electricity market reforms

Industrial energy consumers fear EU measure will derail liberalization

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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.

 

 

 

 

Power market reform delays stressed in central bank report

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The implementation of reforms intended to help liberalize Greece’s electricity market, such as the upcoming NOME auctions, to provide independent firms access to main power utility PPC’s low-cost lignite and hydropower sources, as well as the breakway of IPTO, the power grid operator, from PPC, its parent company, has been delayed, Bank of Greece Governor Yannis Stournaras has noted in an economic report.

The central bank chief devoted eight pages to the need for electricity market reforms in his report, which highlights how crucial he considers them to be.

“Stagnancy emerged in the electricity market’s liberalization effort, especially in the production and wholesale domains, as a result of the combined effect of unfinished planning and implementation of reforms and the lack of investments due to the economy’s prolonged recession,” Stournaras noted in his report.

Swift implementation of reforms ratified in Greek Parliament in 2015 and 2016 will intensify market competition and activate serious investment efforts in the electricity market’s production, distribution and retail levels, the central bank governor’s report added.

These favorable market developments will be propelled by offering independent electricity companies access to the country’s lignite and hydropower sources – through the NOME auctions expected in September – as well as through IPTO’s breakaway from PPC, the report concluded.