Zero electricity subsidies for high-level usage considered

Electricity subsidies for high-level usage could be greatly reduced, even zeroed out, in February as a result of recent Eurogroup pressure applied on Greece for revisions to the country’s subsidy model.

Energy minister Kostas Skrekas, admittedly working his way through an extremely busy schedule this week, has delayed announcing electricity subsidy levels for next month, suggesting revisions cannot be ruled out.

Subsidies are revised monthly, depending on nominal retail tariffs for each forthcoming month announced by suppliers on the 20th of each preceding month.

One thing for certain, the government’s electricity subsidies for low-voltage consumers will be reduced in February as a result of a sharp drop in wholesale electricity prices.

Subsidies will not need to exceed 5 to 6 cents per KWh to ensure retail power prices are contained at a level of between 14 and 16 cents per KWh, the government’s goal.

Power utility PPC, the dominant retail player whose monthly nominal tariffs subsequently shape electricity subsidies set by the state, has 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.

Energy ministry officials are believed to even be considering zero subsidies for high-level consumers, though it is still unclear whether this category would be defined as monthly consumption exceeding 500 KWh or 1,000 KWh.

For some time now, the European Commission has applied pressure on Greece to revise its electricity subsidies model, applied universally. Brussels has called for a two-tier system benefiting lower-level electricity consumption.

Brussels looking to revise network expenses formula for operators

The European Commission, in conjunction with ACER, Europe’s Agency for the Cooperation of Energy Regulators, has begun preparing market revisions that, amongst other things, will change how market operator expenses are calculated.

The initiative’s aim is to establish new market rules that will support energy demand management, energy storage and also lift regulatory obstacles.

A related European Commission document points out that although existing legislation enables operators to provide flexibility services such as demand management, regulatory frameworks in most EU member states separate the capital cost (CAPEX) of operators from their operating expenses (OPEX), ultimately restricting investments and standing as a disincentive.

An approach through which both capital cost and operating expenses would be taken into account for a so-called TOTEX sum is now being looked at by the authorities.

This would help operators move more freely when committing capital to develop their networks and provide flexibility services, especially demand management, the ultimate goal being to increase renewable energy penetration.


Suppliers hit by move for extra subsidies to businesses

An energy ministry decision, reached earlier this month, offering additional electricity subsidies to enterprises in categories up to 35kVA and all bakeries, regardless of energy consumption levels, without having been given the green light to do so by the European Commission, has led to major financial issues for suppliers, caught up in a situation where, among other things, they must either seek reimbursement from their customers or accept having lost these amounts by sacrificing funds through no fault of their own.

European Commission approval for additional electricity subsidies to these consumer groups expired in November.

This measure was launched in April, 2022, when the energy ministry asked suppliers to provide extra subsidies to these consumer groups, retroactively, from January, 2022. These additional subsidies have been offered on a monthly basis, following related monthly updates from the energy ministry to suppliers.

Brussels’ approval, last April, was offered under the condition that the additional-subsidies measure would only cover enterprises consuming up to 35kVA and all bakeries as long as they had not previously received state support exceeding specific limits. This means some recipients of these extra subsidies in 2022 may not have been eligible.

Making matters even more complicated for electricity suppliers, the energy ministry’s decision to keep offering additional electricity subsidies to these consumer groups will force suppliers to check customers for any excess state funds.


Brussels electricity subsidy proposal on Eurogroup agenda

An electricity subsidy proposal put forth by the European Commission, essentially seeking to replace universal subsidies offered by EU member states such as Greece with a two-tier system prioritizing subsidies for low-income households, is on the agenda of a Eurogroup meeting in Brussels today.

According to the Brussels proposal, any electricity tariff increases will be fully covered through subsidy support offered to consumers in the top-tier subsidy category for low-income households.

The second-tier subsidy group, which would include medium and high-income consumers, would offer gradually increasing subsidies, as long as consumers have proven records of reduced energy consumption.

The Greek government has implemented an electricity subsidy system based on energy consumption levels. Subsidy amounts for households are reduced if monthly energy consumption levels exceed 500 MWh.

This consumption-based system was chosen by Athens as a result of low income levels in general and higher electricity prices in Greece compared to many other EU member states.

Acceptance and implementation of the Brussels proposal would result in higher electricity costs for medium-income groups. However, the Brussels proposal faces major obstacles as each EU member state has its own subsidy-related electricity market conditions to deal with.

Greek energy minister Kostas Skrekas, in comments offered to media over the weekend, ascertained the country’s existing electricity subsidy program for households and businesses will continue to apply until at least July.

RAE prepares list of crucial industries for gas rationing exemption

RAE, the Regulatory Authority for Energy, has prioritized industrial enterprises for a ranking system exempting the most crucial players from natural gas rationing in 2023, should such an emergency measure be necessary.

This list of prioritized industries is needed so that a revised emergency plan for 2023, prepared by gas grid operator DESFA and approved by RAE, can be implemented, if needed.

The European Commission requires all EU member states to deliver lists prioritizing industries for the year as part of an EU’s emergency plan designed to weather extreme energy market conditions.

In Greece, a total of 104 industries have been divided and prioritized in eight groups. Industries belonging to the highest-ranked group would be the first to be subject to rationing, while industries in the lowest-ranked group are least likely to be subject to gas rationing.

Industries in the highest-ranked group could convert to alternative fuels and second-tier industries could reduce gas consumption without any major impact on their operations.

PPC negotiating long-term PPAs with 3 industrial players

Power utility PPC is holding talks with two, possibly three, industrial players for new electricity supply agreements in the form of long-term power purchase agreements (PPAs) of up to ten years following the expiry, on January 1, of high-voltage supply deals.

PPC and the industrial enterprises involved in these negotiations are currently discussing the details of terms and fixed price levels, sources informed.

The energy ministry’s intention to exempt electricity producers from a wholesale electricity market cap, as long as they have established PPAs with energy-intensive consumers for physical delivery of power quantities, has served as a catalyst for the ongoing negotiations.

Energy minister Kostas Skrekas is awaiting the European Commission’s approval for this exemption.

The industrial players discussing prospective PPAs with PPC cannot fully cover their energy needs through their own electricity production facilities, sources noted.

The current energy crisis highlights the energy-price volatility risk faced by industrial players and the importance of fixed electricity prices for stability and security to their operations, officials pointed out.

PPAs promise to offer industries energy-cost stability during times of great uncertainty, they added.


IPTO: At least 3 new gas-fired power stations will be required

At least three new gas-fired power stations will be needed to ensure energy sufficiency within the next few years, but these new facilities will require a support mechanism to remain sustainable, a study conducted by power grid operator IPTO, looking ahead to the period between 2025 and 2035, has determined.

This IPTO study, whose findings have been unofficially handed over to the energy ministry, is essentially transitional as its outlook regarding the increase in RES and energy storage installations falls short of announcements made recently by energy minister Kostas Skrekas for the country’s updated National Energy and Climate Plan.

IPTO will make related revisions to the study once an upgraded NECP is officially approved.

Even so, two fundamental issues raised by the IPTO study appear unlikely to change. Firstly, the growing presence of wind and solar energy units in the energy system will need to be accompanied by the installation of more thermal plants, especially gas-fired power stations, given the existing capabilities of energy storage technology, in order to ensure electricity sufficiency.

Besides the new Ptolemaida V power station, now gearing up for a full-scale launch by the end of February – initially as a low-emitting lignite-fired power station before eventually converting to natural gas – at least three big gas-fired power stations will also be needed.

The IPTO study’s second fundamental finding unlikely to change concerns the need for support mechanisms to ensure the sustainability of both new and old power stations, given the concurrent installation of new RES units, energy storage facilities and gas-fired power stations. The energy ministry, as a result, will need to seek European Commission approval of Capacity Remuneration Mechanisms (CRM).

The IPTO study takes into account two RES penetration scenarios, one based on the existing NECP, established in 2019, forecasting RES installations of 15.5 GW and energy storage installations of 1.8 GW by 2030. The other scenario, more ambitious, assumes RES installations of 24 GW and energy storage installations of 3 GW by 2030.

Suppliers, traders reject PPC lignite power packages for ’23

Energy retailers and traders have shunned lignite-fired electricity packages offered by power utility PPC through the energy exchange for the first, second and third quarters of 2023, as part of an antitrust agreement between Greece and the European Commission, energypress sources have informed.

Commenting on the lack of interest in these packages, market analysts noted they were not surprised given the high risk involved and the financial pressure felt by energy retailers as a result of the energy crisis.

The agreement, designed to end PPC’s monopoly in the lignite sector, required the power utility to offer, by October 31, lignite-fired electricity packages for Q1, Q2 and Q3 in 2023, their quantities representing 40 percent of lignite electricity production in the corresponding quarters this year.

According to the agreement, shaped by a legislative revision brought forward by the energy ministry, PPC must also offer lignite-fired electricity packages for Q4 next year by January 31, 2023.

Greece has submitted a request to the European Commission to have the antitrust agreement abolished. If not scrapped, the measure appears set for major revisions.

EU member states divided on gas price cap level

A European Commission proposal for a gas price cap of 275 euros per MWh will be strongly opposed at today’s meeting of the EU’s twenty-seven energy ministers by representatives of fifteen EU member states, including Greece, fearing this proposal could result in higher gas prices.

The fifteen energy ministers are expected to demand a lower price cap level of between 150 and 200 euros per MWh, which they view as the only possible solution that could secure lower prices.

Their approach, however, is opposed by a small yet powerful group of four EU member states, comprised of Germany, the Netherlands, Sweden and Finland, who fear a low price cap level could repel LNG suppliers and send them away to non-European markets.

Besides Greece, other EU member states in favor of a lower gas price cap level include Belgium, Bulgaria, France, Italy, Latvia, Lithuania, Poland, Romania and Spain.

A final decision on the issue is not expected at today’s meeting and will most likely be deferred until the next Council meeting of EU energy ministers, scheduled for December 19.


‘Environmental assessments undermining green transition’

At a time when the European Commission is urgently promoting renewable energy growth, development in the Greek RES sector is being held back by special environmental assessment requirements for projects that threaten to undermine the country’s green energy transition, ELETAEN, the Greek Wind Energy Association, has underlined in a statement.

The delay in the energy transition poses a threat for the environment, perpetuates the country’s dependence on fossil fuels, and does not allow for a reduction in energy prices, the association added.

Special environmental assessments are being demanded too easily and for extensive areas, prohibiting RES project applications from making progress, the association pointed out.



Brussels proposes gas price cap for extreme pricing situations

A price cap on gas, to serve as a market correction mechanism, will only be activated under certain combined conditions, according to a draft proposal sent by the European Commission to the EU’s 27 energy ministers.

A first round of negotiations took place yesterday between representatives of member-state delegations, ahead of an informal Council of energy ministers on November 24, when a first attempt will be made to reach an agreement on the price cap plan.

According to well-informed sources, Brussels’ draft proposal, seeking to reconcile two opposing EU blocs, one comprising Greece, Italy, Poland and Belgium, and the other, Germany, the Netherlands, Austria and Hungary, will not lead to consensus at next week’s Council of energy ministers and, as a result, will be referred to their ensuing meeting.

Brussels’ draft proposal is intended to act as an effective tool against excessive and extremely high gas prices. The plan is to trigger it into action only if prices reach extremely high levels (compared to international markets), the objective being to avoid significant disruptions in supply contracts, which could lead to serious risks concerning security of supply.

Industrial energy-saving incentives auction next month

An inaugural auction offering compensation amounts to high and medium-voltage industrial consumers for reduced electricity usage is set to take place in December as part of the country’s effort to limit energy demand by 5 percent during peak hours, a European Commission order that needs to be met by all EU member states.

Industrial consumers – high and medium-voltage – submitting the lowest compensation bids at monthly auctions will be offered energy savings through monthly auctions.

Separate auctions will be held for high and medium-voltage industrial consumers, energypress sources informed.

The compensation amounts to be offered to successful bidders will stem from the Energy Transition Fund.

A legislative revision facilitating these auctions has just ratified in parliament. However, other legislative and regulatory matters still need to be settled before the inaugural auction can go ahead, December being the target.

The Greek government has set the three-hour period from 6pm to 9pm, including weekends, as the country’s peak time for energy.

European effort for energy cost solutions well underway

European discussion for electricity market reforms that could lead to permanent solutions for lower-cost energy by detaching the cost of electricity from natural gas is well underway.

European Commission authorities, institutions, major enterprises and other electricity market players are currently putting forward proposals until December, when Brussels is expected to issue its own proposal for consultation, as has just been noted by Mechthild Wörsdörfer, deputy director general for the European Commission’s Directorate-General for Energy.

Discussion for longer-term reforms is planned to continue in February and March. Reforms will need to be approved by the European Parliament, as well as by the Energy Council of Ministers, in order to become binding.

The overall approach is based on a proposal forwarded by Pantelis Kapros, Professor of Energy Economics at the National Technical University of Athens, supporting the need for remuneration of renewable energy, as well as electricity production generated by other low-emission technologies, such as nuclear, to be based on actual cost through long-term agreements rather than through the day-ahead market, whose levels are determined by wholesale market prices.

According to Kapros’ proposal, wholesale market prices should be used to determine remuneration levels for fossil fuel-based energy production technologies (coal, lignite, natural gas) as well as hydropower facilities with water reserves and energy storage units.

RAE clarifying criteria for key industries to avoid rationing

RAE, the Regulatory Authority for Energy, is working on clarifying the selection process for a list of vital industries to continue being given priority status for natural gas supply should gas imports be subject to major disruptions.

RAE, conducting related consultation, needs to assemble this list following a European Commission order requiring all EU member states to name their respective industries of vital social and economic importance. These enterprises would be exempted from natural gas rationing, if such an extreme measure needs to be adopted.

However, the selection criteria for this list remain ambiguous, preventing Greek authorities from proceeding with the selection process.

A total of 104 industrial enterprises operating in Greece have submitted applications for inclusion on this special-status list. To date, no member states have put together a special-status list.

North-South gap remains, crisis solution unlikely soon

All developments suggest Europe may need to cope without a common energy solution this coming winter as there is nothing to suggest authorities are close to reaching an agreement at the extraordinary Council of Energy Ministers on November 24.

If so, any decision making will be postponed until the regular Council of Ministers, scheduled for December 19, or passed on to the Swedish EU rotating presidency, which will succeed the Czech presidency on January 1.

Even though the European Commission is reportedly speeding up procedures for a temporary gas cap, following a warning by 15 member states to veto the overall energy package, the chances of a gas cap being ready by the forthcoming meeting of energy ministers are very slim.

Disagreement between the EU 27 remains, dividing Europe’s north and south. Germany insists the introduction of even a flexible price cap could drive gas suppliers out of European markets.

The willingness of European authorities to take action has weakened as the risk of an out-of-control energy crisis has receded. The continued de-escalation of gas prices (just under €114/MWh yesterday) may be good news for households and businesses, but it has led the EU towards a general complacency.


New European LNG benchmark to be shaped by EU-27 prices

Europe’s new LNG benchmark will be determined by LNG price-level data presented by the EU’s 27 member states, the objective being to offer a broader, better-balanced and more reliable pricing formula than the existing one, shaped by the Dutch TTF index, sources have informed energypress.

ACER, Europe’s Agency for the Cooperation of Energy Regulators, will present a preliminary plan for this new market correction mechanism at a meeting in Brussels today to be attended by the EU’s permanent representative committee, Coreper, involving all EU member states.

The new European LNG benchmark, promising a more accurate reflection of international prices for LNG, the dominant global energy source at present, will not affect existing agreements, officials have pointed out.

EU officials are striving for an imminent launch of this new LNG pricing tool, the aim being to have it introduced by early 2023. Last month, the European Commission noted it wants the new LNG benchmark to be ready by March 23.

On a wider scale, although the European Commission hopes EU member states can resolve differences for a common solution to the energy crisis, there have been no indications of possible consensus. On the contrary, the North-South divide remains and expectations for a common European approach to the issue this winter are extremely low.

RAE emergency plan with 3-level alert system sent for EC approval

RAE, the Regulatory Authority for Energy, is expected to finalize a list of vital industrial enterprises at a plenary session next week, this inclusion assuring listed companies of gas supply priority should the country be placed on high alert in a three-level warning system that has been prepared.

A total of 104 industrial enterprises have submitted applications for inclusion on this priority list.

RAE’s emergency plan, which includes alert system-linked measures, has, following consultation, been forwarded to the European Commission for approval. It will then also need to be approved by RAE.

Level One of the warning system will be declared if reliable evidence arises of an event that is likely to result in the deterioration of the country’s gas supply.

Level Two will be activated if either a supply disruption or exceptionally high gas demand is experienced, resulting in a significant deterioration of gas supply, which, nevertheless, will remain manageable without market intervention.

Level Three, the highest alert level, will be declared if a significant supply disruption occurs along with exceptionally high demand and resulting market measures are unable to full cover fuel demand.

EU leaders agree on common natural gas purchases at summit

EU leaders have agreed, on yesterday’s first day of a two-day summit in Brussels, on some emergency measures needed to curb high energy prices, actions including common natural gas purchases for greater bargaining power, solidarity agreements, as well as rules to come into effect should gas supply to Europe be seriously disrupted.

In addition, two different models aiming to curb energy prices are being worked on, one concerning TTF benchmark revisions, the other a price cap on gas used to produce electricity, European Commission president Ursula von der Leyen informed.

The European Commission president stressed: “There was strong will to reach an agreement in order to lower energy prices,” adding “different member states have different priorities”.

She was responding to a question from the Athens-Macedonian News Agency enquiring why a considerable amount of time was needed to reach agreements on the first day of the summit, and whether some member states could be criticized for placing emphasis on their own interests at a time when the EU is encountering an energy crisis.

Energy crisis gap bridging the main aim at today’s EU summit

The EU’s 27 leaders participating at today’s EU summit will strive to heal divisions that have created blocs within Europe for energy crisis solutions rather than seek finalized solutions on how price levels could de-escalate.

The EU-27 will be asked to agree to European Commission proposals announced yesterday. They include collective natural gas orders for reinforced bargaining power and prevention of bidding wars by fellow EU member states for LNG quantities, as well as a supplementary gas benchmark offering a more accurate reflection of market conditions.

A Brussels request concerning a temporary price cap on gas used for electricity generation, a strategy already adopted by Spain and Portugal, is expected to be contested by the EU leaders.

Brussels considers the proposal for a price cap on gas used for electricity production should be further examined, judging by European Commission president Ursula von der Leyen’s comments in European Parliament yesterday.

France, using minimal amounts of gas for electricity generation as a result of its considerable nuclear capacity, has expressed support for such a plan. Germany accepts it but Greece, Italy, Belgium and other EU member states object as a result of the significant fiscal cost entailed.

Some EU members favoring a general price cap on gas, including Greece and, more recently, the Netherlands, are expected to remain adamant on their  preferred approach at today’s summit.

Germany strongly opposes a general price cap on gas, fearing it will repel gas suppliers and push up prices as a result of reduced supply and higher demand.

Brussels seeks to prevent internal EU bidding for LNG

A European Commission proposal for joint European gas orders, one of the most crucial aspects of Brussels’ energy-crisis package to be discussed at tomorrow’s EU summit, aims, besides boosting Europe’s bargaining power, to prevent EU member states from bidding against each other, an unwanted prospect that would increase prices, ultimately favoring stronger members.

The Brussels proposals also include a measure that would discourage speculation in derivatives through the establishment of a temporary intraday price-increase mechanism. It would protect market players from huge price fluctuations within the same day by setting limits. TTF fluctuations above and below limits set will be prohibited, according to this proposal.

The details of how these two proposals could actually work remain to be seen.

“The LNG market is in danger of becoming a jungle. Things will be tight in coming years and a first-come, first-served logic could prevail. In practice, this means bigger countries will manage to buy faster and cheaper than smaller ones, so a brake is needed,” Pantelis Kapros, Professor of Energy Economics at the National Technical University of Athens, told energypress.

Unrestricted competition between countries would drive up prices, undesired by all, as an oligopoly exists in LNG supply, the professor added.

Cohesion Funds worth €40bn for household, business aid

The European Commission’s energy crisis plan includes a proposal enabling EU member state governments to redirect some of their Cohesion Fund money to support households and businesses, sources have informed ahead of Thursday’s EU summit.

According to a Bloomberg report, the EU plans to propose using as much as 40 billion euros from the bloc’s budget to support people and companies struggling to cope with high prices caused by the energy crisis.

However, it is estimated that this amount would not suffice to cover the EU-27’s needs this coming winter.

According to Bloomberg, the European Commission, the EU’s executive arm, will offer governments the ability to tap existing cohesion funds to support small- and medium-sized companies affected by the price hike of gas and electricity and to help vulnerable households pay their energy bills through national programs.

Other package proposals aimed at countering high energy prices are expected to include a supplementary gas contract in early 2023; voluntary collective gas purchases by member states for greater bargaining power; and a solidarity mechanism for emergency gas supply by fellow member states able to provide cover, at fair price levels, to member states short of sufficiency levels during the forthcoming winter.


Four-part energy crisis plan, gas price cap as last resort

European Commission president Ursula von der Leyen is tomorrow expected to announce an EU energy-crisis plan based on four axes, as well as a possible price cap on natural gas as a last resort and only for a short period of time, sources have informed.

The leaders of the EU’s 27 member states will go into an EU summit, scheduled this Thursday, for decisions amid a very ambiguous setting.

The European Commission president’s proposal will incorporate, as one of the four axes, the EU’s bargaining power as one collective buying unit for lower-cost natural gas purchases, according to sources.

The plan also includes a solidarity mechanism for emergency gas supply, by fellow member states able to provide cover, at fair price levels, to member states short of sufficiency levels during the forthcoming winter.

The third part of the proposal will, according to the sources, focus on the details of a plan aiming to reduce natural gas demand in the EU by 15 percent this winter.

The fourth part of the European Commission proposal is believed to focus on the establishment of a new European gas benchmark as the TTF, the current benchmark, is shaped by pipeline gas supply and does not take into account the market’s increased LNG penetration.

Political agreement sought for gas price cap, eyes on Germany

Though no gas price-cap decision is expected at today’s informal EU meeting of heads of state, participants will be expected to establish the basis for a political agreement at the European Council meeting on October 20.

All eyes are on Germany following a significant step taken by the European Commission to adopt a proposal forwarded by 15 EU member states supporting a price cap on gas. The German government now appears to the considering the proposal but an agreement is not yet guaranteed.

If Berlin is to accept the gas price cap proposal, assurances will be needed on how the risk of LNG shipments straying to Asian markets – where buyers appear willing to offer whatever sums are necessary to secure shipments, instead of staying in Europe – may be eliminated.

Another issue the German government would want addressed to offer its consent concerns how a rise in gas demand, as a result of lower prices, can be prevented.

Disagreement between Berlin and other EU member states on a gas price cap has now somewhat softened. The matter is gradually shifting away from the political sphere and closer to market reality.

Greece, Belgium, Italy, Poland and Spain, the five EU member states most supportive of a price cap on natural gas, represent the nucleus of the 15 member states calling for a gas price cap and are working feverishly on a flexible proposal to be forwarded to the European Commission as soon as possible.

Trilogue Negotiations on the Emissions Trading System: Recommendations for Greece’s priorities

By Tassos Chatzieleftheriou

Energy Policy Analyst, The Green Tank

We are approaching the final, crucial stage of the trilogue negotiations for the revision of the Emissions Trading System Directive where European Commission, European Parliament and the Council will negotiate to reach a final compromise on the revised EU ETS Directive starting from their respective initial positions.

So, how is each of the three positions influencing Greece and what should Greece’s priorities be on the key points of the file?

The three different positions would lead to different outcomes for the EU as a whole and for Greece in particular in terms of overall emission reductions under the EU-ETS, the volume of the allowances distributed to Greece and the corresponding revenues (i.e. the Member State revenues, the Modernisation Fund and the Innovation Fund) and the speed of the phase-out of the allowances offered to the industrial sectors for free along with the phase-in of the new Carbon Border Adjustment Mechanism (CBAM).

In the following we use a model built by CLIMACT to comparatively evaluate the impact each of the three positions have on the abovementioned parameters for Greece.

Impact on the climate

Regarding the emissions reduction target for the sectors covered by the EU ETS, the European Commission (EC) and Council positions propose a 61% reduction in 2030 compared to 2005 levels, while the European Parliament (EP) proposes a 64% cut. This means that the volume of greenhouse gases allowed to be released in the atmosphere by all EU ETS sectors according to the EC and Council positions will be higher compared to those resulting from the EP proposal. The cumulative supply of emission allowances for the entire 4th ETS phase (2021 – 2030) for the position of each of the three institutions as estimated by the CLIMACT model can be seen in Graph 1. The EP’s position results in 341 million allowances or 341 million tonnes of CO2,eq less supply during the period 2021-2030 compared to the emissions corresponding to the positions of the EC and the Council.

Market Stability Reserve (MSR)

Other than the increased emission reduction ambition of the EP position, another factor that contributes to the reduced supply of emission allowances of the EP position compared to the positions of the European Commission and the Council is the functioning of the Market Stability Reserve, the mechanism aimed to reduce the oversupply of allowances in the carbon market[1].

The EP supports the most ambitious review of the functioning of the MSR, supporting lower thresholds, leading to higher reduction of the emission allowances in the market.

National revenues

The auctioning volume that will be distributed to Greece (Graph 2) if the positions of the EC and the Council are adopted (around 172 million allowances from 2021 until 2030), is higher than the corresponding volume resulting from the EP’s position (145 million allowances). However, Greece’s resulting revenue may be higher if the EP’s position prevails since the carbon price may rise to higher levels due to the aforementioned higher overall climate ambition and stricter MSR embedded in the EP’s position.

The Modernisation Fund

Regarding the extension of the Modernisation Fund for which Greece is eligible, very small differences exist between the three positions in terms of the volume of allowances Greece will receive. Specifically, between 2024[2] and 2030 Greece will receive 19.9 million allowances if the EC’s original proposal is adopted, and 19.7 and 19.5 million, according to the EP’s and the Council’s position, respectively. The slightly smaller size of Greece’s share of the Modernisation Fund under the Council’s position is mainly attributed to the inclusion of Slovenia among the eligible Member States for the extension of Modernisation Fund. The marginal difference in Greece’s share between the EP’s and the EC’s position is attributed to the overall smaller supply of allowances to be auctioned under the EP’s proposal. Using a conservative estimate of 80 Euros/ tonne for the average carbon price during the 2024-2030 period, and also adding the 25 million allowances Greece is set to receive for the decarbonisation of its islands under the current EU ETS Directive,  the EU ETS will provide Greece with approximately 3.6 billion euros to modernise its energy sector. Graph 2 shows the sum of the member state auctioning volumes together with the Modernisation fund and the 25 million allowances for the decarbonization of the islands.

Despite the similarities between the three positions regarding Greece’s share of the Modernisation Fund, there is a fundamental difference on the type of investments that are eligible for funding. Specifically, the EC and the EP completely exclude investments on energy-related infrastructure using all fossil fuels. On the contrary, the Council’s position allows investments in fossil gas, thus directly undermining the overall climate goal of the EU, as well as the REPowerEU plan to tackle the energy price crisis, according to which, the EU’s fossil gas consumption, independent of the source, should be reduced by 64% by 2030 compared to 2020 levels, more than doubling the previous 30% reduction target included in the initial fit for 55 package.

Overall, the total number of allowances that will be distributed to Greece in the period 2021-2030 including those from the new Modernisation Fund and the 25 million allowances earmarked to decarbonize the islands is 216.4 million according to the EC’s original proposal; 216 million according to the Council’s preliminary position and 189.6 million according to the plenary vote of the European Parliament. It can be estimated that if the average carbon price resulting from the more ambitious position of the EP is more than 14.1% higher compared to the average price resulting from the more conservative positions of the EC and the Council, then Greece will end up with more funds from the EU ETS[3]. This percentage difference in the carbon price for which the revenue from the EP’s position will be higher than the one resulting from the positions of the EC and the Council, becomes even smaller than 14.1%, if the revenue from the Innovation Fund that will end up supporting Greek industries is taken into account, assuming of course the exact same number of allowances financing industrial decarbonisation in Greece under the three positions.

Innovation Fund and Ocean Fund

The Innovation Fund that is used to decarbonise the EU’s industries is not distributed to Member States by a fixed share; it is rather channelled to industries on a case-by-case basis, following a centrally managed evaluation process for each application submitted by the Member States. The overall size of the Innovation Fund varies significantly between the three proposals. Specifically, the Council proposes to channel only 669 million allowances to support the reduction of the EU’s industrial carbon footprint, whereas the EP’s and the EC’s proposals result to 901 and 899 million allowances, respectively, for the same purpose. In conjunction with the increased carbon prices that the EP’s position will probably lead to due to the higher climate ambition (-64% by 2030 vs -61%), the larger size of the Innovation Fund will likely result in a significantly higher revenue for decarbonization investments in the industrial sectors[4].

In addition to being the most ‘’generous’’ on the Innovation Fund, the EP proposed the establishment of a new fund, called the “Ocean Fund” which is similar to the Innovation Fund, but dedicated to the maritime sector. According to the EP’s position, 75% of the revenues from the allowances auctioned to shipping (i.e. revenues from 332 million allowances) will support projects that aim to decarbonize the maritime sector. Since the EC and Council do not have such a Fund, any projects to reduce the carbon footprint of the maritime sector will be financed through the Innovation Fund according to these two proposals. In this sense, the EP’s position lead to a much larger fund for the direct support of the decarbonization of all industrial sectors included in the ETS (1233 million allowances) compared to the 899 and 669 million proposed by the EC and the Council, respectively (see Graph 3)

Free emission allowances

There are also considerable differences in the number of free emission allowances distributed to Greece’s industrial sectors according to the different positions of the three institutions. As shown in Graph 4, the Council’s position would result to the highest volumes of free emissions allowances for the industry (92.5 million allowances for the period 2021-2030), followed by the corresponding volumes resulting from the EP’s position (91.2 million) and the EC’s position (88.9 million). Thus, the Council’s position undermines the most the efforts to decarbonize the industrial sectors, which has had only a minimal contribution to the emission cuts achieved in Greece by all EU ETS sectors during the first three EU ETS phases. On the other hand, even though the EP’s position has the earliest full phase-out date for free allowances offered to industries (2032), the phase out speed until 2030 is lower than that proposed by the EC, hence resulting to higher volumes of free allowances compared to the EC’s proposal. In that sense, if one focuses on the reduction in free emission allowances that will be achieved until the end of the 4th EU ETS phase (i.e. 2030), the initial proposal by the EC can be considered as the most ambitious among the three positions, despite the fact that the complete phase out of free emission allowances will occur 3 years earlier if the EP’s position is adopted.

Thus, taken together with the overall bigger size of the Innovation Fund, the EP’s position contributes much more substantially to the long-term competitiveness of the EU industry by phasing out the obsolete and unsuccessful so far free emission allowance system faster (2032 vs 2035) and by channeling more funds for industrial decarbonization.


Based on this analysis, we propose that Greece supports the following positions in the trilogue negotiations:

Higher climate ambition and a stronger MSR: Greece should support a higher ambition level than that of the Council’s and the EC’s preliminary positions of at least 64% emission reduction by 2030 compared to 2005 levels, as well as a stronger Market Stability Reserve (MSR) leading to a tighter control of the oversupply of allowances in the carbon market. In addition to being closer to the climate commitments the EU has undertaken by signing the Paris Agreement and the leadership role it aspires to play in global climate politics, such a position will be more aligned with the REPowerEU plan which aims at decreasing the dependence on fossil fuels -especially fossil gas- more rapidly. Furthermore, higher climate ambition and a stronger MSR, will most likely lead to increased carbon prices due to the reduced number of allowances in the market, which, will in turn, translate into bigger revenue for Greece from the auctioning of the allowances that it will receive during the rest of the 4th EU ETS phase, as well as from the Modernisation and Innovation Funds.

Faster phase out of free emission allowances to industry in conjunction with a larger Innovation Fund: Greece should support a faster reduction rate of the emission allowances that are offered for free in the industrial sectors until 2030 and a complete phase-out by 2032 at the latest. At the same time Greece should support a larger Innovation Fund for the decarbonization of its industry. This will contribute the most in the long term competitiveness of the Greek industry, and will reduce its carbon footprint which has remained almost stagnant over the years. Moreover, incentivizing the investments necessary to decarbonize the Greek industry and increasing the available funds for this purpose, will provide a realistic chance for Greece to achieve its ambitious 2030 national climate target set in the first National Climate Law (-55% in net GHG reductions by 2030 compared to 1990 levels).

Fossil fuel-free ETS-related funds: Funding fossil gas infrastructure through the Modernisation Fund or leaving the door open to do the same with the national revenue from the auctioning of ETS allowances, goes fundamentally against the very scope of the EU ETS, the overall climate targets the EU has committed to, as well as the objective of the REPowerEU plan to tackle the energy crisis. Therefore, Greece should support the full exclusion of all fossil fuels investments (including fossil gas) via the Modernisation Fund, as well as dedicating 100% of the revenue from the auctioned emission allowances to climate action in line with the proposal of the European Parliament, thus contributing to a faster and cheaper transition towards carbon neutrality.

[1] For more information on the oversupply of allowances and the MSR:

[2] Expected date when the revised Directive will come into force

[3] For example, let us assume that the limited climate ambition in the EC’s and Council’s position lead to an 80 euro/tn average carbon price during the period 2021-2030 and that the corresponding average carbon price resulting from the more ambitious position of the EP is more than 14.1% higher (i.e. more than 91.3 euro/tn). Then the revenue that Greece will accumulate during the same period will be larger (17.31 billion euro for an average carbon price of 91.3 euro/tn, for the period 2021-2030)

[4] All the abovementioned emission allowance volumes of the Innovation Fund will be reduced, if the Council’s position from the 4th of October on the EU ETS resources that will be used to collect the additional 20 billion Euros needed for financing REPowerEU, is adopted. According to this position, the Innovation Fund volumes will be reduced by a number that corresponds to a revenue of 15 billion Euros (approximately 190 million allowances in current carbon prices).

Germany considering price cap, gas usage drop a condition

The German government now appears to be considering an EU proposal for a price cap on gas ahead of tomorrow’s informal EU meeting of heads of state, but Berlin’s acceptance of such an initiative would be conditional, requiring a compulsory and significant reduction in gas consumption levels throughout the EU.

Germany’s Vice Chancellor Robert Habeck, who heads the country’s energy portfolio, set this condition during a meeting yesterday with the energy ministers of Greece, Belgium, Italy, Poland and Spain, representing the five EU member states most supportive of a price cap on natural gas.

The European Commission’s recent proposal for an optional reduction in gas consumption would need to be made compulsory if Berlin is to accept a price cap on gas, Habeck told the five energy ministers, according to sources.

Despite Germany’s softer stance, work is still needed if a price cap on gas is to be implemented. An official decision cannot be reached at tomorrow’s EU meeting of heads of state as it is an informal session.

It will be followed by another informal meeting in Prague next Tuesday between the EU’s energy ministers.

Brussels is also working on the establishment of a new benchmark for natural gas that better reflects Europe’s new energy reality in which LNG, not pipeline gas, is now the dominant gas source.

Monthly auctions for industrial energy-saving compensation

Industrial consumers – high and medium-voltage – will be offered energy-saving incentives through monthly auctions offering compensation for bids with the lowest compensation levels, it has been decided at an extraordinary meeting yesterday involving the energy ministry, RAE (Regulatory Authority for Energy), distribution network operator HEDNO/DEDDIE and power grid operator IPTO.

The session was staged ahead of tomorrow’s meeting of EU energy ministers, whose agenda will include talks for the establishment of a formula reducing electricity usage.

The European Commission has prepared a plan for 5 percent reduction of electricity consumption during peak hours, but, following negotiations over the past few days, this reduction rate could be cut to 3 percent. Member states are expected to seek flexible terms.

Electricity consumption restrictions, in Greece, between 6pm and 9pm are seen as a certainty following yesterday’s meeting of Greek officials. Also, an additional hour during non-peak hours will most likely be introduced, but it remains unclear whether this hour will be set in the morning, from 9am to 10am, or in the evening, from 9pm to 10pm.

European gas index may link TTF with US, Japan, S. Korea

The European Commission is moving towards establishing a new European benchmark for natural gas that would link the Dutch TTF index, currently providing reference prices for Europe, with the American hub Henry, as well as other indices, including the Japanese and South Korean systems.

Brussels is looking to broaden the scope of the European bloc’s reference pricing system so that it could reflect Europe’s gas imports market with greater accuracy and objectivity.

A new European benchmark will need to also factor in LNG quantities being traded and could be linked with the Japanese and South Korean indices, European sources noted.

European Commission officials explained it would be more appropriate and realistic to establish a new benchmark linked to real supply and demand conditions, rather than relying on the TTF, no longer reflecting the continent’s balance between supply and demand.


EC windfall profits tax soon, revision to local plan possible

Greece will not be required to make adjustments to its windfall profits tax on electricity producers now that the European Commission is preparing to implement a corresponding tax mechanism covering the entire EU, energy ministry sources have told energypress.

Brussels’ related directive notes that EU member states already implementing wholesale electricity market interventions to contain retail prices, namely Greece, Spain and Portugal, can maintain their measures, with any revisions being at their discretion, the ministry sourced added.

However, revisions to the Greek formula, influenced by details in the European model, cannot be ruled out, as government officials will examine whether partial changes can be made to improve the formula recovering electricity producer windfall profits for the country’s day-ahead market, the ministry sources added.



Energy saving compensation for industry, incentives for households, businesses

Industrial enterprise compensation packages, offered through auctions, in exchange for lower energy consumption, and energy-saving incentives for households to be announced at the end of this month, have been included in a Greek plan aiming to achieve a European Commission order for a 5 percent reduction of electricity usage by all EU member states.

It will be up to each EU member state to decide on the details of respective formulas achieving the crisis measure’s objective set by the European Commission.

The Greek plan is greatly relying on industrial players to embrace compensation packages to be offered through auctions.

Reduced energy usage by households and businesses will be optional as, contrary to other EU countries, smart meters, offering immediate online information on energy consumption, have yet to be installed in Greece.

A promotional campaign encouraging households and businesses to use less electricity will be launched at the end of this month, immediately after the energy ministry has announced subsidy-related incentives.


‘EC intervention acceptance of energy market failure’

The European Commission has finally decided to adopt state intervention measures in energy markets, mainly electricity, after much delay, essentially accepting the failure of markets to produce desired results, Pantelis Kapros, Professor of Energy Economics at the National Technical University of Athens, has noted in an analysis.

Major energy price increases needed to spread throughout Europe for Brussels to decide to intervene, the energy expert noted.

Fixed price offers and price hedging contracts – which, in many countries, secured, over a considerable period, relatively stable retail electricity prices not reflecting rising electricity prices at energy exchanges – have become impossible to maintain as a result of the extended energy price crisis, the professor pointed out in his analysis.

Consumer prices are now skyrocketing virtually everywhere in Europe, increasing the risk of bankruptcies, a perilous situation that has prompted EU governments to push the European Commission for state intervention proposals, the professor underlined.

During this crisis, electricity markets have failed to achieve consumer prices at levels reflecting the true long-term average cost of electricity, as healthy competition would, the professor noted.

Given the exorbitant natural gas prices at present, green hydrogen would represent a lower-cost alternative, if infrastructure was in place, the professor noted, concluding green transition is the only positive way out of the problem, as has now been recognized by all.