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EU energy-crisis concerns over Ukraine corridor ‘manageable’

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European fears of further energy-crisis woes that could result from the nearing end of a five-year pipeline gas transit agreement between Kyiv and Moscow for Russian gas supply to Europe via Ukraine, appear to be manageable, as long as a series of specific measures are implemented, most EU ministers responsible for energy agreed at an Energy Council in Brussels yesterday.

The bilateral agreement between Ukraine and Russia expires at the beginning of 2025. Ukraine has declared it does not intend to renew this agreement.

Further energy-crisis concerns as a consequence of this agreement’s conclusion, expected to reduce the EU’s total gas imports by 5 percent, can be prevented if EU member states speed up their development of roughly 20 LNG facilities planned from Europe’s north to south; renewable energy investments gain further momentum; energy-savings measures are continued; natural gas consumption reductions continue at the current rate; and LNG imports are increased to make up for reduced Russian gas imports, energy ministers of most EU member states agreed at the Brussels meeting.

Last year, approximately 14 bcm of Russian gas was transported through the Ukrainian corridor to countries such as Austria, Hungary and Slovakia.

Numerous EU member states achieved renewable energy production all-time highs last year. In Portugal, renewables covered 61 percent of the country’s energy needs in 2023. RES coverage of Greece’s energy needs reached 57 percent. In Germany, RES units met 52 percent of the country’s energy needs, while in Belgium the figure reached over 30 percent.

US sees American interests in PPC’s southeast Europe plans

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Greek power utility PPC’s aspirations to establish itself as a key energy market player in the Balkans and southeast Europe is being embraced by US investors who, through such a development, see further potential for interests of their own, given the excellent standing of Greek-US bilateral ties.

Protecting the region’s energy sufficiency from the threat posed by Russia remains a top priority for the US, which also sees potential for American interests in PPC’s plans to penetrate markets in the Balkans and beyond with large quantities of renewable energy.

PPC’s chief executive Giorgos Stassis made note of the power utility’s plans for southeast Europe, and also referred to the wider Three Seas Initiative in an announcement made yesterday following a meeting with Geoffrey Pyatt, US Assistant Secretary of State for Energy Resources.

The Three Seas Initiative, presently covering 13 countries between the Baltic Sea, Black Sea and Adriatic Sea, aims to attract major investments from the EU and the US in the areas of road and rail transport, economy, energy infrastructure for transmission of renewable energy, fiber optic development and everything needed to launch 5G telecommunication networks.

Greece, Austria, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia are all included in the Three Seas Initiative, while Ukraine and Moldova were granted membership rights last September.

EU support sought for half of Vertical Corridor’s €450m budgeted cost

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The Vertical Corridor, a European gas-pipeline system now planned to involve TSOs of seven countries – Greece, Bulgaria, Romania, Hungary, Slovakia, Moldova and Ukraine – will require an estimated 450 million euros in investments, energypress sources have noted.

Greek gas grid operator DESFA’s share of this sum will be minimal as a compressor station at Komotini, northeastern Greece, is all it will need to contribute to the project. All other upgrades to Greece’s gas grid, which, once completed, would enable the country to serve as a Vertical Corridor entry point, are already under development.

Officials of the six other countries participating in the project through initiatives taken by local TSOs believe that 50 percent of the project’s budgeted cost would need to be covered by EU funds if Vertical Corridor is to be materialized.

Project participants will push for political commitment from the European Commission by March as the upcoming European elections and any leadership changes would result in delays.

This issue was raised during a two-day ministerial conference staged by the Central and South-Eastern European Gas Connectivity Group (CESEC) in Athens last week, a gathering attended by European Commissioner for Energy Kadri Simson, but no indications of Brussels’ stance were offered.

Vertical Corridor project members are now expected to intensify their call to the European Commission for political support regarding the project’s development.

Following an initiative taken by Slovakia, an MoU was signed at the CESEC meeting in Athens to bring Moldova and Ukraine into the Vertical Corridor project.

Besides TSOs from the seven participating countries, Gastrade, a consortium established by the Copelouzos group for the imminent Alexandroupoli FSRU at Greece’s northeastern port of Alexandroupoli, and ICGB, the consortium behind the Greek-Bulgarian IGB gas pipeline, are also involved in the Vertical Corridor initiative.

Gastrade Alexandroupoli FSRU anchors for testing, launch

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The Alexandroupoli FSRU, a floating natural gas liquefaction and storage unit to be installed at the country’s northeastern port of Alexandroupoli by Gastrade, a consortium established by the Copelouzos group for the project’s development and operation, has just entered the Thracian Sea and anchored after setting sail November 26 from Singapore’s Seatrium shipyard, where the unit was developed over a period of nearly ten months.

The FSRU’s arrival to its permanent anchorage marks the completion of a project of major importance for the national and local economies.

In the coming days, the FSRU will be moored through a twelve-point mooring system before being connected to a high-pressure subsea and onshore gas transmission pipeline, which, once operational, will deliver gas to the Greek gas network and, subsequently, consumers in Greece, Bulgaria, Romania, North Macedonia, Serbia, Moldova, Ukraine, Hungary and Slovakia.

The FSRU’s commercial launch is planned for the first quarter of 2024, once testing has been completed. The unit will offer a 5.5-bcm annual liquefaction capacity.

 

Wider interest for Greece-to-Germany hydrogen pipeline

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Greek gas grid operator DESFA and operators in Bulgaria, Romania, Hungary, Slovakia and the Czech Republic are interested in developing a hydrogen pipeline running from Greece to Germany via these countries and intend to sign a Memorandum of Agreement early in the new year, energypress sources have informed.

Though the initial idea emerged in Germany and has been encouraged by the German system operator, it is also compatible with broader plans and initiatives undertaken by DESFA, particularly its staging of a market test for an upgrade of Greece’s national gas transmission system that would also serve future hydrogen transmission needs.

The prospect of a vertical hydrogen corridor has been embraced by all Balkan countries, as highlighted by the results of a work group staged in September and those of ensuing meetings.

The Greek gas grid operator is in constant communication with neighboring operators and operators of the wider European region as it is determined to take on an active role in regional developments, especially ones concerning the construction of a hydrogen network serving the continent, sources noted.

Germany, it is worth noting, is set to become the largest – by far – hydrogen import market in Europe in the coming decades, with plans to buy around 70 percent of the hydrogen needed to meet its targets.

EU reaches agreement on electricity market reforms

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Germany has taken a step back permitting France to use state subsidies to fund its nuclear power plants, a development that has enabled EU member states to establish a wider agreement on electricity market reforms.

As part of the new EU rules, governments will be free to use funding structures known as contracts for difference (CfD). These set a minimum price guarantee for electricity suppliers, as well as a price ceiling, above which the state can recover any revenue.

EU member states backed the reforms almost unanimously at yesterday’s EU energy council, Hungary being the only member state to vote against the electricity market revisions.

It was agreed that CfD contracts will be mandatory, with certain exceptions, when public funds are used in long-term contracts.

Also, CfDs will be used for electricity generation investments using photovoltaic, geothermal, hydro and nuclear technologies, in order to provide predictability and stability.

The EU energy council agreed to provide flexibility in how member states can distribute revenues generated by CfD contracts. As a result,  these revenues will be able to be distributed to consumers and also to finance mechanisms reducing electricity costs.

CfD regulations will be implemented following a three-year transitional period for all electricity production sectors except offshore wind farms, to be given a five-year transitional period.

EU ministers have been negotiating reforms to the bloc’s electricity market for months, the objective being to offer RES developers better investment signals and secure consistent electricity supply to prevent price spikes.

DEPA Commercial tender soon for PV parks totaling 495 MW

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Gas company DEPA Commercial aims to announce, by the end of the year, a tender for the design, procurement and development of its first renewable energy projects, energypress sources have informed.

The tender will concern two projects totaling 495 MW, most of this capacity, 400 MW, for solar energy farms in Kozani, northern Greece, plus 95 MW for solar energy farms in Viotia, slightly northwest of the wider Athens area.

DEPA Commercial, which has shaped a new company strategy striving for vertical integration by also becoming an electricity producer, last year acquired New Spesconcept, holding a 222-MW RES portfolio, and North Solar, possessing a RES portfolio of 500 MW.

Besides its entry into the RES sector, with prospective solar energy projects totaling approximately 730 MW, DEPA Commercial also intends to partner with power utility PPC and the Copelouzos group in a new 840-MW combined-cycle power plant being planned for development in Komotini, northeastern Greece.

Also, DEPA Commercial, as part of its new strategy, has undertaken initiatives to expand its wholesale trading activity in foreign markets. This effort has significantly intensified over the past two years.

At present, DEPA Commercial is active in the Austrian, Hungarian, Romanian and Italian markets and has signed agreements to supply gas to Moldova and Albania.

DEPA Commercial, it should be noted, is the first Greek gas company to have become a member of the Hungarian Energy Exchange (CEEGEX).

The Hungarian market represents a pivotal gas trading hub in central Europe and is also located at the northern end of the prospective Vertical Corridor, a route running from Greece to Bulgaria, Romania and Hungary that will be created by interconnecting the transmission systems of these four countries to enable two-way transport of fuel between south and north.

Alexandroupoli FSRU on track for early-2024 launch

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Development of the Alexandroupoli FSRU at the country’s northeastern port is progressing steadily and set for an on-schedule launch by the end of January, 2024, energypress sources have informed.

Tanker conversion work being conducted for the FSRU at Singapore’s Keppel Shipyard was 87.1 percent ready at the end of August, meaning all basic equipment, including burners and gasifiers, has been installed, the sources added.

Representatives of Gastrade, the consortium established by the Copelouzos group for the development and operation of the Alexandroupoli FSRU, visited the Keppel Shipyard just days ago.  The consortium’s chief executive, Kostis Sifneos, headed the visiting group.

The consortium’s members – the Copelouzos group’s Elmina Copelouzou, Gaslog Cyprus Investments Ltd, DEPA Commercial, Bulgartransgaz and Greek gas grid operator DESFA, all holding 20 percent shares – plan to soon hold a meeting to discuss the project’s steps leading to its launch, the sources added.

The FSRU vessel is expected to be ready to set sail for Alexandroupoli in mid-November, before reaching its destination in early December.

The Alexandroupoli FSRU, to offer a 153,500-m3 LNG capacity, will be connected to Greece’s gas network via a 28-km pipeline, through which gasified LNG will be distributed to the domestic market, Bulgaria, Romania, Serbia, North Macedonia, Hungary, Moldova and Ukraine.

The project will serve as a new energy gateway promising to play a key role in the energy security and independence of Greece as well as central and southeast Europe.

PPC chief to take part in Romanian Three Seas meeting

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Greece aims to bolster its geopolitical influence in the Balkans through energy, power utility PPC’s takeover of Italian group ENEL’s Romanian subsidiary ENEL Romania being a key part of this strategy.

In addition to PPC’s takeover of ENEL Romania, Helleniq Energy recently invested in Romania and had been preceded by Mytilineos – both in renewable energy projects.

PPC’s ENEL Romania takeover has prompted an announcement from Romanian president Klaus Iohannis, who named Greece as a new member of The Three Seas, a diplomatic initiative taken by Romania’s political leadership to bring together EU member states and candidates located between the Baltic, Adriatic and Black Seas for collaboration in the fields of energy, infrastructure and the digital economy.

Austria, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Slovakia, Slovenia, and Ukraine are the other members of The Three Seas initiative.

Iohannis, Romania’s president, will host a two-day meeting in Bucharest on September 6 and 7 for talks on collaboration in these domains. Ministers and entrepreneurs representing the aforementioned countries, including PPC’s chief executive officer Giorgos Stassis, energypress sources have informed, will take part at the upcoming Bucharest meeting.

Romania has become a geopolitical focal point as a result of the country’s close proximity to war-entangled Ukraine. In addition, Bucharest has established a pivotal role as a result of its support of Ukraine in the war with Russia and Moldova’s EU membership quest. Romania has also facilitated the movement of grain across its borders.

Revised Nabucco pipeline hopes fade, Sofia drops pro-Turkish stance

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A Russian initiative to establish Turkey as a central gas hub, through a revival of a revised version of the old Nabucco project plan, as the transitional government in Bulgaria had attempted to do last spring, appears to have hit an impasse and is unlikely to progress further.

Under the leadership of Bulgarian Prime Minister Nikolai Denkov, who assumed office in June, the new government in Sofia has veered away from the pro-Turkish stance of its predecessor. Instead, it has embraced a more pro-Western orientation in the realm of energy policy.

Also, the European Commission has not shown any interest to financially support the project, dubbed Solidarity Ring.

The ambitious plan had received the backing of certain political circles in Bulgaria keen to exploit Azerbaijan President Ilham Aliyev’s intention to more-than-double his country’s gas exports to the EU from 11 to 27 bcm by 2027.

Bulgaria, Romania, Hungary and Slovakia signed an MoU in Sofia in early May, in the presence of Aliyev, for increased gas supply to central Europe via the Solidarity Ring route.

However, talks in support of this gas pipeline project have ceased, despite its supposed intention to help end Europe’s energy reliance on Russia, EU sources have informed.

Athens, along with other major international energy players, contributed to this impasse. In a letter forwarded to the European Commission in May, Athens noted the project would degrade Greece’s role on the international energy map, upgrade Turkey’s, and serve Russia’s efforts to regain access into the European market, indirectly, by supplying Russian gas as Azeri gas.

This is possible as the Solidarity Ring would bypass Greece and follow a Turkish-Bulgarian-Romanian-Hungarian-Slovakian route into central Europe, meaning Ankara could use Turk Stream, the Russian pipeline running through Turkey, to feed Solidarity Ring.

 

Greek gas hub potential now realistic, DESFA actions show

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Greece, for the first time, has shown true potential to soon establish itself as a regional gas hub and gateway for southeast Europe, judging by the results of gas grid operator DESFA’s recent auctions offering grid capacity reservations, as well as the operator’s non-binding market test for a prospective expansion of the country’s gas transmission network.

DESFA has prepared an extensive ten-year development plan that is fully aligned with the new market conditions taking shape, as well as with the company’s efforts to achieve energy-transition objectives, the operator’s administration has underlined at a news conference.

Greek gas exports increased by 15.09 percent in the first half of 2023, compared to the equivalent period last year, according to DESFA data presented at the news conference.

Also, DESFA’s non-binding market test for a prospective expansion of the country’s gas transmission network drew the participation of 27 companies, 17 of these from abroad, primarily central and southeast Europe, such as Bulgaria, Romania, Austria, Hungary, Slovakia, Germany, Cyprus, North Macedonia, as well as the USA.

Forty percent of the market test’s participants have never before been active in Greece’s natural gas market, DESFA announced.

Participants expressed interest for all the country’s gas grid entry points (Sidirokastro, Nea Mesimvria, Kipoi and Agia Triada), as well as for connections to Greece’s prospective FSRUs (Gastrade, Argo, Dioryga Gas, Elpedison).

Highlighting the Greek natural gas market’s export orientation, exports to Bulgaria totaled approximately 2.4 bcm in 2022, roughly half of Greece’s annual gas consumption last year, 4.9 bcm.

Alexandroupoli infrastructure offering regional gas-hub potential

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Gas infrastructure being planned and developed at Alexandroupoli, on the edge of northeastern Greece, offers potential to establish this provincial city as a regional gas hub in southeast Europe that will facilitate gas trade and shape regional gas prices.

Gas quantities of between 20 and 30 bcm are expected to be attracted to the region by FSRUs, gas pipelines and a vertical pipeline corridor, covering the wider region.

However, the effort to establish a gas hub in this specific region faces many challenges. Besides bringing in large gas quantities and offering competitive prices as well as high liquidity, all needed to lure players from other hubs and neighboring markets, the region also requires a major reinforcement of the transport system, along with a significant increase in the capacity of the recently launched Greek-Bulgarian IGB gas pipeline.

The absence of a gas hub in southeast Europe and the prospective accumulation of quantities up to 30 bcm in Alexandroupoli offers great potential for the provincial Greek city, as was pointed out by a leading energy ministry official during last weekend’s launch of a new power station in the area.

Attracting significant gas quantities to the location is a first step. It must be followed up by the establishment of a gas spot market in Greece, one capable of increasing interconnectivity in the southeast European market.

Greece promises to serve as an entry point for the aforementioned natural gas vertical corridor, to run through Bulgaria, Romania, Hungary, Ukraine and Moldova.

This project, to utilize existing infrastructure combined with new infrastructure, will incorporate the Trans Balkan Pipeline, which transported Russian gas to southeast Europe via Ukraine for thirty years and is now set to operate with gas flow in the opposite direction.

EastMed alliance broadens, eight countries express support

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Support for the EastMed pipeline, planned to transport natural gas from offshore Levantine Basin gas reserves in the southeast Mediterranean to Greece and further into Europe, is growing in numbers with an initial Greek-Israeli-Cypriot alliance promoting this project now joined by five additional partners, Bulgaria, Romania, Hungary, Serbia and North Macedonia.

Energy ministers representing these eight countries forwarded a letter of support for the EastMed project to the European Commissioner for Energy Kadri Simson late last week, Greece’s energy and environment minister Kostas Skrekas has told local media.

The pipeline, to be developed by IGI Poseidon SA, a 50-50% joint venture between Greek gas utility DEPA and Italian gas utility Edison, is planned to cover a 1,470-km distance.

IGI Poseidon plans to develop EastMed all the way to Italy via Cyprus, Crete, the Peloponnese, mainland Greece and Epirus, the country’s northwestern flank.

This latest move, bringing the eight energy ministers together for the joint letter, was initiated by Skrekas, Greece’s energy minister, sources informed, following an initiative taken two months earlier by his Israeli counterpart Yuval Steinitz to organize a joint virtual conference involving ministers of all eight countries.

In their letter to Simson, the EU energy commissioner, the eight ministers highlight the importance of EastMed, noting the project promises to contribute to the wider region’s energy security and offer benefits to consumers as a result of increased competition and reduced natural gas price levels.

Regional gas interconnections, including the Greek-Bulgarian IGB, Bulgarian-Serbian IBS, Bulgarian-Romanian IBR and the Romanian-Hungarian IRH would be utilized to extend EastMed’s reach, the letter notes.

Greece and North Macedonia are currently planning a new gas pipeline interconnection whose Greek segment is being promoted by gas grid operator DESFA.

Gas developments in the East Med

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The international oil companies (IOCs) are still reeling under the impact of low oil and gas prices and massive losses and asset write-offs during 2020. ExxonMobil, under increasing pressure, is considering further spending cuts and even a shake-up of its board.

The path to full recovery will be slow and at the end of it, in 2-3 years, the IOCs will be different, placing more emphasis on clean energy and renewables.

In the meanwhile, around the East Med, Egypt is forging ahead. It has signed a new exploration agreement with Shell for an offshore block in the Red Sea. This is in addition to the 22 agreements signed during 2020 that included major IOCs such as ExxonMobil, Chevron, Shell, BP, Eni and Total. Moreover, EGPC and EGAS are planning to offer onshore and offshore exploration blocks for bidding in February.

This continuing activity led to the discovery of 47 oil and 15 natural gas fields in 2020, 13% more than in 2019, despite Covid-19.

Tareq El-Molla, Egypt’s petroleum minister, signaled earlier this month Egypt’s intention to expand its petrochemicals sector to take advantage of the country’s expanding hydrocarbon resources. Egypt has updated its petrochemical national plan until 2023 to meet the increasing prospects in this industry.

LNG exports

Egypt has also benefited from the recent increase in LNG prices, resuming exports from its liquefaction plant at Idku, with most exports going to China, India and Turkey. The country is also ready to resume exports from its second liquefaction plant at Damietta starting end February. This has been lying idle since 2012 due to disputes that have now been resolved.

LNG exports will mainly utilize surplus gas from the Zohr gasfield and possibly imports from Israel, should prices allow it.

In fact, the resumption of LNG exports from Idku relieved some of the pressure on Egypt’s gas market, which is in oversupply partly due to impact of the pandemic, but also due to falling gas demand in Egypt’s power sector and growth in renewable energy.

El-Molla said that Egypt is planning a revival of its LNG exports. But this depends greatly on what happens to global markets and prices.

The International Energy Agency (IEA) said that the Asian LNG demand and price spike in January was a short-term phenomenon and it is not an indicator that global demand will rebound in 2021. The IEA expects only a small recovery in global gas demand this year, after the decline in 2020, partly due to the pandemic. But given ongoing concerns over the pandemic, the rate of gas demand growth will remain uncertain. The IEA said the longer-term future of LNG markets remains challenging.

Gas from Israel

Chevron – having acquired Noble Energy and its interests in the region last year – with Delek and their partners in Israel’s Leviathan and Tamar gasfields, signed an agreement to invest $235million in a new subsea pipeline, expanding existing facilities. According to an announcement by Delek, the pipeline will connect facilities at Israeli city Ashod to the EMG pipeline at Ashkelon, enabling Chevron and its partners to increase gas exports to Egypt to as much as 7billion cubic meters annually (bcm/yr).

The partners signed agreements last year to export as much as 85bcm/yr gas to Egypt over a 15 year period. Gas supplies from Israel to Egypt started in January last year.

It is not clear at this stage if new agreements will be reached to fully utilize the increased export capacity from Israel to Egypt, but given Egypt’s gas oversupply this may not be likely.

These developments, though, show the vulnerability of Cyprus and the weakness of relying on trilateral alliances with Egypt and Israel for its gas exports.

EastMed gas pipeline

This is being kept alive by regional politicians. Only this week, Greece, Cyprus, Israel, Bulgaria, Hungary and Serbia confirmed their support for the EastMed gas pipeline.

While such developments are good politically, bringing like-minded countries around the East Med closer together, they are not sufficient to advance the project. This requires private investment and buyers of the gas in Europe. None of these is forthcoming, because the project is not commercially viable. By the time the gas arrives in Europe it will be too expensive to compete with existing, much cheaper, supplies.

Europe is also moving away from gas and from new gas pipeline projects. Catharina Sikow Magny, Director DG Energy European Commission (EC), covered this at the European Gas Virtual conference on 28 January. Answering the question how much natural gas will the EU need in the future, she said ZERO. She was emphatic that with the EU committed to net zero emissions by 2050, by then there will be zero unabated gas consumed in Europe. In addition, with the EU having increased the emissions reduction target from 40% to 55% by 2030, the use of gas in Europe will be decreasing in order to meet the 2030 and 2050 climate targets. She said that ongoing natural gas projects are expected to be completed by 2022 – with no more needed after that.

With exports to global markets becoming increasingly difficult, there are other regional options to make use of the gas discovered so far around the East Med, including power generation in support of intermittent renewables and petrochemicals, as Egypt is doing. The newly constituted East Med Gas Forum (EMGF) should place these at the heart of its agenda.

What about Cyprus?

Hydrocarbon exploration activities around Cyprus are at a standstill, partly due to the continuing impact of Covid-19, but also due to the dire state of the IOCs and the challenges being faced by the natural gas industry in general.

This lack of activity in resuming offshore exploration may be a blessing, taking the heat off hydrocarbons, while priorities shift to discussions to resolve the Cyprus problem and the Greece-Turkey maritime disputes.

Dr Charles Ellinas, @CharlesEllinas

Senior Fellow

Global Energy Center

Atlantic Council

3 February, 2021

 

Greece, Israel eyeing broader alliance for Balkans, central Europe

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The Greek-Israeli energy alliance is broadening its scope by aiming for the establishment of a Greek gateway to facilitate Israeli gas supply to the Balkan region and, by extension, central Europe.

This objective, part of strong diplomatic relations between the two countries in energy, was confirmed during a recent virtual meeting between Greece’s newly appointed energy minister Kostas Skrekas and his Israeli counterpart Yuval Steinitz.

Their bilateral talks will be followed up by broader meeting today to involve the energy ministers of Greece, Israel, Cyprus, Serbia, Bulgaria, Romania, North Macedonia and Hungary.

The participating officials will seek to lay the foundations for a closer energy alliance that would facilitate distribution from Israel’s Leviathan gas field via alternate routes – the Alexandroupoli FSRU and the IGP – to soon be offered by Greece.

The aforementioned Balkan and central European countries are extremely keen on securing alternative supply routes, diplomatic sources informed.

Much work is needed by Israel and Greece to establish energy alliances with Balkan countries, but a first step will seemingly be taken today.

Wholesale power prices rise, perilous times for suppliers

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Increased wholesale electricity prices in Europe, still only partially reflected in the Greek market, are increasing the challenges faced by local suppliers.

CO2 emission right costs have risen over the past three months, especially in May, while fuel and natural gas price levels have also climbed to remain at elevated levels.

These developments have sharply increased prices of electricity futures markets contracts both in Germany, guiding European developments, and in regional markets impacting Greece, namely Hungary, which shapes prices in Balkan countries interconnected with Greece, as well as Italy, a key market also interconnected with the Greek grid.

In Germany, wholesale electricity prices rose by approximately 10 euros per MWh in a month. In Italy, current electricity futures contracts concerning delivery in July are being established at levels of around 75 euros per MWh.

In Hungary, energy supply term contracts covering all of 2019 (CAL-19 contracts) rose by 6.3 percent in May, from 47.45 euros per MWh to 50.78 euros per MWh. Compared to price levels in March, the cost of CAL -19 contracts has increase by 22 percent, from 41.65 euros per MWh to 50.78 euros per MWh.

These regional price increases are already impacting the Greek market, where the System Marginal Price, or wholesale price, averaged 56.33 euros per MWh in May. June contracts are being established at 59 euros euros per MWh.

Worse still for independent suppliers, the starting price at the country’s next NOME auction, next month, will be significantly increased.

Higher price levels in regional markets have made electricity exports a more attractive prospect for local traders, resulting in further upward pressure on local prices.

Given the current market conditions, lofty price levels reached at previous NOME auctions no longer look as bad, officials at independent supply firms have told energypress. Elevated NOME auction prices of 45.2 euros per MWh reached at the end of 2017 are no longer regarded as lofty and will soon be reminisced, independent supply firm officials said.

NOME auctions were introduced in Greece nearly two years ago to offer independent suppliers access to the main power utility PPC’s lower-cost lignite and hydrocarbon sources.

It remains to be seen whether independent suppliers, especially smaller players, will be able to handle these wholesale price increases as they push to penetrate the retail market. Export and trading will offer suppliers some profit opportunities but, at current wholesale price levels, most firms, including PPC, are incurring losses in the local retail supply market.

Under normal market conditions, wholesale price increases lead to higher retail prices. But this is not so in the Greek electricity market, still distorted. State-controlled PPC, the dominant player, does not set its retail prices based on cost but political decisions taken at the energy ministry, keeping electricity price levels lower than they should be.

This market distortion is affecting the ability of independent suppliers to compete and gain more respectable retail market shares as they are forced to follow PPC and keep their price offers low.

An upcoming reduction of the RES-supporting supplier surcharge will offer independent suppliers some relief, but it does not appear to be enough to offset the higher wholesale prices, while CAT payments paid by suppliers are expected to be reintroduced.