flexibility mechanism

Elpedison posts losses, delayed flexibility mechanism cited

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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

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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.

Suppliers left with growing coffers in absence of new CATs

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The country’s electricity suppliers have found themselves with unlikely coffers containing accumulating sums expected to eventually reach a grand total of 170 million euros as a result of a delay in the introduction of a new transitional flexibility mechanism.

Once this mechanism – rewarding producers for flexibility offered to the grid – is up and running, the accumulating amounts held by electricity suppliers will need to be relayed to electricity producers.

Electricity suppliers, who are continuing to collect these amounts as surcharges included on electricity bills, stopped relaying the respective amounts to electricity producers in April, when the validity of the previous transitional CAT mechanism expired.

According to recent reports, a further delay to the new mechanism’s introduction can be expected as the European Commission’s needed assessment of the Greek plan has been shifted to September. As a result, the new CATs cannot be expected to be introduced until late this year.

Energypress has estimated that the related amount held by electricity suppliers will have reached around 170 million euros by then.

These amounts are divided up for electricity producers, based on their respective market shares.

The main power utility PPC, whose retail electricity market share currently stands at 85 percent, is holding on to an equivalent share of the accumulating surcharge total, while the remainder sits in the coffers of the independent suppliers.

The Greek government would like a swift solution but officials in Brussels will seemingy require some time before endorsing the Greek plan.

 

Gradual progress being made on flexibility mechanism

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RAE, the Regulatory Authority for Energy, and IPTO, the power grid operator, are currently focusing on the technical aspects of a transitional flexibility mechanism being prepared by Greece for imminent delivery to the European Commission.

Ongoing talks between officials in Athens and Brussels are gradually providing shape to the Greek proposal. At the same time, Greek officials are seeking to make necessary legal revisions concerning the electricity market that will ensure electricity producers of payments they are entitled to.

The European Commission’s Directorate-General for Competition and Directorate-General for Energy both demand that all required electricity market legal revisions are made prior to the implementation of any capacity mechanisms covering market needs.

The revisions required in Greece primarily concern compensation methods for electricity producers offering supplementary services to the grid.

As for the country’s transitional mechanism for electricity producers offering flexibility, the Greek plan appears to be settling for two products to be offered through auctions. 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.

Local officials are pushing to have the plan endorsed by the European Commission as soon as possible as the previous mechanism expired in April, leaving electricity producers without CAT payments.

Authorities are currently examining issues such as the technical feasibility of the current plan, which production units would be entitled to participate in auctions for the two aforementioned products, and their order of entry.

The procedure determining the level of compensation for units offering flexibility to the system (new transitional CATs) will be tendered. Two pre-determined upper limits are expected to be set for the two aforementioned products. The upper limit is expected to be higher for the product giving electricity producers a one-hour notice.

 

 

Athens, Brussels working on two-type flexibility mechanism

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A proposal by local authorities for Greece’s transitional flexibility mechanism, currently being focused on by officials in Brussels and Athens, is aiming to deliver two competitive-based systems for electricity producers.

Greek officials are hoping the European Commission will finish its processing of the plan as soon as possible as the previous mechanism expired in April. IPTO, Greece’s power grid operator, which prepared a related study identifying the system’s needs, has also been called into action.

Capacity mechanisms must be auction-based according to new European Commission regulations. As part of its bailout agreement, Greece had committed itself to launching a transitional mechanism and delivering pre-notification of a permanent mechanism by the end of June.

According to a related study prepared by IPTO, Greece’s total system flexibility needs amount to approximately 4,000 MW per year for the next year or two.

It appears that RAE, the Regulatory Authority for Energy, and IPTO have settled for two flexibility products to share this 4,000 MW capacity. The first of these is designed to operate with three hours notice and manage a capacity of approximately 1,600 MW, while the other would give producers a one-hour notice for a capacity of between 2,500 and 2,600 MW.

Authorities are currently looking to determine which units will have the right to participate in the auctions for these two products, their order of entry and other details.

It is believed that natural gas-powered electricity generation units will be able to qualify for both categories.

The procedure determining the level of compensation for units offering flexibility to the system will be tendered. Two pre-determined upper limits are expected to be set for the two aforementioned products. The upper limit will be higher for product giving producers a one-hour notice.

Greece’s demand response mechanism (interruptability) plan is not included in the current transitional flexibility mechanism. The interruptability plan is being carried out as a separate procedure initiated by the energy ministry with support from IPTO.

The permanent flexibility mechanism will need to incorporate the demand response mechanism (interruptability).

RAE is currently working in conjunction with the European Commission and striving to deliver a final draft within the next three to four weeks.

RAE seeking consultant for country’s new CAT mechanism plan

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RAE, the Regulatory Authority for Energy, intends to seek guidance from a consultant for its shaping of a plan to serve as the energy ministry’s proposal to the European Commission for Greece’s fixed CAT mechanism.

The plan will need to fully address the country’s need for a fixed CAT mechanism, used to compensate electricity production units for output contributing to the grid’s adequacy and stability. The plan will also need to comply with related EU directives. These include payment provisions for units contributing to the grid’s adequacy and flexibility and energy-intensive consumers for their demand response participation.

RAE has asked IPTO, the power grid operator, to prepare a new study on the system’s flexibility needs and tools that could possibly be introduced to the electricity market’s operating framework. A previous IPTO study was delivered by the operator to RAE a couple of months ago but returned as it was considered incomplete.

Tools ensuring flexibility for the energy system are considered essential if RES production, entailing inevitable output fluctuations, is to further penetrate the market.

Besides the new fixed CAT mechanism, the energy ministry will also propose a new transitional CAT mechanism to apply as of this April, when the validity of the current transitional CAT mechanism expires. This new transitional CAT mechanism would support the system until the fixed plan is approved and adopted.

As April is just around the corner, electricity producers face the prospect of remaining unpaid for output until a new transitional CAT mechanism is introduced. The intermediate inability to be paid could challenge certain units in their struggle to remain sustainable.

A recent European Commission report on CAT mechanisms made clear to all EU member states the need for detailed presentations justifying the need for such mechanisms.