The European Commission is evaluating the performance to date of an antitrust mechanism that was introduced last year to promote competition in Greece’s electricity market by ending power utility PPC’s lignite-sector monopoly through lignite-generated electricity packages offered to rivals.
Market players have largely remained disinterested in lignite-based electricity packages offered by PPC.
Although Brussels’ inspection of the mechanism is focused on performance and not intended to offer criticism, the procedure will also pinpoint gaps and obstacles and result in revisions to the original plan, sources informed.
It remains unclear if this evaluation process was prompted by the energy crisis’ extraordinary conditions or the mechanism’s failure to produce desired results.
Numerous functional difficulties are believed to have already been identified. Offering these lignite-generated electricity packages on the European Energy Exchange, primarily, as well as the Greek Energy Exchange, despite the fact that these exchanges do not involve the participation of all Greek energy market players, has already been deemed a fundamental mistake as the packages are intended for Greek electricity suppliers and producers but likelier to be purchased by buyers abroad.
According to the mechanism’s rules, PPC, this year, is required to offer three-month lignite-fired electricity packages amounting to 40 percent of the power utility’s lignite production levels in the corresponding quarters last year.
An increasing number of energy companies in Greece are opting to hedge through the European Energy Exchange (EEX) and the derivatives market as a means of monitoring and countering risks prompted by strong price fluctuations and volatility in markets.
Most recently, the Mytilineos group registered with the European Energy Exchange, joining Protergia, the group’s energy supply company, which was already a member. Two major energy companies are set to follow suit, energypress sources informed.
The liquidity of the European Energy Exchange, combined with the security offered by a range of its products, allows participants to hedge their exposure to the markets and, therefore, reduce their risk ratio to sustainable levels.
Given that the EEX is a market leader in power derivatives, it offers significant opportunities to participants, as they can trade in 20 markets in addition to the Greek market, which currently has specific limits and restricted liquidity.
At present, the EEX includes 13 Greek participants, the majority trading in the producer market and 4 in the spot market, while two more new registrations are expected to be announced within the next few days.
Greek energy futures at the European energy exchange are on an upward trajectory from August onwards, as is the case with most European markets.
Greece’s energy futures for August ended yesterday’s trading session at 343 euros per MWh, while September futures were sold for 417 euros per MWh, taking the quantity ordered for the month to 926 GWh.
Greek energy futures for the fourth quarter of 2022 also rose, reaching 351 euros, following recent trends set by Germany and Italy, as well as Greece’s day-ahead market over the past month, which has risen from 260 euros to levels consistently over 300 euros.
Despite the high costs, the government is hoping its retail electricity market revisions can rekindle interest in futures.
In any case, developments in the wider electricity market due to the energy crisis have strengthened the reflexes of companies, pushing them towards safety moves through the acquisition of relevant products.
Power utility PPC has chosen to offer lignite-fired electricity packages to third parties through the Greek energy exchange, not the European energy exchange, as it was also entitled to, sources have informed.
This main reason behind this decision, part of an imminent mechanism to be implemented as a remedy to a long-running antitrust case concerning PPC’s monopoly in the lignite sector, is that PPC sees the forthcoming mechanism as a good opportunity for the domestic futures market to gain momentum and, by extension, help improve the utility’s cash flow.
The mechanism’s launch, coming at a time of elevated wholesale electricity prices, will help PPC’s rivals offset the period’s price volatility, which is crucial support that will enable independent players to compete more effectively in the retail electricity market and offer stable prices to consumers, the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, noted in an official announcement.
A legislative revision for the mechanism offering lignite-fired electricity packages to third parties is likely to be submitted to parliament today by the energy ministry.
The plan is expected to begin offering lignite-fired electricity packages to third parties by the fourth quarter.
Power utility PPC will be entitled to choose whether to offer lignite-fired electricity packages to third parties through the Greek energy exchange or European energy exchange, according to details of an upcoming mechanism to be implemented as a remedy to a long-running antitrust case concerning PPC’s monopoly in the lignite sector.
PPC preference for the domestic energy exchange would keep open the option of physical delivery of these lignite electricity packages and ensure the company greater flexibility in its portfolio management. Opting for the European energy exchange would not permit physical delivery, making the deals purely financial transactions.
All that remains for the implementation of the mechanism, whose details have been agreed to by the government and European Commission, is a decision by the energy ministry on when to submit a related legislative revision to parliament, according to sources.
The legislative revision has been completed and the ministry is believed to be on standby for an appropriate date, the objective being to make a first round of lignite-fired electricity packages available to third parties by the fourth quarter this year.
All electricity suppliers will be entitled to purchase these packages, to have three-month durations.
As previously reported by energypress, the electricity quantity planned to be offered to suppliers through the mechanism in the fourth quarter this year will represent 50 percent of lignite-fired output in the equivalent period of 2020.
Then, for every quarter in 2022 and 2023, lignite-fired electricity packages to be offered to PPC’s rivals will represent 40 percent of lignite-based production in equivalent quarters of the respective previous years.
According to the country’s decarbonization plan, all existing lignite-fired power stations will cease operating by the end of 2023.
The RES special account, already facing deficit pressure, has been dealt a further blow by a European Energy Exchange decision drastically reducing Greece’s CO2 emission right allowance for the year’s final four-month period, a move estimated to deprive the account of 54.2 million euros and test its sustainability.
This decision, based on European Commission rules, was made ahead of the implementation of the Market Stability Reserve mechanism.
Greece’s CO2 emission rights allowance for 2020 is being reduced by 3,767,500 tons, from 24,396,500 tons to 20,628,000 tons. This reduction concerns the period between September and December.
The percentage of CO2 emission right revenues resulting from auctions and distributed to the RES special account was increased to 72 percent from 65 percent in March. The latter figure applied in 2019 and was initially planned to also be maintained for 2020.