision condemning PPC for abuse of power had been delivered in 2008 but has not been followed up by firm action as a result of the various electricity market revisions at play.

The Greek State’s legal officials and PPC will now need to seek solutions that cannot be too different to the “Little PPC” demand made by Brussels in the past. Options could include the opening up of new coal mines to be controlled by private-sector energy companies or even PPC’s sale of existing mines and lignite-fired power stations.

ELTA an early candidate in PPC sale plan to offer retail portion

ELTA (Hellenic Post) has emerged as the first candidate to express an interest in acquiring a share of main power utility PPC’s clients through the latter’s plan to split and sell a portion of its business in the form of at least one new retail company to be offered through a tender.

Though market players remain hesitant about the PPC plan, fearing it could burden robust independent suppliers with undesirable PPC customers carrying arrears, the power utility appears determined to press ahead with the initiative as a means of avoiding bailout-linked market share contraction targets to be sought through the just-introduced NOME auctions.

The objective of the NOME auctions is to provide third parties with access to PPC’s low-cost lignite and hydropower sources as a measure to help break the utility’s market dominance.

PPC’s new retail company or companies are planned to represent about 6 to 7 percent of the utility’s market share, or roughly 400,000 clients. Last week, PPC’s chief executive Manolis Panagiotakis noted that the new company would be formed by March.

ELTA purchased a 15-MW package of electricity at last month’s inaugural NOME auction but does  not possess a retail network to supply this amount to the market. As things stand, ELTA could either sell this amount to suppliers at a small profit, at best, return it to the grid at a loss.

Alternatively, if PPC carries out its plan to stage a tender selling a new retail company, or companies, and ELTA emerges as the buyer, the latter would not only be able to supply the 15 MW electricity amount to the market but also suddenly emerge as the market follower with a 6 to 7 percent share of the electricity retail market, well ahead of the current second-placed firm, currently holding a share of about 3 percent. PPC still dominates with a market share of about 88 percent.

ELTA had commissioned PPC as a technical adviser for a development plan.

The majority of independent suppliers have declared they cannot adopt positions on the PPC plan as it remains murky, adding that the type of clients to be included in the utility’s split-and-sell plan are a prime factor.




PPC risks greater losses by doubting NOME auction price

Main power utility PPC’s delayed decision to cast doubts the NOME auction starting price level has angered the Greek government, which has refused to comment on the matter, energypress sources have informed.

The utility’s decision to take its case to the Council of State, the Supreme Administrative Court of Greece, a move aiming to stop the next NOME auction from beng held, threatens to destabilize the governmnet’s overall policy concerning PPC.

If PPC’s intervention affects the NOME process, PPC risks facing harsh measures down the road that would take an even greater market share away from the utility.

Commenting last night, PPC officials assured that they are not reacting against the arrival of the NOME auctions – introduced last month with the intention of providing third parties with access to PPC’s low-cost lignite and hydropower sources as a measure to help break the utility’s market dominance – but the formula used to determine the starting price.

The government has highlighted that its avoidance of a majority-stake sale of PPC subsidiary IPTO, the power grid operator, as well as its avoidance of PPC’s part-privatization – an older plan forged by the previous government concerning the sale of 30 percent of the utility, locally dubbed “Little PPC” – stand as key political accomplishments.

However, the country’s bailout agreement stipulates that if the NOME auctions fail to produce the desired results, meaning specific and considerable retail market share gains for independent suppliers, then structural measures will automatically be imposed to deliver these intended results.

These alternative measures would most probably entail the sale of PPC units, prompting the surrender of a 50 percent market share by 2020, well over the “Little PPC” approach’s 30 percent sale.

Responding to PPC’s opposition to the NOME auctions, as well as the country’s temporary CAT mechanism, market officials noted that the utility is repeatedly expressing hostile views against the implementation of market mechanisms needed to reform and liberalize Greece’s electricity market.

The inaugural NOME auction’s low starting price and subdued bidding thoughout the session guranteed low purchase prices for participants, who walked away feeling satisfied. PPC officials, who had anticipated more aggressive bidding and higher prices, were not pleased.

Based on the bailout requirements, PPC will need to have surrended around 20 percent of its market share to independent suppliers in 2017. Even so, judging by its latest move, the utility appears determined to avoid such a development. PPC’s perennial monopoly is slowly eroding. PPC’s market share has slipped to a level of about 88 percent.


Market changes, PPC future spark conference debate

Leading main power utility PPC and energy ministry officials engaged in an impromptu debate at a Greek-Russian energy conference staged in Athens yesterday, trading views on Greek electricity market developments and the utility’s future.

PPC’s deputy director Stavros Goutsios focused on new costs being shouldered by the utility, while the energy ministry’s secretary general Mihalis Veriopoulos countered by defending measures taken to rationalize the electricity market’s functioning within the wider European framework.

The PPC official presented a series of new costs being taken on by the utility, including the additional financial weight prompted by high tariff prices offered for PV production and RES facilities in general, averaging 292 euros per MWh. Legislation was ratified in July to increase contributions provided by suppliers for the RES special account in an effort to eliminate its deficit. This revision will cost PPC 35 million euros in 2016, 180 million euros in 2017 and 190 million euros in 2018, the utility’s official noted. Recent amendments to the bill will increase PPC’s by a further 50 million euros for 2017 and an extra 50 million euros in 2018.

The country’s temporary CAT mechanism requires PPC to provide independent gas-based electricity producers a sum of 48 million euros in 2016 and 54 million euros in 2017, the PPC deputy also noted.

Goutsios contended that the NOME auctions – introduced less than a fortnight ago to provide independent suppliers with access to PPC’s low-cost lignite and hydropower sources as a means of breaking the utility’s market dominance – could lead to profiteering as independent suppliers may purchase low-cost electricity and export it abroad. PPC’s losses over the next two-year period, as a result of the NOME measure, were estimated at 300 million euros.

The deputy also mentioned the negative impact on PPC of the demise of two now-defunct electricity retailers, Energa and Hellas Power, whose retail market entries several years ago both ended in financial scandal. Their fall will cost PPC as much as 70 million euros, including a contribution to the compensation amount accumulated for independent electricity producers, owed an estimated 27 million euros by the two failed electricity retailers.

Veriopoulos, in response, pointed out that the RES-related cost mentioned by the PPC deputy essentially covers the positive impact on suppliers of RES production to the grid.

“The participation of RES producers in the market benefits suppliers, especially PPC. This benefit has, until now, been exclusively enjoyed by the utility and it is only fair that it gradually shoulders the cost,” Veriopoulos responded.


Target model draft bill set for public consultation procedures

Public consultation procedures for a draft bill concerning the electricity market’s target model, a road map to guide Greece through a series of reforms needed as part of the EU’s wider effort to establish an integrated European energy market, are expected to be launched imminently, possibly today.

Ratification of the bill stands as an energy-sector bailout prior action. The next review by the country’s creditors begins today in Athens. Completion of the prior actions will pave the way for the disbursement of a subtranche of 2.8 billion euros.

As part of the European framework, the Greek draft bill will lead to the establishment of four markets, an Electricity Futures Market, a Day-After Market, an Intraday Market, and an Electricity Balancing Market.

According to officials at RAE, the Regulatory Authority for Energy, the Electricity Futures Market will concern trade conducted years in advance of actual delivery. This will offer traders the opportunity to handle risk management as a means of protecting consumers from real-time price fluctuations.

The Intraday Market will allow for trading during the day, just hours ahead of delivery, enabling traders to make corrective measures based on consumer demand and power-station output levels.

Trading in the Day-After Market will take place a day before actual delivery, offering traders the opportunity to cover remaining demand following orders placed in the Future Market.

Trading in the Electricity Balancing Market will primarily take place slightly prior to actual delivery. Its activity will be determined by real-time needs.