Flexibility surcharge improper, suppliers complain to Brussels

A CAT surcharge imposed on electricity suppliers to support the flexibility mechanism was adopted without proper consultation via a procedure that was not fully substantiated, ESEPIE, the Hellenic Association of Electricity Trading and Supply Companies, has charged in a letter forwarded to the European Commission’s Directorate-General for Competition and Directorate-General for Energy.

Consultation on the matter lacked a detailed study by power grid operator IPTO on current flexibility needs, the association protested in the letter, forwarded to the Brussels authorities just weeks ahead of the launch of target model markets in Greece.

The flexibility mechanism’s details are based on a study conducted years ago but current flexibility needs concerning production and demand have since changed drastically, the association noted.

A transitional mechanism is not needed given the current conditions in Greece’s energy market, especially if the pandemic-related drop in electricity demand is taken into consideration, ESEPIE noted. State aid or any other form of support for energy producers offering flexibility is unnecessary, the association stressed.

Suppliers have been asked to cover flexibility-related surcharges, beginning August 15, at a rate of approximately 3 euros per MWh. This is burdening their finances, especially in the mid-voltage market, where heightened competition has severely narrowed profit margins.

Flexibility CATs, it should be noted, do not impact independent, vertically integrated suppliers as the corporate groups they belong to collect the flexibility surcharge payments for their production.

Energy companies actually benefit from the surcharge if their retail electricity market shares are smaller than their shares of production. This is not the case for PPC, whose retail market share is considerably bigger than its share of electricity generation.

 

IPTO set to stage flexibility remuneration auction this Friday

Power grid operator IPTO has invited interested parties to register for an inaugural flexibility remuneration auction scheduled to take place this Friday.

The August 14 auction will offer bidders flexibility remuneration rights for a period covering August 15 to October 31 this year.

A total flexibility capacity of 4,500 MW will be offered at Friday’s auction at a starting price of 39,000 euros per MW, annually.

 

Ministry preparing for Brussels demand response, TFRM approvals

Anticipating the European Commission’s approval of government proposals for a demand response mechanism and a transitory flexibility remuneration mechanism (TFRM), the energy ministry is preparing ministerial decisions for immediate signing once Brussels has given the green light.

These decisions will need to be signed by Greek officials before the two mechanisms can be implemented. The ministry is preparing the ground to have both mechanisms launched as soon as possible.

Brussels and Athens have reached an agreement on the mechanisms, prompting the energy ministry to deliver a finalized version of the demand response plan to the European Commission’s Directorate-General for Competition, ahead of this mechanism’s reintroduction.

The energy ministry expects power grid operator IPTO to be able to stage its first auction for demand-response capacities in July.

According to the agreement reached with Brussels, IPTO will be permitted to auction demand response capacities of up to 800 MW, below the previous limit of 1,030 MW.

Also, a greater number of participants will be eligible as enterprises with capacities of at least 2 MW will be able to take part, down from 3 MW in the previous mechanism. Troubled nickel producer Larco will not be excluded.

In addition, the new mechanism will run until September 30, 2021, not for two years as had been requested by EVIKEN, the Association of Industrial Energy Consumers.

As for the TFRM, it will remain valid until the implementation of a permanent CAT mechanism, which the energy ministry expects to launch in March, 2021.

The TFRM will be divided into two stages, the first running until the launch of target model markets, scheduled for September 17, under the same terms that applied for a mechanism that expired in March, 2019.

The TFRM’s second stage will run from the launch of the target model until a permanent flexibility mechanism is introduced. Its capacity is expected to be drastically reduced to 750 MW from 4,500 MW. Remuneration levels are also expected to drop.

Brussels grants Athens demand response, TFRM extensions

The European Commission has granted extensions for Greece’s demand response mechanism and transitory flexibility remuneration mechanism (TFRM), according to sources well-informed on the negotiations. They have dragged on for over seven months.

The development promises to offer energy-intensive industries and electricity producers crucial support given the period’s adverse conditions. Both mechanisms are vital for energy-cost savings.

The agreement also paves the way for the establishment of a permanent Capacity Remuneration Mechanism (CRM). The energy ministry plans to assemble a special committee comprised of various electricity market officials for work on the CRM details.

Greece’s demand response mechanism and transitory flexibility remuneration mechanism (TFRM) had both expired – the former three months ago and the latter in March, 2019.

Both mechanisms were extended by Brussels despite Greece’s pending implementation of the target model, now behind schedule.

Suppliers also given lignite access by DG-Comp agreement

The Greek government and European Commission’s Directorate-General for Competition appear close to reaching an agreement that would give the country’s independent electricity suppliers access to state-controlled power utility PPC’s lignite-based production through a transitional mechanism running until 2023, when most of the utility’s lignite units are expected to cease operating.

This prospect comes hot on the heels of an agreement between Athens and Brussels enabling extensions of Greece’s demand response mechanism and transitory flexibility remuneration mechanism (TFRM).

PPC has monopolized Greece’s lignite sources and generation, but an agreement offering lignite access for all would open the door for independent suppliers as well as industry.

For quite some time, the DG-Comp has criticized PPC for not complying with a European Court decision requiring lignite access to third parties.

Settlement of the lignite dispute would leave just one pending energy-sector matter, the target model’s implementation.

Talks between Athens and Brussels on Greece’s energy sector matters have dragged on for at least seven months.

Athens and Brussels also appear to have drawn closer for an agreement on how lignite-based electricity will be priced.

Industrial energy cost reduction measures planned, deputy tells

The government is preparing to reduce a special consumption tax for energy-intensive mid-voltage companies and also push through a series of other measures aiming to reduce industrial energy costs, deputy energy minister Gerassimos Thomas has revealed in an interview with Greek daily Kathimerini.

The deputy minister said he is confident a Greek proposal seeking extensions for the country’s demand response mechanism and transitory flexibility remuneration mechanism (TFRM) will be approved by the European Commission.

The special consumption tax for energy-intensive mid-voltage companies will be reduced to the level offered to high-voltage companies, the deputy minister informed.

Also, a new public service compensation (YKO) mechanism offering benefits for high and mid-voltage industries will be introduced, he said.

Power grid operator IPTO needs to design and launch new demand response products in compliance with EU directives, the deputy minister noted while addressing the forthcoming launch of the target model in Greece.

The objective is to provide incentives to private-sector producers and industry for equal participation in the balancing and energy markets, he explained.

 

 

Brussels concerns delay flexibility remuneration mechanism

A government proposal for a transitory flexibility remuneration mechanism (TFRM) is being delayed by European Commission concerns, holding back progress despite a legislative initiative taken by the energy ministry to hasten the approval process.

The Greek government forwarded its flexibility mechanism proposal to the European Commission in December, requesting it remains valid over a transitional period. The request has obviously prompted concerns in Brussels, as suggested by an ongoing question-and-response procedure.

Many EU member states no longer use TFRMs. Prior to the request in December, Greek officials had informed the European Commission that flexibility in the country would be remunerated through the Target Model, once it is implemented, not separately.

Approval by Brussels is needed before Greece’s energy ministry can issue a ministerial decision formalizing the transitory mechanism.

The energy ministry, in an effort to limit the overall delay, has attached a related legislative revision to a wider draft bill covering environmental matters, now headed for parliament.

Otherwise, the ministry would need to submit a separate legislative revision to parliament once Brussels has given its green light. Such a course would further delay the mechanism’s implementation.

Brussels ‘attaching unresolved market issues to target model’

Greece’s unresolved energy market issues, including demand response and flexibility mechanism requests, appear to have been bundled up into one package by the European Commission as it waits to see if the country will honor its commitment to launch the target model this summer, sources believe.

Brussels has held back on approving a demand response mechanism extension request and CATs rewarding flexibility. Sources believe the European Commission will maintain delay tactics, through ongoing correspondence, until the summer.

The Greek government forwarded a request for a demand response mechanism extension of two years in late December before presenting the plan in Brussels the following month.

The presentation prompted an extended period of correspondence between the two sides that ended up requiring Greece’s energy ministry to respond to a lengthy list of questions. The ministry’s responses to these questions were forwarded two weeks ago. Athens is now awaiting news from the European Commission.

Work still needed for demand response, flexibility approvals

European Commission officials of the Directorate-General for Competition have questioned various aspects of a Greek proposal seeking a two-year extension of the country’s existing demand response mechanism, a key energy-saving tool, as well as a proposal for a transitional mechanism rewarding flexibility.

Despite the hesitation, a series of meetings held Wednesday between the energy and environment ministry’s secretary-general Alexandra Sdoukou and DG Comp officials have been described as constructive.

Brussels officials appear to be gradually overcoming reservations stemming from Greece’s failure to meet previous commitments.

The energy ministry plans to address the DG Comp’s concerns on the demand response and flexibility mechanisms in a response to be forwarded today.

Sdoukou is scheduled to travel to Brussels in about two weeks for further talks.

Industry experts believe Greece’s demand response mechanism proposal stands a solid chance of being approved as it is based on a power grid operator IPTO study determining that a real need exists for the mechanism.

However, any chance of an approval by February 6, the expiry date of the existing demand response mechanism, has been ruled out. The industrial sector will be left without a demand response mechanism for a period of at least two months, it is estimated.

European Commission approval of the flexibility mechanism is seen as a less likely prospect as units offering flexibility to the grid face less of a financial strain and, moreover, flexibility will soon be rewarded within the framework of the target model.

Demand response mechanism proposal seeks two-year extension

A Greek proposal forwarded to the European Commission late in December for an extension of the country’s existing demand response mechanism, a key energy-saving tool for industry, is seeking an additional two years.

This application was forwarded along with a proposal for a transitional mechanism rewarding flexibility.

If an entirely new permanent demand response mechanism is granted a two-year lifespan, then the two-year extension for the existing system will cease to apply, sources informed.

The target model will need to be launched before a permanent mechanism can be implemented.

Conclusions to be drawn through the target model’s introduction will enable Greek officials to shape a proposal for the permanent mechanism, seen occurring late this year.

A previous demand response proposal forwarded to Brussels by former energy minister Giorgos Stathakis is no longer valid as the country’s energy plan has been completely reshaped since last summer’s change of government.

Brussels talks on demand response, flexibility mechanisms today

Greece’s demand response mechanism (interruptability) and a transitional flexibility mechanism are on the agenda for talks today, at a technical level, between Greek government and Brussels officials.

Greece has not yet submitted an application for an extension of the country’s demand response mechanism as the energy ministry is still gathering related details from the European Commission, primarily on the extension duration it should apply for.

Ministry officials want to know if a two-year extension for the demand response mechanism is feasible. Otherwise, Greece could apply for a one-year extension.

Both the demand response mechanism and transitional flexibility mechanism are crucial for the proper functioning of the market, according to a recent study conducted by the power grid operator IPTO, a prerequisite for the double application.

Demand response mechanism to be extended ahead of bid for new plan

The energy ministry has decided to extend a December 31 deadline concerning the country’s demand response mechanism (interruptability) into February, and, during this additional period, apply for a new two-year replacement.

A ministerial decision to facilitate this extension adheres to provisions offered by the European Commission, energypress sources informed.

This action will secure uninterrupted demand response mechanism coverage for the industrial sector. Power grid operator IPTO may stage one more demand response mechanism auction in January based on the support system’s existing terms.

The application for Greece’s new demand response mechanism, a key energy-saving tool for industry, will be along with another application for a temporary mechanism compensating flexibility.

Both mechanisms are considered crucial for the market’s proper functioning, a recent IPTO study determined.

The demand response mechanism compensates major-scale electricity consumers when the TSO (IPTO) asks them to shift their energy usage (lower or stop consumption) during high-demand peak hours, so as to balance the electricity system’s needs.

 

Independent producers set to lose €80m in CATs for flexibility

The country’s independent electricity producers are on the verge of missing out on annual remuneration worth 80 million euros and offered through a temporary CAT mechanism rewarding flexibility as a result of a new European Commission term setting the implementation of target model regulations as a prerequisite.

A temporary CATs auction scheduled for March 20 was cancelled after Brussels determined that Greek authorities failed to fully deliver on revisions that would have enabled demand response operators to participate at these auctions.

The loss of these temporary CATs will directly impact private-sector electricity producers. Natural gas-fueled power stations and hydropower facilities were anticipating an influx of flexibility CATs by the end of March, the mechanism’s first period, while the second period, beginning April 1 and running until the end of the year, was planned to include demand response operators and energy storage facilities.

Acknowledging the problem, energy ministry officials have noted that a last-ditch effort is being made to deliver revisions that would enable flexibility CAT eligibility for demand response operators.

First temporary CATs auction called off by Brussels reaction

A decision by power grid operator IPTO to call off, on the eve of the event, a March 20 auction offering temporary CATs  is believed to have been prompted by European Commission intervention resulting from a Greek breach of the auction’s terms included in a Brussels endorsement, sources have informed.

IPTO attributed its move to reasons concerning a framework revision of the auction procedure’s terms, noting further clarification could be sought at the energy ministry.

The Brussels-approved mechanism for temporary flexibility CATs requires a division of eligible parties into two groups for participation at separately held auctions over two periods.

The first, by the end of March, is intended for natural gas-fired and hydropower plants, while the second is for demand response operators and energy storage facilities. Lignite-fired power plants have been excluded from the temporary CAT mechanism.

 

Technical team returns Monday for full review of energy sector

A technical team representing the country’s lenders will be returning to Athens Monday to examine, with Greek authorities, the progress of energy-sector revisions agreed to in the bailout era.

Besides the disinvestment procedure for main power utility PPC lignite units and the course of privatizations, the visiting team’s inspection will primarily focus on the local effort being made for maintenance of the target model’s time frame, which appears to be behind schedule.

For quite some time now, the country’s lenders have applied pressure on Greece for full implementation of the target model – aiming for market coupling, or harmonization of EU wholesale markets – by the first quarter of 2019 and a launch of the local energy exchange by April.

These target dates will be difficult to achieve given the current rate of developments. The time frame’s viability is expected to be discussed by Greek officials and the visiting inspectors.

Electricity market liberalization issues as well as developments concerning RES auctions and the implementation of a transitional CAT mechanism compensating electricity producers offering grid flexibility will also be on the agenda.

PPC takes high court action against flexibility mechanism

The main power utility PPC has filed a case at the Council of State, Greece’s Supreme Administrative Court, in an effort to cancel a transitional CAT mechanism remunerating electricity producers for providing grid flexibility, just days after the staging of an inaugural flexibility auction.

The power utility believes the mechanism is unfavorable for its hydropower and lignite-fired power stations, compared to the benefits offered to natural gas-fueled power stations.

PPC, which expressed its objections against the mechanism in a recent public consultation procedure for the flexibility remuneration plan, has also resorted to the Supreme Court in the past to tackle other temporary CAT mechanisms.

In addition, the power utility has described as unfortunate a decision by RAE, the Regulatory Authority for Energy, to establish a flexibility mechanism whose operation is directly linked to the balancing market instead of focused on ensuring that new markets operate in a timely manner and delivering a mechanism to protect energy sufficiency.

Flexibility auction among the good news for power producers

Favorable industry developments on a number of fronts have raised the expectations of electricity producers for stronger performances in the second half. These include an inaugural auction, scheduled for today, to offer producers providing grid flexibility CAT remuneration for a total of 4,500 MW at a starting price of at 39,000 euros, annually, per MW installed.

The starting price of the descending-price auction would ensure a 400-MW power station 3.9 million euros in revenues per quarter. It remains to be seen how much bidding pressure will be applied by participants.

RAE, Greece’s Regulatory Authority for Energy, will be monitoring the session’s developments today to take corrective action for future auctions should abusive practices be discerned.

The flexibility auction comes as a favorable development for electricity producers that promises to fill a gap created in April, 2017 when a previous CAT mechanism expired.

Higher System Marginal Price (SMP) levels are also expected to favorably impact producer revenues. The SMP reached 63.83 euros per MW in August.

Gas-fueled power plants are expected to become increasingly competitive against lignite-fired power stations in the short term if CO2 emission right costs persist at levels over 20 euros per ton.

Inaugural CAT flexibility auction planned by IPTO for next week

An inaugural auction offering CAT remuneration for a total of 4,500 MW of electricity output offering grid flexibility has been planned by power grid operator IPTO for September 28.

IPTO is expected to make an official announcement, including participation details, during the day.

The starting price at the upcoming CAT flexibility descending-price auction has been set at 39,000 euros per MW. The total amount to be paid to producers through temporary CATs for flexibility has been set at 175.5 million euros.

The transitional CAT flexibility mechanism, to remain valid until March, 2019, will be available to open-cycle gas-turbine technology facilities and combined cycle units, hydropower plants contributing to the grid, as well as combined heat and power (CHP) units for their output not remunerated through renewable energy support mechanisms.

Lignite-fired power stations have been excluded from the transitional mechanism as they do not meet flexibility criteria.

The transitional CAT mechanism model will be succeeded by the implementation of the target model, aiming for a single European electricity market.

 

 

Launch of PPC’s Megalopoli V seen impacting wholesale market

The commercial launch of the main power utility PPC’s new gas-fired power station Megalopoli V on August 14, following a prolonged period of trial runs and priority dispatch rights that led to further market distortions, is expected to impact wholesale electricity market levels.

This new unit’s commercial launch appears to have been timed intentionally for the purpose of enabling PPC to seek CAT flexibility remuneration for a further 500 MW. Megalopoli V’s installed capacity actually measures 800 MW but 300 MW cannot be utilized until a grid update has been completed.

Megalopoli V will be able to participate in CAT flexibility auctions, expected to be launched next month following European Commission approval. The CAT flexibility mechanism will remain valid until the end of 2019 and remunerate power plants offering flexibility to the grid.

Flexible power mechanism amendment taken to Parliament

A law amendment for Greece’s transitional CAT mechanism, planned to remunerate flexible electricity capacity from the date of ratification to December 31, 2019, has been submitted to Greek Parliament by the energy ministry.

Flexible power capacity providers such as gas-fired power plants and flexible hydro plants will be eligible for remuneration through the mechanism, as will combined heat and power (CHP) stations for capacities not already compensated by RES and CHP support mechanisms.

The CAT mechanism remunerating flexible electricity capacity has been divided into two periods, the first to run until March 31, 2019 and the second to expire on December 31, 2019. This time distinction has been made as the second period will run concurrently with the balancing market.

The amendment submitted to parliament also offers a description of the competitive procedure through which production units will be chosen for flexibility mechanism remuneration.

Flexibility auction participants will need to bid for capacities of at least one MW, while a starting price of 39 euros per KWh will be set. A total capacity of 4,500 MW will be remunerated through the flexibility mechanism. The first auction is planned to take place no later than September 30, 2018.

The European Commission has just approved Greece’s transitional CAT mechanism model planned to remunerate flexible electricity capacity, it announced earlier this week.

 

EC approves Greek support mechanism for flexible power capacity

The European Commission has approved Greece’s transitional CAT mechanism model planned to remunerate flexible electricity capacity, it has just announced.

Natural gas-fired power plants and hydropower stations offering flexibility will be remunerated with amounts to be determined at auctions, according to the plan.

The mechanism, offering remuneration for a total capacity of 4,500 MW, will be valid until the end of 2019.

“The European Commission has found the planned Greek mechanism to remunerate flexible electricity capacity to be in line with EU State aid rules. Under this mechanism, flexible power capacity providers such as gas-fired power plants, flexible hydro plants and, in a second stage, demand response and storage operators can obtain a payment for being available to generate electricity or, in the case of demand response operators, for being ready to reduce their electricity consumption,” the European Commission announced in a statement. “This flexibility in power capacity will allow the Greek transmission system operator (TSO) to cope with the variability in electricity production and consumption, in particular during evening hours, when decreasing solar energy generation coincides with increasing demand for electricity. To limit costs, the TSO will select the flexible capacity providers through competitive auctions, with a maximum tendered volume of 4,500 megawatts. The measure will apply until the end of 2019. The Commission concluded that the scheme will allow a smooth transition towards a reformed electricity market, which Greece committed to implement as part of the European Stability Mechanism support program, while limiting distortions of competition in line with EU State aid rules,” it added.

First CAT flexibility auction expected in September

A new transitional CAT mechanism model compensating electricity generation flexibility, to soon be implemented in Greece, is expected to be valid for less than a year, all the way up to the implementation of the target model, seen occurring in the first half of 2019.  The target model is aiming for a single European electricity market.

The first auction for the CAT flexibility mechanism, taken on by the government as a fourth-review bailout commitment, will not be staged any sooner than September, despite initial efforts for a launch by July, energypress sources have informed.

Independent electricity producers are keen to see the new CAT flexibility mechanism up and running as its previous version expired in April, 2017. This has prompted financial issues at production units.

If no major changes are made to the CAT flexibility mechanism plan ahead of its implementation, then it should offer compensation for 4,263 MW of annual output. Hydropower facilities are expected to be entitled to compensation for output totaling 750 MW, up from the previous model’s amount of 582 MW. Starting prices at the CAT flexibility mechanism’s descending-price auctions are expected to be set at 39,000 euros per MW, higher than 25,000 euros per MW originally planned.

The demand response mechanism (interruptability) – compensating major-scale consumers, such as industrial enterprises, when the TSO (IPTO) asks them to shift their energy usage (lower or stop consumption) during high-demand peak hours, so as to balance the electricity system needs – will not be incorporated into the new CAT flexibility mechanism.

 

CAT flexibility mechanism’s publication to pave way for auctions

Greece’s new CAT mechanism model compensating electricity generation flexibility, a bailout demand taken on by the government during the fourth review, will be uploaded to the EU’s official website either today or tomorrow and is then expected to be officially endorsed soon after.

According to energypress sources, the European Commission gave permission for the Greek plan’s publication a few days ago, once adjustments it had requested were made.

The European Commission is expected to officially approve the new CAT flexibility mechanism soon after it is published, sources informed.

Then, Greek authorities are expected to push ahead with procedures leading to the first auction. Though it is not yet clear how long this could take, environment ministry officials are confident the first CAT flexibility mechanism auction could be staged in July. Preliminary work needed to set up the auctions has already begun ahead of the plan’s anticipated approval in Brussels, the ministry officials noted.

The new CAT flexibility mechanism will operate transitionally until the implementation of the target model, expected towards the end of the first half next year.

Independent electricity producers are keen to see the new CAT flexibility mechanism up and running as its previous version expired in April, 2017. This has prompted financial issues at production units.

Hydropower facilities, natural gas-fueled power stations, as well as RES units will be eligible to take part in these auctions and be compensated for their short-term notice electricity supply to the grid. Compensation for RES units will be limited to output not remunerated through renewable energy support mechanisms.

Assuming no major changes have been made to the plan, the new CAT flexibility mechanism should offer compensation for 4,263 MW of annual output. Hydropower facilities are expected to be entitled to compensation for output totaling 750 MW, up from the previous model’s amount of 582 MW. Starting prices at the CAT flexibility mechanism descending-price auctions are expected to be set at 39,000 euros per MW, higher than 25,000 euros per MW originally planned.

The demand response mechanism (interruptability) – compensating major-scale consumers, such as industrial enterprises, when the TSO (IPTO) asks them to shift their energy usage (lower or stop consumption) during high-demand peak hours, so as to balance the electricity system needs – will not be incorporated into the new CAT flexibility mechanism.

 

Flexibility plan settled, auction starting price at €39,000/MW

Greece’s new and transitional flexibility remuneration mechanism was endorsed by the European Commission last week, as was expected, according to energypress sources, paving the way for this payment tool’s imminent implementation.

According to the sources, the mechanism will offer electricity producers providing flexibility to the grid a total capacity of 4,263 MW in 2018; include hydropower facilities, to be offered 750 MW, above the previous mechanism’s level of 582 MW and below the 1,000 MW level proposed by RAE, Greece’s Regulatory Authority for Energy; and offer a maximum auction starting price of 39,000 euros per MW, instead of 25,000 euros as was proposed in an original plan.

Besides the inclusion of hydropower facilities, the new flexibility remuneration mechanism will be open to natural-gas fueled power stations, as well as RES and Combined Heat and Power High Performance (CHP) units, for output not remunerated through existing RES payment mechanisms.

Also, major-scale industrial consumers participating in the demand response mechanism are not eligible to participate in the new flexibility remuneration mechanism.

The previous flexibility remuneration mechanism expired last April, which has tested the sustainability of independent power producers.

Natural gas-fired electricity producing units will need to be equipped to run on alternative fuel (diesel) or possess additional natural gas reserves to be eligible for the flexibility mechanism’s auctions.

Given the terms and conditions of the new flexibility remuneration mechanism, approximately 1,800 MW of the total 4,263 MW will go to the main power utility PPC, for the corporation’s natural gas-fired electricity producing units, while independent producers will battle for around 2,400 MW through an auction.

 

 

 

Flexibility mechanism offering 750 MW to hydropower plants

An energy ministry plan submitted to the European Commission for approval and concerning the participation of hydropower facilities in the new flexibility remuneration mechanism proposes a level of approximately 750 MW, a middle-of-the-road solution above the previous mechanism’s level of 582 MW and below the 1,000 MW level proposed by RAE, the Regulatory Authority for Energy.

The new flexibility remuneration mechanism for electricity producers is planned to apply until the target model, a process entailing the electricity wholesale market’s harmonization with EU law, and a permanent CAT mechanism are adopted.

If applied, this energy ministry proposal will reduce the CATs to be received by independent natural-gas fueled power stations compared to payments they were entitled to through the previous flexibility remuneration mechanism, which expired last April.

These natural-gas fueled power stations also stand to lose from an auction starting price limit of 30,000 euros per MW imposed on the new flexibility remuneration mechanism, down from the previous mechanism’s 45,000-euro level. The capacity to be auctioned has also been reduced to 4,263 MW from the previous mechanism’s 4,994 MW.

These factors are expected to intensify competition not only between main power utility PPC units and private-sector units, but also between independent producers, which could test their sustainability.

Following a public consultation process staged by RAE, the Regulatory Authority for Energy, the new flexibility mechanism will offer producers three-hour-notice flexibility compensation for a maximum of 4,263 MW through one auction in 2018, not two as was initially considered.

Hydropower and natural gas-fired electricity generation units as well as Combined Heat and Power High Performance (CHP) stations will be entitled to take part in flexibility mechanism auctions. CHP units will have the right to seek payment for any output not remunerated through existing RES payment mechanisms.

Also, natural gas-fired electricity producing units will need to be able to run on alternative fuel (diesel) or possess natural gas reserves to be eligible for the flexibility mechanism’s auctions. This essentially means producers will need to hold additional supply contracts or be able to cover the cost of temporary LNG storage solutions, either directly or indirectly, as was proposed by DEPA, the public gas corporation.

Flexibility mechanism delayed by insufficient market reforms

The delivery of the country’s new flexibility remuneration mechanism plan by local authorities to the European Commission has been postponed until March, meaning its implementation, intended to compensate electricity producers for flexibility-related output, will be delayed accordingly, energypress sources have informed.

This rescheduling, included as a term in the bailout’s just completed third review, has been attributed to the lack of progress in local electricty market reforms.

Market reforms are expected as prior actions by the European Commission’s Directorate-General for Competition and Directorate-General for Energy before any remuneration mechanism may be applied to cover additional needs.

Officials in Brussels have obviously identified delays concerning electricity market reforms and, as a result, opted to delay the new flexibility remuneration mechanism’s introduction.

This delay will place even greater sustainability pressure on the country’s gas-fired electricity producers, left without CAT payments since April, and also pose a threat for the country’s energy supply security, especially amid the forthcoming winter period.

RAE, the Regulatory Authority for Energy, recently staged a public consultation process to shape the new flexibility mechanism’s details. It will be based on an annual auction procedure, as required by European law.

The plan entails offering producers three-hour-notice flexibility compensation for a maximum of 4,263 MW through one auction in 2018, not two as was initially considered.

Also, the starting remuneration price at flexibility mechanism auctions will be set at 30,000 euros per MW of output, slightly higher than the originally planned level of 25,000 euros per MW.

Hydropower and natural gas-fired electricity producers as well as Combined Heat and Power High Performance (CHP) stations will be entitled to take part in flexibility mechanism auctions. CHP units will have the right to seek payment for any output not remunerated through existing RES payment mechanisms.

Also, gas-fired electricity producing units will need to be able to run on alternative fuel (diesel) or possess natural gas reserves to be eligible for the flexibility mechanism’s auctions. This essentially means producers will need to hold additional supply contracts or be able to cover the cost of temporary LNG storage solutions, either directly or indirectly, as was proposed by DEPA, the public gas corporation.

Gas-fired producers to get less from new flexibility mechanism

Natural gas-fired electricity producers will need to share a smaller remuneration pool and accept lower prices for their output, judging by a plan for the new flexibility remuneration mechanism, now being shaped by RAE, the Regulatory Authority for Energy, following a public consultation procedure and contact with European Commission officials. The new mechanism’s plan is expected to be forwarded to the European Commission for approval next week.

HAIPP, the Hellenic Association of Independent Power Producers, locally acronymed ESAI, has already reacted against the RAE plan, expressing opposition to virtually all its aspects.

Hydropower facilities are expected to be compensated for a greater output amount through the forthcoming flexibility remuneration mechanism. It should offer hydropower units remuneration for close to 1,000 MW, up from 582 MW through the previous mechanism, which expired in April.

As a result, gas-fired electricity producers will be deprived of approximately 1,000 MW through this flexibility remuneration mechanism.

A reduced amount of 4,263 MW will be paid through the new flexibility mechanism, down from 4,994 MW covered by the previous version.

As required by European law, the mechanism will be based on an auction procedure. Starting remuneration prices for these auctions will be set at 30,000 euros per MW of output, slightly higher than the originally planned level of 25,000 euros per MW but still well under the 45,000 euros per MW starting price offered by the previous mechanism.

These conditions are expected to intensify competition at the auction, not only between the state-controlled main power utility PPC and privately owned gas-fired electricity units, but also between the privately owned facilities, themselves, when bidding downwards for the remuneration price levels they would be prepared to accept for output covering the grid’s flexibility requirements. This competition is likely to test the sustainability of certain units.

Hydropower and gas-fired electricity producers as well as Combined Heat and Power High Performance (CHP) stations will be able to take part in the flexibility mechanism’s auctions. CHP units will be entitled to seek payment for any output not remunerated through existing RES payment mechanisms.

Also, gas-fired electricity producing units will need to be able to run on alternative fuel (diesel) or possess natural gas reserves to be eligible for the flexibility mechanism’s auctions.

Flexibility mechanism’s public consultation a further delay

A decision by RAE, the Regulatory Authority for Energy, to launch a public consultation procedure this week addressing the fundamentals of Greece’s forthcoming flexibility remuneration mechanism for gas-fired power units adds further delay to the mechanism’s re-establishment, needed to reward the output of gas-fired electricity producers who have been left without a flexibility mechanism since April, when the previous model’s validity expired.

RAE is also currently engaged in discussion with European Commission authorities over the new flexibility mechanism, expected as an extension of the previous temporary CAT plan before a fixed system is eventually adopted.

RAE’s public consultation procedure, based on a flexibility study conducted by IPTO, Greece’s power grid operator, is expected to last a fortnight. A finalized proposal will then be forwarded to the European Commission for approval.

According to sources, the RAE plan is expected to leave certain issues open, including an option for one or two flexibility products to be remunerated through the temporary CAT system, as well as the terms defining which technologies provide flexibility to the grid.

One thing for certain is that the new flexibility mechanism will be offered to producers through auction procedures. An upper limit will also be set at the auctions at a level well below the current level of 45,000 euros per MWh.

Sources have also infomed that RAE’s proposal will not include terms satisfying the European Commission’s insistence for the inclusion of a demand response feature in the temporary mechanism.

RAE attributes this decision to two main factors. Firstly, the authority believes that, in practical terms, a mechanism with a demand response feature will not be able to be implemented. The other reason is that the incorporation of a demand response feature to the mechanism will further delay its arrival and ultimately deprive the temporary CAT system of ever getting off the ground.

 

Elpedison posts losses, delayed flexibility mechanism cited

ELPE, the Hellenic Petroleum group, may have announced record profit figures yesterday but a closer look at the results does hide one important and unfavorable development, the performance of Elpedison, an associated company in which ELPE holds a 50 percent stake, which incurred losses and presented a reduced energy production level.

Elpedison’s EBITDA registered at €1m in 2Q17, down from six million euros a year earlier, while its EBIT stood at a loss of six million euros. Company officials, in comments offered to analysts, cited the delayed re-establishment of the flexibility remuneration mechanism for gas-fired units as the key reason affecting its electricity division.

This cannot be viewed as an isolated incident as all other independent electricity producers are also being affected by the flexibility remuneration mechanism’s delayed re-establishment.

Market officials have expressed concerns that the transitional mechanism, whose adoption has already been delayed, will take longer to implement. RAE, the Regulatory Authority for Energy, which still appears a long way off from sending its mechanism plan to the European Commission for approval, has contributed to the problem.

According to energypress sources, a public consultation procedure has been planned for the first half of September as a means of examining the views of interested parties. The sources added that RAE will not present a full and  completed plan for its upcoming public consultation procdure.

Despite the obstacles, Elpedison did manage to increase its electricity production in the first quarter, which was enough to deliver a 14 percent overall increase in the first half. Second-quarter electricity production at Elpedison fell to 464,000 MWh from 540,000 MWh.

From a wider perspective, the country’s gas-fired electricity units are contributing to the grid for longer hours, compared to the past, but being deprived of CAT payments, which is affecting their operating profits and sustainability.

 

 

Transitional flexibility mechanism acquiring shape

Greece’s transitional flexibility mechanism proposal, currently being reviewed by RAE, the the Regulatory Authority for Energy, and likely to be finalized within the next few days, is acquiring shape.

Following up on European Commission advice, the authority has requested and received additional details from, IPTO, the power grid operator, for two models to be proposed.

The first of these, offering producers three hours notice, will require roughly 1,600 MW. The second, giving producers a one-hour notice, will require a capacity of between 2,500 and 2,600 MW.

According to sources, IPTO has not ruled out either of these two products but has shown a preference for the latter, believing it could be implemented with greater ease and prove  more functional.

RAE now needs to decide whether it will consult market officials before announcing its finalized proposal or directly deliver a decision to the energy ministry. If it chooses the latter, it remains to be seen if this decision will only concern the first of the two models, used in the past, or both.

The transitional flexibility mechanism needs to be delivered to the European Commission by September, along with pre-notification of a plan for a permanent mechanism.

The country’s previous mechanism expired in April, leaving electricity producers without CAT payments for their output.