Energy Transition Fund

Swifter H2 framework action needed to secure EU funds

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Procedures to establish a regulatory framework on hydrogen, biomethane and CCS need to be accelerated, otherwise the country risks missing out on crucial EU support funds promoting these sectors through the Energy Transition Fund, market sources have stressed. The regulatory framework needs to be finalized by a June 30 deadline.

Officials at RAAEY, the Regulatory Authority for Waste, Energy and Water, and the energy ministry are currently engaged in talks with market players interested in developing hydrogen-related projects but needing clarity.

The emergence of the hydrogen market as a new market poses regulatory and operational questions. It is not yet clear how these responsibilities will be distributed.

Though final decisions have yet to be taken, the energy ministry appears inclined to appoint RAAEY as the hydrogen sector’s regulatory authority and gas grid operator DESFA as its operator, as the sector will use networks already managed by this operator, energypress sources have informed.

As for distribution, the ministry appears likely to take the course taken in other European markets, where the role of distribution network operator is performed by companies that make the investments, resulting in multiple small distribution systems.

Ministry to seek state budget support for special a/c deficit

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The energy ministry plans to seek state budget support for the public service compensation (YKO) special account’s deficit, now close to 600 million euros and widened by 300 million euros in a year.

This special account, normally subsidizing high-cost electricity production on non-interconnected islands through YKO surcharges included in all electricity bills, experienced a wider deficit last year as a considerable proportion of its inflow was channeled into the Energy Transition Fund to fund electricity subsidies offered by the government to all consumers as an energy-crisis measure.

The energy ministry hopes this will be the final time state budget support will be needed to keep the YKO special account balanced. The ministry expects major YKO special account savings to result from the prospective Crete-Athens grid interconnection, planned for commercial launch in 2025.

The Crete-Athens grid interconnection project is expected to lead to an YKO special account surplus of 150 million euros in 2026.

Electricity producers’ payment upper limit now lifted

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Remuneration upper limits imposed on all electricity producers as one of a number of emergency measures implemented by authorities during the energy crisis have just been lifted, effective as of January 1, a move representing a significant step in the wholesale electricity market’s return to normality.

In the retail electricity market, subsidies offered to all consumers during the energy crisis were also lifted with the arrival of the new year.

The government introduced remuneration upper limits for electricity producers on July 7, 2022, at the height of the energy crisis, as a tool for recovering windfall profits, which were injected into the Energy Transition Fund to finance electricity subsidies offered by the state to all consumers.

A preceding remuneration system for electricity producers, introduced as part of the target model, has now been reinstated in place of the upper limits. A marginal price model, it sets payment levels for electricity producers based on the highest-price production unit brought into play every day.

Under the emergency measure imposing remuneration upper limits, all electricity producers, regardless of technology, were subjected to payment restrictions that took into account respective operating costs.

RES facilities faced a remuneration upper limit of 85 euros per MWh, while hydropower units were subjected to a payment limit of 112 euros per MWh. The remuneration upper-limit for natural gas-fueled power stations was revised monthly so that wildly fluctuating factors such as emission right costs and natural gas prices could be factored in.

The next and final step for the wholesale electricity market’s complete return to normality entails lifting an extraordinary levy imposed on natural gas used for electricity production. The energy ministry has noted it intends to proceed with this step early in 2024. However, a legislative revision by the ministry will be needed.

 

No sum for energy-crisis support in 2024 draft budget

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Consumers face a challenging winter in terms of energy costs, as indicated by a number of revisions included in the 2024 draft budget, just submitted to Parliament.

Besides the absence of horizontal energy-support measures, the budget draft does not provide for any special reserve that would cover energy-crisis situations.

Fiscal concerns expressed by the European Commission, pressure by the ECB for an end to generous support that is cancelling out monetary policy, as well as the normalization of energy market conditions are key factors behind these budget restrictions for energy consumers, who were offered substantial support in 2022 and 2023.

A senior member of the government’s economic staff, responding to questions during a briefing yesterday on budget figures, admitted that no energy-related safety cushion for consumers was included in the country’s financial package for 2024. However, the official did point out that corresponding action would be taken to meet any potential needs, should they arise.

This essentially means that certain support measures offered last winter would only be recalled if deemed necessary, to avoid burdening the budget in advance.

For the time being, the only emergency amount included in the draft budget is a 600 million-euro sum for natural disasters.

Contrary to last winter, the draft budget for 2024 does not include any sum for heating fuel subsidies. If any support, on this front, is eventually offered to consumers, it would result from initiatives taken by refineries. Clarity is expected around mid-October, when the heating-fuel trading season commences.

Also, horizontal electricity subsidies, for all consumers, will cease to apply as of January, when electricity suppliers will be introducing new pricing policies, to include indexation clauses or similar pricing tools.

Horizontal support for natural gas purchases also appears set to be scrapped as of January, given the gas market’s currently subdued prices.

The absence of any reserve amount for potential energy crises stands as the draft budget’s fourth major energy-related change, compared to last winter. If needs do arise, they will seemingly be dealt with via the Energy Transition Fund, not the budget.

TCF, compensating industry for crisis cost, to be approved

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The European Commission is preparing to approve, next week, a Temporary Crisis Framework, designed to compensate energy-intensive industry in the EU for losses incurred during the energy crisis as a result of elevated energy costs, sources have informed energypress.

The TCF is expected to offer eligible producers subsidies reaching up to 50 euros per MWh in 2023, beginning March 1.

The aim of the framework’s implementation is to alleviate the financial burdens that the industrial sector has faced during the energy crisis. These additional costs have had a significant impact on the viability and competitiveness of various industries, particularly those involved in steel, aluminum, glass, and paper production.

The TCF funds will stem from the Energy Transition Fund and will be provided once the framework has been approved by the EU’s Directorate-General for Competition.

In Greece, the TCF was announced by the previous leadership of the energy ministry before the country’s general elections in May and June. However, at that time, the TCF had not been finalized and officially approved. It is now anticipated that the current leadership of the energy ministry will soon take steps to finalize and approve this support framework.

Power suppliers’ windfall tax imminent, to raise up to €275m

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The government is preparing to introduce a windfall profit tax on electricity suppliers for earnings between August, 2022 and June, 2023, which is expected to rake in up to 275 million euros in tax revenue, calculations have indicated.

The energy ministry, now set to co-sign a joint ministerial decision that will enable the tax measure’s introduction, has received relevant financial data provided by electricity suppliers to determine if an existing tax formula shaped for the measure will need any revising as a result of the time that has elapsed since its establishment.

Under the current plan, the windfall tax formula will be applied in segments to calculate taxes covering an initial five-month period from August to December last year, and then over two successive three-month periods running from January to March, 2023 and April to June, 2023.

The tax measure could also be applied over one eleven-month period, but this would require a legislative revision.

If implemented in fragmented fashion, as currently planned, the tax measure is seen raising approximately 275 million euros, while, if applied over one continual period, the measure would raise roughly 250 million euros.

Electricity suppliers will be expected to make immediate payments covering 60 percent of any resulting windfall tax amounts, followed by the other 40 percent at latter dates.

Tax revenue raised through this extraordinary measure is planned to be injected into the country’s Energy Transition Fund.

Levy on gas for power output to be terminated at end of year

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The energy ministry plans to terminate an extraordinary levy that was imposed on natural gas used for electricity generation at the beginning of 2024, along with the termination of other measures implemented in the wholesale and electricity markets during the energy crisis.

A joint ministerial decision issued last spring for subsidy distribution of amounts collected through the extraordinary levy is also set to expire on December 31, 2023.

The joint ministerial decision, which had been signed by then-energy minister Kostas Skrekas and former deputy finance minister Theodoros Skylakakis, now in charge of the country’s energy portfolio, facilitated the collection of funds through the levy on gas used for electricity production in order to contribute to electricity-bill subsidies offered through the Energy Transition Fund.

The formula of the levy on gas used for electricity production, introduced in November, 2022, was revised in May this year and set at 5 percent of the TTF index, replacing a previous fixed charge of 10 euro per MWh.

Though this revision did reduce the cost of the levy imposed on gas used for electricity production, it has continued distorting the domestic wholesale market, market officials have contended.

As a result, the levy has undermined the competitiveness of domestic gas-fueled power plants compared to counterpart units in neighboring countries, thus limiting their operating hours.

The TTF index, a key benchmark for natural gas prices in the European market, ended August at an average of 34.83 euros per MWh for contracts requiring delivery in September.

 

Small-business subsidy returns solution sought for electricity suppliers

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The energy ministry and ESPEN, the Greek Energy Suppliers Association, have held talks in search of a solution that would reimburse electricity suppliers for electricity subsidies they have provided, on behalf of the Greek State, to small businesses supplied up to 35 kVA, as well as all bakeries, regardless of supply capacity.

The total amount owed by the Greek State to electricity suppliers is estimated to have reached 800 million euros and has been pending for many months, despite the fact that this outstanding sum has been fully recognized, including legally.

Under the current reimbursement procedure, the Greek State only reimburses electricity suppliers for customers who have submitted formal declarations to RES market operator DAPEEP, managing the Energy Transition Fund that covers subsidies, once these formal declarations have been checked.

However, most customers tend to neglect filling in and forwarding these required formal declaration forms, hindering the reimbursement procedure.

An initial Brussels-approved subsidy support program for small businesses ran from February to November last year and has since been extended on a monthly basis.

Emergency measures extended by 3 months over price fears

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Unsettling energy price forecasts have prompted the energy ministry to extend the country’s emergency measures by a further three months, meaning they will now remain valid until December 31, to protect consumers against any new upward price trajectory.

The energy ministry reached a decision last Friday to extend the emergency measures – namely a price cap imposed on the wholesale electricity market and a suspension of indexation clauses usually included in electricity bills. Both measures, introduced a year ago, were due to expire on October 1.

The energy ministry wants the financial support of the Energy Transition Fund, in order to provide electricity subsidies to consumers should the energy crisis flare up again.

Such Energy Transition Fund support would not be possible if the existing price cap in the wholesale electricity market were to be lifted, as any price levels over the cap would remain in the market and not be diverted into the Energy Transition Fund to cover electricity subsidy needs.

Since its introduction last July, the price cap on the wholesale electricity market has so far raised over 3.3 billion euros for electricity bill subsidies, the energy ministry pointed out in its announcement of the decision to extend the country’s emergency measures.

Highlighting concerns of possible energy price rises ahead, German electricity forward contracts for the fourth quarter of 2023 and the first quarter of 2024 have been set at 123 and 146 euros per MWh, respectively.

As for France, one of Europe’s other major energy markets, forward contracts for Q3 2023 and Q1 2024 were set at 155 and 218 euros per MWh, respectively.

DAPEEP collections pivotal in budget revenue returns boost

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A state budget revenue refunds increase for the first half has been largely attributed to amounts collected by DAPEEP, the RES market operator, provisional budget execution data has shown.

State budget revenue refunds in the first half of the year totaled 3. 389 billion euros, 586 million euros over the target, set at 2.802 billion euros, with approximately 220 million of this influx injected into the state budget via DAPEEP collections facilitated by a temporary mechanism for partial returns of day-ahead market revenues, according to the provisional state budget data.

Also, a 367 million-euro sum was secured for the Energy Transition Fund from windfall earnings returns by energy producers between October 1, 2021 and June 30, 2022.

The Greek state budget recorded a primary surplus of 2.166 billion euros in the January-June 2023 period, up from a budget target for a surplus of 415 million euros and a primary deficit of 3.425 billion euros in the same period last year, the data showed.

RES sector now main Energy Transition Fund contributor

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The de-escalation of natural gas prices has drastically diminished the level of contributions made by power generation technologies to the Energy Transition Fund, virtually all input now provided by the RES sector, RAAEY, the Regulatory Authority for Waste, Energy and Water, has determined following an assessment of data concerning a related earnings recovery mechanism.

This recovery mechanism has essentially stopped functioning as, in recent months, the average wholesale price in the electricity market has fallen below upper limits set for electricity production technologies.

Since its introduction in the wholesale electricity market last July, the earnings recovery mechanism has so far amassed 3.2 billion euros, of which 2.1 billion euros have been provided by the RES sector.

More recently, over the past five months, a period during which energy prices have been on a downward trajectory, amounts injected into the Energy Transition Fund have shrunk. During this five-month period, a total of 374 million euros have been recovered for the Energy Transition Fund, of which 320 million euros has stemmed from the RES sector.

Power producers and suppliers have, for some time now, been calling for an end to emergency measures applied in the electricity market last summer. They contend that price caps per technology are no longer needed as energy prices have fallen. Maintaining these measures under the current conditions is only leading to market distortions, they support.

Energy sector well prepared for interim government

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The ruling center-right New Democracy party, widely expected to seek a majority vote in a second round of voting seen taking place between one-and-a-half and two months from now, has left the energy sector in an orderly state with no significant pending issues requiring any immediate political decisions during the interim period, when a caretaker administration will govern the country.

Indicatively, the interim government’s energy ministry will assume stable operating frameworks, valid until the end of September, for the wholesale and retail electricity markets following pre-election extensions, by a few months, to emergency measures introduced to counter energy crisis effects.

This means that, until a new government is sworn in, a price adjustment clause for electricity tariffs will remain suspended, electricity subsidies will most likely be continued, and price caps on the wholesale market’s day-ahead and intraday markets will remain intact.

Also, the Energy Transition Fund will continue being supported by an extended mechanism recovering windfall profits earned by electricity producers.

Electricity producers disagree with the current windfall profit recovery system, implemented universally for all electricity generation technologies, an approach causing a series of distortions, noting an alternative way should be considered. The Energy Transition Fund is currently being exclusively financed by RES producers.

However, Greece, in one important pending issue, needs to renegotiate with the European Commission for a more realistic gas storage requirement. The current requirement, a 7.5 TWh quantity, planned to be stored away at Bulgarian and Italian facilities ahead of next winter, is excessive and costly.

Energy crisis measures to be extended until September

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The energy ministry has decided to extend until September expiring emergency energy-crisis measures implemented in the wholesale electricity market, along with the suspension of a price adjustment clause for electricity tariffs.

A ministerial decision enabling extensions of these measures is expected to be signed today, if it has not been signed already, thereby triggering the extensions prior to this Sunday’s legislative election.

Under the current terms, a recovery mechanism for windfall earnings of electricity producers would expire on June 1. But this measure is now being extended for a further three months, until the start of September.

The ongoing suspension of a price adjustment clause concerning electricity tariffs was due to expire on July 1, but, as a result of the ministerial decision, it is also being extended, for two months, until the start of September.

As the energy crisis has continued to soften, these emergency price-absorbing measures have become less crucial and are deducting diminishing amounts from retail electricity prices of households and businesses.

In April, for example, the recovery mechanism retrieved just 46.3 million euros for the Energy Transition Fund, 41.7 million euros of this sum coming from RES units.

Suppliers seek recovery of business-category subsidies

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A number of electricity suppliers have begun procedures aimed at securing the recovery, through the Energy Transition Fund, of additional electricity subsidies offered to businesses between February and November, 2022.

Some 1.25 million businesses, including restaurants, bakeries, hair salons, shops and kiosks, benefited, during this period, from additional electricity subsidies, which supplemented the government’s standard state electricity subsidies offering to consumers as energy-crisis support.

The overwhelming majority of suppliers ended up using own company capital to cover supplementary state subsidies offered to businesses for electricity usage.

According to market officials, electricity suppliers have spent a total of over 500 million euros to finance these extra electricity subsidies offered by the government to businesses.

 

SPEF: RES tariffs need to be adjusted to inflation annually

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RES unit tariffs need to be adjusted annually in accordance with inflation rate changes, Stelios Loumakis, president of SPEF, the Hellenic Association of Photovoltaic Energy Producers, has told the European Commission’s Directorate-General for Energy Ditte Juul-Joergensen, who held a meeting with key domestic market players as part of her visit to Greece to take part in the ongoing Delphi Economic Forum.

A system annually adjusting guaranteed RES tariffs needs to be applied to projects from 2016 onwards, as a percentage of annual inflation, as was the case up until 2014, the SPEF chief pointed out.

This need has arisen as a result of drastically increased interest rates on loans and project development costs, as well as the impact of higher inflation, Loumakis noted.

The SPEF official also noted that power grid operator IPTO must pause issuing new RES connection offers until grid energy storage installations have commenced. RES connection offers need to be issued proportionately with the development of energy storage unit installations, Loumakis added.

To date, IPTO has issued RES connection terms totaling 25 GW, including projects already in operation, a level that already meets the country’s goal for 2030.

Loumakis also called for the removal of a cap on the remuneration of RES producers, noting its level of 85 euros per MWh, under current market conditions, is depriving the Energy Transition Fund of cash inflow.

Wholesale electricity cap deadline extension sought

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The energy ministry has taken action aiming to secure extensions for two energy-crisis protection measures, a wholesale electricity cap and freeze of indexation clauses, beyond approaching deadlines.

As part of the effort, the ministry has lodged an application to the European Commission for an extension of a recovery mechanism concerning windfall profits gained by electricity producers in spot markets.

If this application is approved by Brussels, day-ahead and intraday market inflow into the Energy Transition Fund will be maintained. However, this ETF inflow has, in more recent months, been limited by significantly lower wholesale electricity prices. Inflow in March was limited to 56 million euros, just a fraction, for example, of an 878 million-euro amount generated by the windfall profit recovery mechanism for the ETF last August.

Brussels’ approval of the application would pave the way for the suspension of an indexation clause concerning retail tariffs throughout 2023.

The European Commission has already given the green light to Spain and Portugal for extensions, until the end of 2023, of measures taken by the two countries to contain wholesale energy prices. The validity of these measures was due to expire in March.

Under current terms, Greece’s mechanism enabling the recovery of windfall profits gained by electricity producers is set to expire on June 1.

 

Energy transition fund to cover DEPA Commercial for LNG cancellations

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DEPA Commercial will be compensated through the energy transition fund for its cancellation of two LNG orders made with TotalEnergies a few months ago as part of the country’s overall effort to bolster energy security ahead of this winter period.

A multi-bill submitted to Parliament yesterday by the energy ministry includes a special revision facilitating this compensation payment to DEPA Commercial, which cancelled two LNG orders submitted to TotalEnergies as a result of a sharp reduction in domestic natural gas consumption.

The legislative revision specifies the compensation payment to DEPA Commercial will be made within a two-month period once all supporting documents have been forwarded by the gas company to DAPEEP, the RES market operator.

The two DEPA Commercial orders were planned for delivery between November, 2022 and March, 2023 as cover in the event of a disruption of Russian gas supply to Greece. But the orders ended up proving excessive given the prevailing conditions.

Lower wholesale prices drive down February subsidy requirement

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Electricity subsidies for low-voltage, household consumption in February will be set at between 5 and 6 cents per KWh, offered by the government to ensure retail power prices are contained at a level of between 14 and 16 cents per KWh.

Energy minister Kostas Skrekas is expected to announce February’s subsidy level during the week, possibly tomorrow.

This subsidy handout, far smaller compared to the previous month, and the lowest since the start of the government’s new subsidy strategy – launched last August with levels revised monthly based on nominal retail tariffs announced by suppliers for each forthcoming month by the 20th of each preceding month – has been made possible by lower wholesale electricity prices.

This price dip comes as great relief for the Energy Transition Fund, financially supporting the electricity subsidies offered to consumers, and the state budget, chipping in whenever required.

Power utility PPC, the dominant retail player whose monthly nominal tariffs subsequently shape electricity subsidies set by the state, has just announced a nominal tariff rate of 19.9 cents per KWh for monthly household electricity consumption of up to 500 KWh in February, 60 percent below the utility’s nominal retail price for January.

As a result, subsidies of between 5 and 6 cents per KWh will suffice to keep retail tariffs at 14 to 16 cents per KWh, the government’s target. Subsidies of 34 cents per KWh were needed in January to contain tariffs at the government’s desired level.

Money to be drawn from the ETF money for February’s subsidy effort should not exceed 60 to 70 million euros, well below the sum of 800 million euros required for January.

Industrial power usage cut auction set for January 18-19

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An auction offering compensation amounts to high and medium-voltage consumers for electricity usage reductions of 5 percent during peak hours, an order that needs to be met by all EU member states this winter, will be launched on January 18 and 19 by power grid operator IPTO, the operator has announced.

Industrial consumers submitting lowest compensation amounts requested in return for their electricity consumption cuts will qualify for this mechanism, which will remain valid until March 31, 2023, when a commitment made by all EU member states to limit respective industrial electricity demand during peak hours will expire.

Greek authorities have defined the evening hours between 6 pm and 9 pm as the country’s peak hours.

Compensation amounts to be awarded to the winning bidders are planned to stem from the Energy Transition Fund.  An upper limit of 400 euros per MWh has been set for the mechanism’s bidding process.

 

 

November electricity prices, out tomorrow, down 15-20%

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The country’s electricity suppliers, now finalizing their pricing policies for next month, are expected to announce, tomorrow, reduced tariffs for November, down by 15 to 20 percent compared to the current month’s levels, sources have informed.

Based on new law, suppliers are required to announce their electricity prices for the forthcoming month by the 20th of each preceding month.

Supplier tariffs, sources informed, should range between 0.45 to 0.50 euros per MWh, which, if confirmed, will result in a reduction of between 15 and 20 percent, compared to October’s prices.

The government’s level of subsidy support for electricity bills next month has yet to be announced. Given the current de-escalation in electricity prices, the government may choose to only rely on the Energy Transition Fund for next month’s subsidies and not use any budget money for this purpose, sources said.

Market analysts are projecting further electricity price reductions until the end of the year as a result of a drop in TTF natural gas prices. The Dutch index has fallen by 66 percent since an August 26 peak of 349.90 euros per MWh, reaching 116.45 euros per MWh yesterday.

The EU’s overachievement of gas storage levels, now averaging 91 percent of capacity, as well as an abundance of LNG supply to Europe, are key factors that have driven down the TTF.

 

Surcharge on gas used for power generation imminent

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The energy ministry has, according to sources, prepared a provision for the introduction of a special surcharge of 10 euros per thermal MWh on natural gas used for electricity generation.

This new surcharge could be ratified within October for implementation immediately afterwards, the sources added. It was announced in late September by energy minister Kostas Skrekas, along with the energy subsidy package for October, as a new source for the Energy Transition Fund.

According to the minister, funds to be raised through the new surcharge on natural gas used for electricity generation will be used to offer energy-cost support to low-income households and small and medium-sized enterprises, as well as for biomethane and green hydrogen investments.

The new surcharge is not necessarily being introduced to replace a price cap on gas-fueled power stations, meaning it will be implemented regardless of decisions to be taken on whether to keep or drop a cap on payments for gas-fueled power stations.

Windfall tax for oil and gas firms, government decides

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Windfall profits earned in 2022 by petroleum companies, through their refineries, as well as by natural gas wholesalers, will be subject to an extraordinary solidarity tax, the government has decided, energypress sources have informed.

The money to be collected through this extraordinary tax will go towards the Energy Transition Fund to support the government’s energy subsidies offered to households and businesses.

The government’s plan to move ahead with this extraordinary tax is linked to a probable European-wide solidarity tax on windfall profits earned by fossil fuel companies.

The Greek plan will be shaped along the lines of a windfall tax model imposed on electricity producers.

This new windfall tax on oil and gas companies was discussed at last Friday’s emergency meeting of EU energy ministers. It was supported by Greek energy minister Kostas Skrekas, as well as his German and Spanish counterparts.

The Greek government appears determined to implement the windfall tax on oil and gas companies even if it fails to receive EU approval. Athens recently imposed a 90 percent windfall tax on electricity producers without EU approval.

 

 

September electricity subsidies to be doubled to nearly €2bn

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The government intends to absorb the greatest part of electricity price increases for September through subsidies expected to reach nearly two billion euros for the month, a support package seen subduing retail tariffs at 0.15 euro per KWh, the level of retail electricity prices in August.

This latest monthly subsidy amount is nearly double the 1.136 billion euros the government needed to commit for August to fight escalating energy costs.

Electricity retailers announced higher tariffs for September a couple of days ago, but the latest subsidies are expected to keep prices virtually unchanged for household consumers. The cost of electricity for businesses, however, is seen doubling next month.

Electricity subsidies for September will need to increase sharply to a level of 0.60 euro per KWh, up from 0.337 euro per KWh in August, a 70 percent increase.

Approximately 900 million euros of the government’s two billion-euro subsidy package for September will be covered through the state budget, while the other 1.1 billion euros will hail from the Energy Transition Fund, which gathers CO2 emission right auction revenues, RES special account surpluses and windfall profit taxes imposed on electricity producers.

August electricity prices could reach 50 cents per KWh

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Electricity suppliers are set to announce their tariff rates this Sunday, price levels expected to reach as high as 50 cents per KWh, which would demand consumer subsidy support worth over one billion euros for the month to keep electricity bill costs serviceable at a cost of approximately 15 cents per KWh for households and 16 to 17 cents per KWh for businesses, the government’s objectives.

According to some estimates, monthly Energy Transition Fund sums needed for the government’s support package could reach closed to 1.5 billion euros.

TTF natural gas contracts for August are at a level of 165 euros per MWh and are not expected to deescalate easily. Energy exchange prices have skyrocketed to levels of between 340 and 370 euros per MWh.

Such price levels are expected to force electricity suppliers to announce retail prices of 50 cents per KWh for August this coming Sunday, exorbitantly high considering June and July levels were at about 35 cents per KWh without subsidies.

 

Electricity price intervention mechanism to parliament

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A legislative amendment enabling the implementation of an electricity-price intervention mechanism has been prepared by the energy ministry and will soon be submitted to parliament for ratification.

The amendment includes the framework of a temporary compensation plan for electricity producers, offers details on price-cap formulas for respective electricity production technologies, and also sets a time period for these extraordinary measures.

According to sources, the mechanism will be implemented next month, on July 1, and remain effective until June 1, 2023, while a series of technical issues, including determination of compensation levels for electricity producers, will be set through ministerial decisions.

Natural gas and lignite-fired power stations will not exactly be subject to price caps, but algorithms taking into account a series of factors will be applied to control prices, the sources said.

Based on current market conditions, the upper-level compensation price for natural gas-fueled power stations has been estimated at between 220 and 230 euros per MWh.

An upper-level compensation price of between 85 to 90 euros will be set for RES producers, while a compensation price of 100 euros per MWh is expected for hydropower stations.

According to the plan, the Hellenic Energy Exchange will withhold the difference between the market clearing price and compensation amounts for electricity producers, transferring these amounts to the Energy Transition Fund. These amounts, along with related state budget sums, will be utilized for electricity-bill subsidies, the aim being to keep the average retail price of electricity at approximately 0.145 euros per KWh.

Energy production technology price caps being finalized

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Government officials are finalizing decisions for respective price caps to be applied to electricity generation technologies ahead of the introduction, on July 1, of a compensation mechanism for electricity producers.

Power utility PPC’s hydropower facilities are expected to play a key role in the effort. Windfall profits to be deducted from hydropower unit earnings promise to contribute greatly to the Energy Transition Fund, and, by extension, maximize the level of subsidies offered to consumers.

Officials are taking careful steps so that PPC can keep being able to offer discounts and fixed tariffs to customers and avoid falling into loss-incurring territory.

The cap on hydropower facilities is expected to be set at a relatively high level, ranging from 100 to 120 euros per MWh, well above initial estimates between 80 and 90 euros per MWh, according to figures mentioned by sources.

As for the RES sector, the price cap is expected to be set somewhere between 80 and 90 euros per MWh.

According to energypress sources, the European Commission’s approval of the compensation mechanism for electricity producers is expected imminently. It will be given a 12-month duration.

 

Gov’t plan aims for electricity prices at first-half ’21 average

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The government will pursue a strategic target aiming to reduce retail electricity prices to the average level recorded in the first half of 2021, through the implementation of a price ceiling in the wholesale electricity market and state compensation packages for electricity producers covering the price difference.

However, it remains unclear how this ambitious measure, worth at least 4 billion euros amid the current conditions, will be financed.

The government’s plan will be carried out in coordination with any proposals that may be announced by the European Commission.

Announcements, by the Greek government, are not expected before May 18, when Brussels could deliver energy-crisis proposals for member states.

The price of natural gas in coming weeks, an unknown factor, adds risk to the government’s support plan. Gas prices could further escalate if Russian president Vladimir Putin decides to disrupt supply; if Russia’s war in Ukraine intensifies; or if any other unfavorable factor comes into play.

At present, a best-case scenario would result in a price tag of at least 4 billion euros for the Greek government’s strategic plan to reduce electricity prices.

Three different financing sources could be considered: the Energy Transition Fund, currently financing monthly energy subsidies; a 900 million-euro surplus from a supplementary budget submitted to parliament a fortnight ago; and Recovery and Resilience Facility (RRF) money.