European Commission

Political agreement sought for gas price cap, eyes on Germany

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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

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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.

Recommendations

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: https://thegreentank.gr/en/2022/06/14/eu-ets-guide-life-etx-en/

[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

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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

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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

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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

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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

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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’

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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.

Brussels placing energy crisis hopes on windfall profits tax

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The European Commission is placing its hopes on greater revenues to be generated by a windfall profits tax on refineries, wholesale gas companies and electricity producers as a solution to get the EU through the energy crisis.

According to the plan, the EU-27 will use these increased tax collections to subsidize, as widely and as generously as possible, electricity bills of European households and businesses.

Thoughts of imposing a price cap on natural gas from all sources, including Russia, have been abandoned, following objections raised by many EU member states at a recent meeting of EU energy ministers.

The windfall profits tax on oil, gas, coal and refining companies, to be announced today by European Commission president Ursula von der Leyen, could reach as high as 33 percent, according to Bloomberg. Drafts of this extraordinary tax measure do not include its tax rate.

 

Brussels to demand reduced energy usage from member states

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The European Commission is set to call on EU member states to implement a plan requiring consumers to use less electricity for three to four hours a day.

Though it will be at the discretion of EU member states to each decide their respective hours of reduced electricity usage, the fact that this energy-saving measure will be mandatory highlights the seriousness of the energy crisis.

A draft of Brussels’ plan was leaked yesterday ahead of a series of measures to be announced tomorrow by European Commission president Ursula von der Leyen.

Though the latest energy-saving proposal will offer some flexibility to governments, including the ability to implement the measure during hours when RES output is low, it is expected to prompt further disagreement between member states as to how the energy crisis should be confronted, as was the case last Friday at a meeting of EU energy ministers.

Other measures to be announced by the European Commission’s leader tomorrow will include compensation offers, through auctions, for industrial enterprises reducing energy consumption.

 

RES sector opposes Brussels proposal for price cap on power production

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European renewable energy associations SolarPower Europe and WindEurope have expressed their opposition to any moves by the European Commission for a lower maximum electricity price on renewables than on fossil fuel energy, noting this would endanger the energy transition.

EU member state energy ministers are meeting today in search of emergency measures to protect bill payers.

Speaking earlier this week, European Commission president Ursula von der Leyen announced the EU executive’s desire to cap wholesale electricity prices as separate measures for low-carbon and fossil fuel generators.

Von der Leyen set out revenue limits for renewables and nuclear power companies as the second of five energy crisis measures put forward by the commission, with a similar move for fossil fuel companies labeled the third measure.

This implies that the proposed income ceilings could be set at different levels for low-carbon and conventional power generators. That prospect was opposed by SolarPower Europe, which called for any limit on energy company revenue to be applied “after market clearing.”

 

Eurometaux: Crisis measures needed to ease pressure on struggling industry

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Europe needs to take emergency energy-crisis action to ease the growing pressure on the industrial sector, a letter forwarded to the European Commission by European industry association Eurometaux has underlined.

The letter was signed by representatives of 40 major industrial enterprises and associations, including three leading Greek industrial players, Evangelos Mytilineos, head of Mytilineos group, Panos Lolos, ElvalHalcor’s Copper Segment general manager, and Antonis Kontoleon, president of EVIKEN, the Association of Industrial Energy Consumers.

Aluminium and zinc production in Europe has been forced to drop to 50 percent of capacity as a result of high energy costs, while the copper and nickel sectors are also facing serious problems, the Eurometaux letter notes.

Reasonable electricity and natural gas prices are necessary for production of metals, the letter underlines.

Europe cannot have a successful energy and raw materials strategy if electricity and gas prices remain at current levels for an extended period of time without relief, the letter says.

The crisis requires a comprehensive package of solutions, while no option should be disregarded during such unprecedented conditions, the association notes.

An improved temporary framework for state support as well as incentives for electricity purchase agreements with RES producers are among several proposals listed by Eurometaux in its letter to Brussels.

Energy storage preparations begin after Brussels approval

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The European Commission has approved Athens’ support system proposal for energy storage units, a decision enabling the energy ministry to start preparing the details of auctions concerning investments and operational support for these facilities.

Procedures will need to be carried out swiftly as the support system’s funding, through the Recovery and Resilience Facility, has tight deadlines.

According to a related European Commission decision, contracts for energy storage projects selected will need to be awarded by the end of 2023, while development of the energy storage facilities must be completed by the end of 2025.

On the other hand, some time will be needed to shape the details of the support system approved by Brussels and transform it into a fully competitive procedure, given the limited experience, internationally. Greece’s energy storage auctions will be among the first to be staged in Europe.

Also, the auction’s details will need to be shaped to suit the storage needs of Greece’s grid.

The first auction is expected to take place by the second quarter of next year, while efforts will be made to stage the session three months earlier. The second auction is planned for the third quarter of 2023.

 

New power subsidies to be linked to usage levels

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The government is moving to revise its energy subsidies strategy, until now offered universally, regardless of consumption levels, by incorporating subsidies with energy usage, offering them as a reward for restricted consumption, an approach also being prepared on a wider European scale by the European Commission.

In Greece, state subsidies offered for electricity over the past few months have covered as much as 94 percent of electricity cost increases.

However, such generous support, irrespective of electricity consumption levels, cannot be sustained in 2023 as fiscal margins have tightened, government sources informed, adding that the budget cannot keep supporting such expenditure over an extended period.

Given the high level of electricity subsidies in Greece, consumers have remained careless with consumption.

The European Commission is believed to be preparing to incorporate a revised version of Greece’s windfall tax on electricity producers into its wider plan promoting measures designed to reduce electricity demand.

Brussels looks to combine cap on gas for power, windfall tax

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The European Commission, in search for solutions to ease the effects of the energy crisis on the EU, is likely to soon introduce a cap on gas intended for electricity generation, based on a model implemented in Spain and Portugal, as well as a windfall tax on extraordinary gains achieved by vertically integrated electricity producers, an initiative already taken by Greece.

Brussels authorities are also looking to greatly revise the structure of the target model and possibly introduce a common European funding tool, but these two plans are expected to take longer to prepare and implement.

Officials of a number of EU member states have contacted Greek authorities to enquire about details concerning the windfall tax, withholding excess revenues of electricity producers in the domestic wholesale market through a temporary mechanism that results in a partial return of day-ahead market revenues.

Member states are mostly interested to know if this mechanism has led to any side effects in Greece’s day-ahead market.

Many member state officials find the Greek model appealing as it results in an immediate disconnection of electricity prices from the price of natural gas without the need for any target model changes.

Brussels preparing crisis action, natural gas price cap likely

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The European Commission is preparing drastic action to counter the energy crisis in the form of a price cap on European wholesale gas prices to deescalate electricity prices around Europe.

According to energypress sources, details of the plan will have been finalized by around September 20 so that it can then be discussed by the EU’s energy ministers and heads of state.

Despite these necessary steps, the finalized plan could well be ready for implementation by the end of September as Brussels is seeking a swift procedure.

Highlighting the cruciality of the gas-cap plan for Brussels, European Commission president Ursula von der Leyen is being regularly updated on its progress by the European Commission’s Directorate-General for Energy.

The Directorate-General for Energy is believed to be examining two alternative plans, sources informed.

The first alternative, seen as the more probable option, would entail gas import disruptions for gas offered at prices over the cap to be implemented. Brussels authorities believe Europe’s considerable share of global fuel demand could help subdue gas prices if orders are stopped collectively. The second alternative would involve subsidy support for gas imports.

 

 

FSU at Revythoussa LNG unit, Italy storage solution advances

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An FSU has been licensed and installed at gas grid operator DESFA’s LNG terminal on the islet Revythoussa, just off Athens, boosting the facility’s overall capacity to 370,000 cubic meters.

The new floating storage unit’s installation at the Revythoussa terminal comes as part of the country’s energy security effort for protection should Russia disrupt its gas supply. In addition, it will also be used to serve the needs of neighboring countries.

Other steps are also being taken as part of the national energy security plan.

Greek and Italian officials have reached an advanced stage in talks for maintenance of Greek gas reserves at 1.14 TWh at an underground storage facility in the neighboring country. According to sources, the two sides are set to sign a related Memorandum of Cooperation.

The European Commission requires all EU member states without – or without sufficient – natural gas storage facilities, such as Greece, to store by November 1, gas quantities representing 15 percent of annual consumption at existing storage facilities maintained by fellow member states.

Electricity producers operating generators with dual combustion units (natural gas and diesel) are soon expected to take part in an energy ministry meeting to examine fuel-storage issues. This session could take place tomorrow.

 

 

Day-ahead market split for RES, thermal units requested

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The Greek government has proposed target model structural changes, at a European level, that would split the day-ahead market into two entities, one for RES, hydropower and nuclear facilities, and another for natural gas and coal-fired power stations.

For the first of these two new day-ahead market entities, producers would forecast production quantities and be remunerated based on bilateral contracts, detached from the day-ahead market.

For the second of the two new entities, natural gas and coal-fired power station producers, covering remaining energy needs, would submit financial and volume offers based on existing rules.

The Greek proposal was presented by energy minister at an EU council meeting of energy ministers on July 26, energypress sources informed.

Preliminary talks on the Greek proposal have already been held. The European Commission plans to deliver alternative proposals for the target model’s functioning by September.

The day-ahead market determines clearing prices in the electricity market.

 

 

Decarbonization plan delayed by 2 years, greater lignite focus

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The government has asked power utility PPC to extend its lignite-fired electricity generation by two to three years, as a means of cutting back on the use of natural gas, now a high-cost energy source as a result of Russia’s greatly reduced supply to Europe.

The government request, representing one of several energy-crisis measures it has put forth, will delay the country’s decarbonization plan by at least two years.

Lignite currently represents over 10 percent of the country’s energy mix, double its 5 percent share not too long ago, which resulted in annual production of 2.5 TWH. The government is aiming for a lignite energy mix representation of between 17 and 20 percent, or 9 TWH of electricity production, annually.

Increasing lignite-fired generation by approximately 6 TWH will require a natural gas reduction of 12 TWH, which is double the gas cut requested by the European Commission.

Energy minister Kostas Skrekas believes lignite’s 20 percent energy-mix target can be achieved within the first half of 2023.

 

Skrekas: Greece is against a binding 15% reduction of gas consumption

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Greek energy minister, Kostas Skrekas, said today that a horizontal binding reduction of natural gas consumption is not acceptable for Greece.

Along with other European nations, such as Spain, France and Italy, Greece is against the European Commission’s call for a 15% reduction.

Skrekas said that the topic will be discussed in the upcoming energy summit in July 26, where he will also resubmit the government’s suggestion for a different power market mechanism that will separate the formation of wholesale prices from the price of natural gas.

Coal, nuclear exit slowdowns, demand-response part of EU plan

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The European Commission plans to announce an energy-crisis emergency plan on July 20, its measures believed to include a slowdown of nuclear and coal-fired facility withdrawals in the EU, as well as a demand-response mechanism offering industrial consumers incentives to curb energy demand in exchange for compensation.

The EU is bracing for further cuts to Russian gas supply. Kremlin-controlled energy giant Gazprom shut down Nord Stream I, a subsea pipeline linking Russia with Germany on July 11 for a 10-day period of maintenance work, according to Gazprom.

The EU’s emergency plan, to coincide with the end of this ten-day period, is expected to include measures aiming to cut gas use, incentives for firms to curb energy demand and gas savings now for stockpiling ahead of winter.

The European Commission plan will also call on EU member states to encourage industrial enterprises and electricity producers to switch energy sources and opt for biomass, biomethane, solar and and other renewable energy sources.

In addition, the plan will require thermal power stations equipped to also run on diesel to take necessary precautions enabling them to switch to diesel for continual periods of at least five days.

Italian gas storage up to 2 TWh from October for 5 months

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Greek authorities are taking steps to prepare for a gas-storage solution ahead of next winter in neighboring Italy, in accordance with EU rules, requiring all member states without – or without sufficient – natural gas storage facilities, such as Greece, to store, by November 1, gas quantities representing 15 percent of annual consumption, based on last year’s level, at existing storage facilities maintained by fellow member states.

Based on this requirement and the country’s consumption level last year, Greece will need to store a total of approximately 900 million cubic meters of gas, or 8 TWh, of which up to 2 TWh will be stored at Italian facilities from October for a five-month period.

Storage costs for such a quantity are expected to reach 250 million euros, under favorable conditions.

A related proposal forwarded by RAE, the Regulatory Authority for Energy, will undergo consultation before final decisions on the country’s gas storage plan are made.

 

Strategic reserve mechanism application to be withdrawn

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The energy ministry intends to withdraw its application submitted to the European Commission for a strategic reserve mechanism as a result of the government’s recent decision to revise its withdrawal plan for the country’s lignite-fired power stations in order to permit operations until 2028 instead of 2025, as was planned.

Under the original plan, the strategic reserve mechanism would have been introduced to maintain lignite-fired power stations under the control of power grid operator IPTO for energy contributions during periods of high demand.

Within the framework of these developments, the government is also considering to withdraw a compensation application for power utility PPC’s premature withdrawal of lignite-fired power stations.

PPC’s plan entailed shutting down all existing lignite-fired power stations by the end of 2023.

However, the government is being forced to delay its decarbonization strategy as a result of the steep rise in gas prices prompted by Russia’s war on Ukraine.

Brussels approves wholesale price formula, producer caps

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A government package containing a new formula for the country’s wholesale electricity price along with caps for each of the four electricity generating technologies (hydropower, renewables, gas and lignite) has been approved by the European Commission, paving the way towards its implementation as of July 1, sources have informed energypress.

Once a related draft bill, submitted to parliament last Friday, is ratified, a ministerial decision detailing the price caps per technology will be published at the end of this week or early next week. It is eagerly awaited by market participants.

According to sources, the cap on hydropower facilities is expected to be set relatively higher than initially thought, at 110 euros per MWh, well over the initial expectation of between 80 to 90 euros per MWh.

The price cap on renewables is expected to be set at 85 euros per MWh. Natural gas-fueled power stations are seen taking on a cap of between 230 and 240 euros per MWh.

Power utility PPC’s lignite-fired power stations will be set a cap of no less than 200 euros per MWh.

The mechanism’s operation will be assumed by EnExClear, the day-ahead market’s clearing authority, which will report, on a daily basis, to RAE, the Regulatory Authority for Energy, and DAPEEP, the RES market operator.

Lower-cost gas storage option for 15% of annual use sought

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The energy ministry is seeking lower-cost solutions to satisfy a European Commission order requiring all EU member states without – or without sufficient – natural gas storage facilities, such as Greece, to store by November 1, gas quantities representing 15 percent of annual consumption at existing storage facilities maintained by fellow member states.

A 15 percent proportion of Greece’s annual gas consumption represents approximately 900 million cubic meters. Its supply cost, alone, is worth roughly 700 million euros, based on current prices.

Besides the cost concerns expressed by energy ministry officials over an idea to use Italian storage facilities, companies active in Greece’s wholesale gas market are also troubled.

The head official of one domestic gas wholesaler described the cost of moving ahead with the Italian plan as forbiddingly high, adding that it would be far more preferable to rent as many additional floating storage units as are needed for mooring at Greece’s LNG terminal on the islet Revythoussa, just off Athens.

Extra 10% in support funds for RES, smart networks, efficiency

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Investors seeking to develop energy-related projects in the wind, solar, smart network and energy-efficiency fields will be entitled to bonus support funds of as much as 10 percent through the Just Transition Fund.

The European Commission has just approved 1.63 billion euros in support funds for Greece for the development of projects designed to ease the impact of energy and climate-change policies on local economies.

These areas include Megalopoli in the Peloponnese and northern Greece’s western Macedonia region, both lignite-dependent economies undergoing decarbonization, as well as the islands in the Aegean Sea’s north and south and Crete.

Private-sector projects in these areas, including hotels, agritourism units, wind and solar energy facilities, smart networks and energy-efficiency projects will all be entitled to extra support funds.

PPAs through Green Pool, state subsidies to be set at 85%

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A Green Pool model forwarded by the energy ministry for European Commission approval ahead of an envisaged launch at the beginning of 2023 will have the dual goal of setting energy costs for eligible industries at competitive price levels and bolstering green-energy generation through power purchase agreements.

The energy ministry hopes its plans will be given the green light as soon as possible so that industries can, immediately afterwards, establish PPAs for green energy, with state subsidies set at 85 percent.

This would enable industries to partially cover their energy needs as of the beginning of 2023 at competitive prices and also reduce their carbon footprints.

The Greek proposal was forwarded to the European Commission’s Directorate-General for Competition early this month, the aim being to make energy-intensive industries more environmentally friendly and facilitate the energy-mix entry of new RES facilities.

PPC awaits Brussels energy strategy to decide on Ptolemaida V

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Power utility PPC will wait for the European Commission’s finalized decisions on a strategic plan intended to end the EU’s reliance on Russian fossil fuels before it decides on the operating and conversion details of its prospective Ptolemaida V power station in northern Greece, to be launched as a lignite-fired facility before being converted to natural gas.

The PPC board is now expected to decide on Ptolemaida V’s conversion date towards the end of this year, according to sources.

Ptolemaida V, expected to undergo a trial run in the second half of the year before being launched late in the year or early in 2023, will be introduced as Greece’s last lignite-fired power station.

Early in April, prime minister Kyriakos Mitsotakis announced extensions to withdrawal dates for older lignite-fired power stations that were originally headed for closure prior to 2025. At the time, the prime minister also informed that Ptolemaida V could now operate as a lignite-fired unit until 2028.

Revisions to the country’s decarbonization plan have been prompted by energy security concerns following Russia’s invasion of Ukraine and the exacerbation of the preceding energy crisis as a result of this war.

The Greek government has decided to increase lignite mining output as a safety measure should Russia interrupt its natural gas supply.

A year ago, PPC had announced it intended to convert Ptolemaida V into a natural gas-fired facility as of 2025, but the latest energy security concerns froze this plan.

 

DNV ‘contributing’ to floating PV company ‘bankability’

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By Michalis Mastorakis

An important step to enhance the maturity of the floating photovoltaic industry in Europe is being advanced by the independent energy expert and assurance provider, DNV.

This is starting with the implementation of two Joint industry Projects (JIP’s) which aim to create standards and guidelines for anchorage and mooring design as well as testing and certification of floats.

DNV intends to formulate a “roadmap” for potential investors and operators of floating photovoltaics, developing for the first time in the world, a specific certification and verification framework in terms of design, development and operation of floating photovoltaics.

The Norwegian classification society already collaborated with 24 sector companies as part of a previous JIP effort, that led to the publication of DNV-RP-0584. DNV has also invited others to participate in the two new JIPs, Michele Tagliapietra, solar energy advisor and DNV’s Global Practice Lead for Floating Solar, has told energypress.

As Tagliapietra explained speaking to energypress, there is a significant gap and this affects the “bankability” of investors, resulting in significant obstacles to the maturation and implementation of projects in the industry and even at a time, as he characteristically stated, that the technology of floating photovoltaics is booming and has significant investment interest in major markets on the European continent.

DNV’s first new Joint Industry Project for this sector aims to share and verify optimal practices concerning floating photovoltaic anchoring and mooring design. Taking into account the sector’s experience, so far, and existing concepts, this effort, involving participants from across the entire floating photovoltaics domain, will produce a design standard tackling a range of challenges that are expected to arise during design and installation.

The second new Joint Industry Project, concerning float design, testing and qualification – it is based on DNV’s knowhow and network – will aim to establish an adequate standard for design, testing and certification of floating PVs. This step promises to introduce clearer, swifter and lower-cost procedures.

Specific technology for specific conditions

Evaluating the Group’s overall experience in the floating photovoltaic industry, the senior DNV executive stated that the “key” to the successful development of the projects is the combination of “appropriate technology in the right place”, emphasizing that the project design must take into account the geographical, weather and technical conditions of each place selected for a project.

Determining the level of “maturity” of this technology, he said that for the time being it remains immature for application on the high seas, without however being ruled out in the near future, given that this technology is experiencing rapid development. Today such projects are mainly found in lakes and water basins within the mainland.

The case for Greece

Of particular interest is the case for Greece, where DNV has a long experience in the industry. According to Mr. Tagliapietra, Greece has a comparative advantage with the sea areas near the coastline that are considered particularly favourable to host such projects. “The Greek coastal region may be an optimal choice solution for the installation of floating photovoltaics,” he said.

The European trend

While the Netherlands is at the forefront for installed capacity in Europe, countries like Portugal, Spain, Italy, France and Germany are currently starting to implement floating solar specific regulations and initiatives to promote the sector.

Overall, European countries are becoming more favorable to the development of floating photovoltaics, a stance that puts this technology in good stead as a sustainable solution for energy sufficiency and supply within the framework of the European Commission’s new REPowerEU plan.

DNV forecasts

The geographical potential for floating photovoltaics installation is estimated at 4 TW by the World Bank. Following a hesitant start, the global floating PV market grew to 3 GW in installed capacity in 2021 and, according to DNV, should reach between 7 and 11 GW in installed capacity by 2025, a surge in development expected from 2023 onwards.

 

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.