RRF funds of €195m for new Cyclades link, pivotal substation

Power grid operator IPTO’s grid interconnection plan to link the west and southern Cyclades islands with coastal Lavrio, southeast of Athens, as well as the operator’s upgrade project for its pivotal Koumoundourou high-voltage substation, including a new transmission line to Korinthos, all regarded as vitally important projects by the European Commission, stand to EU Recovery and Resilience Facility (RRF) funds totaling 195 million euros.

The RRF subsidies to be allocated to the west and southern Cyclades islands grid interconnection, seen reaching 165 million euros, will cover just under half of this project’s total cost, budgeted at 408 million euros.

The grid interconnection work will entail the development of five underground and subsea cable circuits measuring 370km in length as well as the installation of four GIS substations on the islands of Santorini, Serifos, Folegandros and Milos.

The Koumoundourou high-voltage substation upgrade stands to receive the other 30 million euros in RRF funds for the two projects.

The Koumoundourou upgrade, budgeted at 46 million euros, has been awarded to the Mytilineos group and is expected to be completed by September, 2023, according to an IPTO announcement.

Pivotal IPTO substation returning to full capacity after repair work

Power grid operator IPTO’s pivotal Koumoundourou high-voltage substation, serving the wider Athens area, will be ready to counter elevated electricity demand levels of the summer season as the installation of a new autotransformer, required following an explosion and fire at the unit in February, has been completed, enabling the facility to return to full capacity, expected within the next few days.

Since the accident, the substation has operated below full capacity, following temporary adjustments.

The Koumoundourou substation’s return to full capacity promises to reinforce the country’s grid security, especially in the Peloponnese, as the summer’s power-demand peaks draw nearer.

Besides the fire-related repair work, the Koumoundourou substation is also undergoing an overall revamp, budgeted at 46 million euros. Work on this upgrade, scheduled to require a total of two and a half years to complete, is expected to be completed in September, 2023.

Once completed, the upgrade will enable the substation to take on a significant proportion of the electricity load needed in the wider Athens area, while it will also serve as the connection point for the Crete-Athens grid interconnection, expected to be completed within 2023.

The substation will also serve as a terminal for the Eastern Corridor (400 kV) from the Peloponnese to the mainland, whose completion is expected in 2024.

 

IPTO set to offer connection terms for PV group applications

Power grid operator IPTO is set to start issuing finalized connection term offers to small-scale PV group applicants after recently completing its assessment of applications submitted.

Late last week, the operator announced a list of group applications that fulfilled requirements by December 31, 2020, in preparation, according to energypress sources, for the issuance of a first batch of finalized connection term offers towards the end of June or early July.

This will place small-scale PV group applicants in line for operator connections.

As was noted by IPTO deputy Giannis Margaris two months ago, over 3,000 small-scale PV group applications representing approximately 3 GW were submitted to the operator for appraisal, a procedure that includes inspections for overlapping property issues concerning project sites.

Revisions were introduced to enable small-scale PV investors to submit group applications as a means of sidestepping distribution network saturation issues through direct connections to the transmission network, made possible by the installation of new substations to be funded by investors.

Small-scale PV group applications must represent a total capacity of at least 8 MW in order to be submitted to IPTO, according to the rule revisions.

 

PPC reducing debt to operators, but court cases still pending

Power utility PPC’s accumulated debt owed to market operators, which, along with amounts owed to contractors, exceeded 900 million euros two years ago, is now being brought under control, reduced to between 40 and 60 percent of previous levels on the strength of solid operating profit figures and improved electricity-bill collection records.

PPC is achieving a continual reduction of debt owed to power grid operator IPTO, distribution network operator DEDDIE/HEDNO, and RES market operator DAPEEP.

The power utility’s net debt owed to IPTO has now fallen to 50 million euros, from 140 million euros in December, 2019.

The corporation has been just as successful in its reduction of debt owed to DEDDIE/HEDNO, down 60 percent, but its reduction of debt owed to DAPEEP has been slightly milder, dropping nearly 40 percent, to 170 million euros from 270 million euros.

The debt figures may be improving but some time will be needed before the bigger picture is entirely cleared up as PPC faces a series of law suits filed by operators. The power utility has appealed many of these, but court hearings remain pending.

 

Wholesale prices up nearly 20% in first 5 months, retail levels impacted

Wholesale electricity market prices rose by nearly 20 percent in the first five months of the year, official market data provided by power grid operator IPTO has shown.

These wholesale price increases directly impact retail price levels for consumers who have opted for floating-tariff supply agreements linked to wholesale price-related clauses.

The overall cost of electricity in the wholesale market rose 19.1 percent between January and May, from 64.111 euros per MWh to 76.373 euros per MWh.

Electricity prices in the day-ahead and intraday markets rose by 14.1 percent between January and May, from 55.612 euros per MWh to 63.499 euros per MWh, the data showed.

Discrepancy cost nearly doubled during this period, rising from 0.836 euros per MWh to 1.643 euros per MWh.

Power utility PPC, which, until now, has incorporated CO2-price clauses into its electricity bills, has announced it will adopt wholesale price-related clauses in August.

IPTO factors Balkans into adequacy report calculations

IPTO is taking into account current and potential grid capacities of neighboring Balkan markets for its preparation of an updated adequacy report, a study to serve as a base for various new plans, including the shaping of Greece’s requests for a Capacity Remuneration Mechanism (CRM) and Strategic Reserve, an updated National Energy and Climate Plan (NECP), and private-sector investment decisions for new natural gas-fired power stations.

IPTO is also factoring into its adequacy report calculations the heightened investment interest and activity in Greece’s RES sector, energy storage, now that this domain appears set for initiation, as well as the introduction of new elements to mechanisms and energy exchange markets, including the demand response system, remunerating major-scale electricity consumers when the operator asks them to shift their energy usage or stop consumption during high-demand peak hours, so as to balance the electricity system’s needs.

Electricity grids in the Balkans are being revamped, creating unprecedented electricity export opportunities for Greek exporters. The EU’s intention to impose a carbon border tax on electricity imports from non-EU countries adds to Greece’s export potential to the Balkans, as well as more new natural gas-fired power stations than the quantity included in the current NECP.

Given the developments, Greece now probably needs four new natural gas-fired power stations, including power utility PPC’s Ptolemaida V.

Private-sector firms are pushing ahead their plans for the development of such units, as was highlighted by a related joint announcement last Friday from GEK Terna and Motor Oil.

 

RAE scrutinizing greater lignite use, IPTO may need to clarify

RAE, the Regulatory Authority for Energy, is considering to seek clarification from power grid operator IPTO on a series of electricity market issues, including differing formations adopted for the day-ahead and ISP markets.

A first presentation, last week, of the target model’s new wholesale market, energy exchange market results and the energy mix has shown an increase in the use of lignite-fired power stations, despite their higher cost.

Power utility PPC’s lignite-fired power stations are still deemed necessary for electricity supply security, even when capacity levels are sufficient, to counter instability issues at the grid’s northern section, where interconnections facilitate electricity exports.

The use of lignite-fired power stations, such as Agios Dimitrios, Megalopoli IV and Meliti, despite the higher cost of CO2 emission rights, has significantly increased energy costs for suppliers and industry.

Also, when IPTO issues grid distribution orders to lignite-fired power stations, the grid-contribution programs of other units are consequently canceled out and remunerated by the energy exchange, even for energy amounts not contributed to the grid.

Meanwhile, lignite-fired power stations are remunerated through the balancing market at price levels that usually exceed 100 euros per MWh.

RAE’s intervention is intended to ensure the electricity market’s smooth functioning and efficiency, for the benefit of participants and consumers.

Lignite-fired power stations still operating despite elevated cost

Despite their increased operational cost, power utility PPC’s lignite-fired power stations remain essential, on an occasional basis, to ensure electricity supply security by countering various concerns that may arise, including voltage instability at the grid’s northern section.

Power grid operator IPTO needed to bring into the system one or two lignite-fired power stations throughout most of May, despite the high cost entailed, which would normally keep these units sidelined.

No lignite-fired power stations needed to be used for grid sufficiency on May 13 and 16, as is also the case for today.

The northern section of the country’s grid can be susceptible to voltage instability as a result of the international grid interconnections in the wider area, facilitating exports.

Until recently, northern Greece’s west Macedonia region was the country’s energy epicenter, courtesy of PPC’s extensive lignite portfolio in the area.

Regular use of higher-cost lignite-fired generation has increased price levels in the day-ahead and balancing markets, which, by extension, is increasing costs for suppliers.

PPC’s increased CO2 emissions, when the utility’s lignite-fired power stations are brought into operation, is also directly impacting industrial consumers, who are burdened by the resulting additional cost, passed on by the utility.

CO2 costs have risen sharply of late as a result of rallying carbon emission right costs.

Electricity demand up 7.5% in April, PPC market share steady

Electricity demand registered a sharp 7.5 percent rise in April, compared to the equivalent month a year earlier, driven by the government’s recent decision to ease lockdown measures, power grid operator IPTO’s latest monthly report has shown.

The relaxation of lockdown measures in Greece prompted a milder 1.5 percent increase in electricity demand in March, year-on-year.

On the contrary, electricity demand fell by 2.5 percent over the four-month period covering January to April, compared to the equivalent period a year earlier, according to the IPTO report.

This decline in electricity demand was approximately half the 5.1 percent drop, year-on-year, for the three-month period between January and March.

Electricity generation rose by 24.6 percent in April, compared to the same month a year earlier, according to the IPTO report.

Natural gas-fired power stations led the way, boosting their production by 52.4 percent, followed by lignite-fired power stations, whose output rose by 21.8 percent, RES units, increasing their generation by 5.8 percent and hydropower stations, which registered a 3.1 percent increase.

In terms of energy-mix shares, the pivotal role of natural gas-fired generation was once again made clear. It captured a 43 percent share of the energy mix in April, followed by the RES sector, capturing 36 percent, lignite with 11 percent, hydropower with 6 percent and electricity imports at 5 percent.

Power utility PPC’s share of electricity demand remained virtually unchanged for a third successive month in April, registering 65 percent, following a 64.8 percent share in March and 65.1 percent share in February.

Protergia, a member of the Mytilineos group, the frontrunner among the independent suppliers, was the only company to increase its market share in April. It rose to 8.2 percent share from 7.95 percent a month earlier.

Heron’s share was steady at 6.3 percent from 6.29 percent in March. Elpedison’s share experienced a mild drop to 4.72 percent from 4.88 percent. NRG’s share in April was unchanged at 3.99 percent, while Watt & Volt’s share slipped marginally to 2.44 percent from 2.58 percent.

IPTO to challenge RAE’s €5m fine for west corridor line delay

Power grid operator IPTO will legally challenge a 5 million-euro fine imposed by RAE, the Regulatory Authority for Energy, for delays in the development of a “west corridor” transmission line in the Peloponnese, from Patras to Megalopoli, operator sources have informed energypress.

The authority’s decision is legally baseless and does not serve interests for optimal functionality in the energy market, the sources noted.

The RAE fine imposed on IPTO encourages local reaction in general and is detrimental to the effort being made for swift development of infrastructure projects around Greece, the operator’s sources added.

IPTO has never kept concealed delays it has faced to develop a small fraction of work remaining for the west corridor’s completion as a result of resistance raised by a regional monastery in the Kalavryta area, the operator sources asserted.

As soon as legal action was taken, late last year, against this project’s completion, IPTO informed RAE in writing about the initiative’s repercussions on the development plan, the sources said.

Also, IPTO does not accept any responsibility for balancing market cost increases, which have risen since last November’s target model launch, and will support its position by providing facts and evidence to RAE as well as other Greek and European authorities, the sources told.

 

Brussels strategic reserve conditions discussed by RAE, IPTO, ministry

A new adequacy report and a new market reform plan, two conditions set by the European Commission for Greece’s adoption of a strategic reserve mechanism, have been discussed during an online meeting between RAE, the Regulatory Authority for Energy, power grid operator IPTO, and the energy ministry.

The European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, during a preceding meeting, earlier last week, with energy minister Kostas Skrekas, called for a new adequacy report, in other words, an updated study proving the country’s need for a strategic reserve mechanism to cover actual grid needs.

The Brussels official also requested a new market reform plan detailing reforms designed to intensify competition in the wholesale electricity market.

Pantelis Kapros, Professor of Energy Economics at the National Technical University of Athens, has been asked to contribute to this new market reform plan, sources informed.

Besides the strategic reserve mechanism, RAE, IPTO and energy ministry officials also discussed details on prospective power purchase agreements (PPAs) between industrial enterprises and RES producers.

Vestager, at her meeting with Skrekas, the energy minister, recommended that Greece follow the examples of PPA models adopted by other EU member states, such as Spain.

Strict schedule for Crete target model transition plan

The European Commission has offered preliminary approval, still unofficial, of a Greek proposal concerning a transitional framework for Crete’s electricity grid link with target model markets.

This development will now enable RAE, the Regulatory Authority for Energy, to conduct public consultation for a temporary plan concerning the island’s participation in the target model’s wholesale markets.

RAE is expected to begin the public consultation procedure this week, sources said. It will feature a strict road map for the model’s implementation, from forthcoming steps all the way to legislation.

The plan’s framework will include two alternative methods for the island’s electricity supply transactions through a small-scale interconnection, with the Peloponnese.

The solution to be selected will greatly depend on the results of the public consultation process.

As previously reported by energypress, a transitional framework is necessary as Crete’s electricity needs will only be partially covered, at a level of about 30 percent, through the small-scale interconnection.

The framework will expire once the island’s full-scale grid interconnection, all the way to Athens, begins operating in 2023.

Key Performance Indicators to be introduced for IPTO earnings

Key Performance Indicators (KPIs) to prompt rewards and penalties determining earnings will be introduced for power grid operator IPTO, abolishing a current formula guaranteeing the operator’s earnings.

The KPI plan, expected to soon be forwarded for public consultation, applies for Europe’s major operators.

It will be used to assess services such as transmission line availability, loading forecast accuracy, and RES forecast accuracy.

The KPI system also promises to bring about changes for projects of major importance, among them the Crete and Cyclades grid interconnections.

Until now, the operator’s bonus arrangement for these projects was set at 2.5 percent of WACC over a period of up to 12 years, but, under the new system, the bonus rate will be trimmed to 2 percent, while the application period will be limited to between four and seven years instead of 12.

Target model tweaks to determine end of balancing market measures

The amount of time still needed before RAE, the Regulatory Authority for Energy, can lift balancing market measures designed to contain related surcharge costs by limiting offers of market participants will depend on the progress of a road map for structural interventions to the target model.

The road map, being prepared by RAE in collaboration with power grid operator IPTO, is expected to be ready within June.

It will offer a time frame for the implementation of all structural interventions planned and needed to promote rational behavior in wholesale electricity markets.

Restrictive measures were introduced on February 13 for an anticipated three-month period.

 

PPC lignite electricity packages through futures market

State-controlled power utility PPC will soon begin offering rival suppliers lignite-generated electricity packages through the target model’s futures market, energy minister Kostas Skrekas and the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, have agreed at a meeting yesterday.

Vestager, during the session, also made clear that the balancing cost of a mechanism concerning power purchase agreements (PPAs) between industrial producers and RES producers cannot be subsidized, but, instead, will need to be aligned with terms that apply for other EU member states.

Athens expects to submit its PPA plan to Brussels in June for approval.

Also next month, the government plans to submit its support framework proposal for energy storage units.

As for the country’s Strategic Reserve Mechanism, the European Commission’s deputy requested a new proposal from Athens, in line with new EU directives.

Under the Strategic Reserve Mechanism, PPC and all other electricity producers opting to withdraw units from the market for back-up services, would be remunerated for sidelining these units for periods determined by IPTO, the power grid operator.

Vestager stressed that the country’s Strategic Reserve Mechanism cannot coincide with the wider Capacity Remuneration Mechanism (CRM).

The Brussels deputy also pointed out that a compensation request made by Greece for PPC’s redevelopment of lignite areas, part of the decarbonization effort, is legally baseless and cannot be pursued further.

PPC power plant in northeast to rely on new Bulgaria, Turkey grid links

New transboundary grid interconnections with Bulgaria and Turkey will seemingly play a pivotal role in the sustainability of a new 665-MW gas-fueled power station planned by power utility PPC in Komotini, northeastern Greece, judging by estimates at RAE, the Regulatory Authority for Energy.

The authority has already issued a production license for this unit, which PPC aims to launch by the end of 2024, despite the fact that five other investments plans for new gas-fueled power stations, promising additional total capacity of 3.2 GW, already exist, including a Mytilineos group unit already under construction.

According to a related report submitted by RAE to Greek Parliament, the National Energy and Climate Plan foresees an increase in installed natural gas-fueled power stations from 5.2 GW in 2020 to 6.9 GW by 2025, a 1.7 GW increase.

Given these figures, RAE presumably considers that the development of all planned units will not be possible. Instead, market forces will determine which of the investors will be able to proceed with their plans, based on individual company feasibility studies.

Power grid operator IPTO’s ten-year development plan covering 2021 to 2030, expected to soon be approved by RAE, includes projects designed to bolster the grid in the east Macedonia and Thrace regions of northeastern Greece, and also reinforce the grid interconnections of these regions with the North Aegean islands, Bulgaria and Turkey.

Energy investment activity rising, focus on RES projects, energy transition

Investment activity in the domestic energy sector is rising with major deals being negotiated, the main focus being on renewables and the energy transition, participants at yesterday’s Delphi Economic Forum made clear.

This activity promises significant growth for all RES technologies, even the more innovative, such as offshore wind farms and energy storage units.

Major energy players are moving to capitalize on opportunities that are emerging as the country pushes ahead with its decarbonization effort. Also, investor talks concerning domestic and international partnerships, the latter promising to secure expertise in sectors such as offshore wind farms, are in progress.

Power utility PPC, moving ahead with RES investments, aims to have launched projects with a total capacity of 1.5 GW by 2023. The utility’s redevelopment plan for the country’s two lignite-dependent regions, Ptolemaida, in the north, and Megalopoli, in the Peloponnese, is in progress.

PPC plans to invest 3.4 billion euros on RES project development in these regions, and an upgrade of their distribution networks, Konstantinos Mavros, chief executive of PPC Renewables, a PPC subsidiary, told the forum.

PPC is also expected to establish partnerships facilitating its entry into the offshore wind market. In addition, the company also aims to have formed a joint venture with German power company RWE by the end of summer for development of RES projects totaling 2 GW.

Elsewhere, energy company Mytilineos is also preparing a strategic alliance with a major international group for its entry into the offshore wind farm sector.

Mytilineos is also close to completing, this year, a major post-lignite investment in natural gas-fueled electricity generation. In addition, the company plans to develop 300 MW in wind farms and 1.5 GW in solar farms over the next two years.

Furthermore, Mytilineos plans to develop 20 energy storage projects, each with 50 MW capacity, by utilizing its immense knowhow gained in this field through involvement in such projects abroad.

Hellenic Petroleum (ELPE) is preparing RES and digital transition projects and will concurrently focus efforts to reduce carbon emissions and develop more eco-friendly products, including biofuels and hydrogen.

The Copelouzos group is nearing an investment decision on the development of a natural gas-fueled power station in Alexandroupoli, northeastern Greece. A decision is expected this summer. The group is currently engaged in talks with neighboring North Macedonia’s power utility for its possible entry into this project as a minority partner.

As for networks, power grid operator IPTO has planned numerous projects as part of a ten-year investment plan worth five billion euros. The operator anticipates new RES project penetration of 17 GW, a forecast exceeding the National Energy and Climate Plan’s goals.

DEDDIE/HEDNO, the distribution network operator, has put together a 3 billion-euro investment plan for the two next regulatory periods, each four years long. Projects include network undergrounding, service upgrades and improvement, new technologies, as well as grid digitalization projects.

Network usage surcharge cut for energy-intensive consumers

Network usage surcharge revisions soon planned by RAE, the Regulatory Authority for Energy, to apply for 2021, are expected to reduce surcharge costs for industrial consumers and, on the contrary,  increase those of households.

Power grid operator IPTO, responding to a RAE request, has forwarded its recommendation on the matter following a related study that examined whether leeway exists to reduce network usage surcharges for high-voltage industries and energy-intensive enterprises of the medium-voltage category – consumers with annual consumption levels exceeding 13 GWh.

The IPTO study concluded that surcharges can be reduced for energy-intensive industries to levels that apply for major-scale consumers in other European countries, including Germany, France and the Netherlands.

IPTO’s guaranteed annual earnings do not change, meaning that a network usage surcharge reduction for industrial consumers will automatically prompt an increase for all other consumer categories, namely medium and low-voltage consumers.

The energy ministry is pursuing a policy aiming to reduce energy costs for the industrial sector.

Network usage costs are also expected to be revised in 2022 as IPTO is preparing a new formula to determine the distribution of surcharge costs based on latest data concerning electricity consumption shares in the high, medium and low-voltage categories. The latest data favors major-scale consumers, sources informed.

Brussels favors uniting Strategic Reserve Mechanism, CRM

The European Commission is supporting the incorporation of a grid back-up model as part of a wider Capacity Remuneration Mechanism (CRM), energypress sources have informed.

A Greek government proposal for a separate Strategic Reserve Mechanism remunerating units made available by electricity producers for grid back-up services – an idea that has been backed by the energy ministry for quite some time now – does not appear likely to be approved by the European Commission, latest online talks between technocrats in Athens and Brussels have indicated.

Under the Strategic Reserve Mechanism, power utility PPC and all other electricity producers opting to withdraw units from the market for back-up services, would be remunerated for sidelining these units for periods determined by IPTO, the power grid operator.

Instead, the European Commission has tabled a proposal for the establishment of a single system that would include both a Capacity Remuneration Mechanism and a Strategic Reserve Mechanism, as two distinct components, respectively remunerating units active in the market and those maintained as reserves and used only when IPTO requires their services.

Athens and Brussels technocrats are holding these mechanism talks ahead of a forthcoming visit to Athens by the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, scheduled for May 13.

Unlocking Greece’s offshore wind potential – Challenges, opportunities

Greece’s attempts to develop its untapped offshore wind potential have stalled in the past, but renewed investor interest and government commitment to set up a sound regulatory framework has strengthened its prospects.

By Dimitris Assimakis, Partner, and Minas Kitsilis, Senior Associate, Reed Smith.”

Introduction

Since 2006, Greece has taken several different approaches to the development of offshore wind projects. So far, these policy measures have had few concrete results. Given the present ambitious national energy and climate plan for the period up to 2030, dictating at least a twofold increase of the existing renewable energy capacity, the immediate necessity for new capacity due to the government’s decision to cease the operation of all existing lignite-fired power plants by 2023, as well as the existence of certain impediments to the further development of onshore wind farms, such as the availability of land, the pressure from other activities, such as tourism, and the necessity for the considerable expansion or reinforcement of the grid, offshore wind is expected to start playing an important role in the country’s pursuit of cost-effective and efficient renewable energy prospects.

For several years now other EU coastal countries with significant sea fronts have developed offshore wind projects and so this could certainly be a successful approach for the country with the most extensive coastline among all Mediterranean countries and one of the highest offshore wind potential in the region.

Therefore, aside from certain technical challenges (e.g. steep sea-bed drop-off around mainland Greece and around most of the Greek islands) and foreign affairs policy issues (e.g. territorial disputes in the Aegean Sea), a clear national regulatory framework, which adequately addresses spatial planning, licensing, grid interconnection and economic support issues, is also required in order for offshore wind technology to deliver its significant potentials in the country’s power generation mix.

Ongoing structured public discussions with interested investors and stakeholders as well as recent policy statements from the Greek Ministry of Environment and Energy are expected to result in an offshore wind-specific framework within this year that will enable the exploitation of this valuable renewable energy source also in Greece. Already, major international market players such as Ocean Winds (EDPR and Engie) in cooperation with Terna Energy, the largest renewable power producer in Greece, Iberdrola, Copenhagen Infrastructure Partners and Equinor are actively involved in these discussions, while reportedly other international investors such as Blue Float Energy and Innogy are closely following the developments in the sector. Moreover, local market players such as PPC Renewables, the renewables arm of Public Power Corporation (Greece’s largest power producer and supplier), Copelouzos group and RF Energy are actively engaged in this process. These deliberations are conducted within a very positive momentum for the offshore wind sector, following the recent release of the EU Strategy on Offshore Renewable Energy and the great technological developments in the sector, especially with respect to the imminent commercialisation of large-scale floating wind projects, which seem to be the most proper offshore wind technology for Greece given the depth of its territorial waters.

Past approaches stalled

Until mid-2010 the generally applicable licensing scheme at the initiative of interested investors was also applicable for offshore wind projects’ development, licensing, spatial planning and economic support against transparent and objective criteria and a regulated feed-in tariff through a standardised long term (20 years) power purchase agreement with the energy market operator as offtaker and dispatch priority for the power produced. In this context a large number of licence applications for offshore wind projects were filed with the competent Regulatory Authority for Energy in Greece (RAE).

However, only two fixed-bottom offshore projects were licensed by RAE in 2012, one of an approximately 500 MW capacity offshore the island of Lemnos in the north Aegean Sea and another one of 216 MW capacity offshore the port of  Alexandroupolis in the Thracian Sea. On the other hand, most of the licence applications filed within the period are still pending assessment from RAE with unclear further development options in anticipation of the new offshore wind-specific framework.

Subsequently, in mid-2010 Greece introduced a special centralised planning scheme for offshore wind projects to be rolled out at the initiative of the jointly competent Ministers of finance and economy, maritime affairs, foreign affairs, national defence, culture, tourism, environment and energy by virtue of a new provision introduced into the Renewables Law 3468/2006 (i.e. Article 6A), which rendered the previous open licensing scheme inapplicable for offshore wind projects.

That rather unclear approach entailed the strategic environmental assessment (SEA) of potential offshore project sites before the respective projects were licensed by the Minister of Environment and Energy, instead of RAE, and before they were auctioned off for construction through an open public tender process (public works procurement process) against economic exploitation by the successful bidder during the concession period; presumably through some long term power purchase agreement with the energy market operator as offtaker against an agreed feed-in tariff and dispatch priority. Environmental impact assessment (EIA) and further site planning, installation and construction works licensing until the operation period (inclusive) would follow the generally applicable legislation for renewables, except for some special provisions of law for the concession of sea areas in favour of renewable energy projects that would be anyways addressed as above.

This framework also entailed a number of implementing ministerial decisions and presidential decrees that were never adopted as this approach was never actually pursued in spite of a SEA study commissioned to this end by the Centre for Renewable Energy Sources in Greece (CRES) and presented in September 2015.

New approach required │ key issues

Licensing framework – recent developments & challenges ahead

The recent review of the Environmental Licensing Law 4014/2011 in May 2020 (i.e. by virtue of Law 4685/2020) raised certain hopes at it was aimed at simplifying and expediting the environmental licensing of projects of any type, including renewable energy projects, as well as at simplifying the first licensing milestone for renewable energy projects before RAE. Offshore wind projects are qualified as ‘special renewable energy projects’ and may benefit from the above simplified licensing framework as soon as an offshore wind-specific framework is adopted. In effect, this licensing framework reinstates the previous licensing scheme at the initiative of interested investors but ultimately, fails to provide any coherent legal certainty as it does not explicitly repeal the rather problematic provision of Article 6A of Renewables Law 3468/2006 mentioned above.

So although the general environmental licensing and the RES specific licensing framework were improved through the adoption of Law 4685/2020, there was not actually any real value for the offshore wind sector from this legislative process, since two parallel and apparently, inconsistent licensing regimes are currently in place although neither in full force and effect until Greece finally decides whether it will go on with a centralised or a develop-led planning system. Moreover, the licensing framework in place does not really address what will happen with the existing two electricity production licences granted as well as the various licence applications that are still pending assessment under the past licensing scheme.

Apparently, the envisaged new framework should provide for a consistent, coherent and well-structured licensing regime enabling as well the performance of any early development actions from the investors, in the sense that they should be allowed, on the basis of an exclusive right, to enter into a specific sea area in order to perform wind measurement campaigns and preliminary field surveys.

Spatial planning issues

The Special Spatial Planning Framework for Renewables of December 2008 provides for wind power in general and onshore and offshore wind power in particular. Such provisions include generally applicable criteria, limitations and exclusion zones for wind energy and special ones for onshore and offshore wind projects. However, it is commonly admitted that the said framework needs to be reviewed to account for technological developments and acquired experience in spatial planning and deployment of renewables not only in Greece but also in the EU, including current best practices.

The Ministry of Environment and Energy is already working on updating the framework but it will take some time to achieve concrete results due to the technical and SEA studies involved. In addition, it must also be compatible with the regional and other special frameworks for spatial planning that are also under review pursuant to Part A of Law 4417/2016 and most importantly, with the still pending maritime spatial planning for marine areas in Greece according to Part A of Law 4546/2018 (as per the relevant EU Directive 2014/89) for the avoidance of conflicts. An interim solution may have to be sought in this connection as otherwise neither central nor individual planning will be feasible and legally sound against a reasonable time schedule and certain target capacity for offshore wind development by 2030 and beyond.

Sovereign rights and public international law

Greece has reserved the right to exercise all its sovereign rights under Article 3 of the 1982 United Nations Convention on the Law of the Sea (UNCLOS) to expand its territorial sea beyond six (6) nautical miles, which is the current breadth thereof, up to twelve (12) nautical miles measured from baselines determined in accordance with the UNCLOS. Greece has signed and ratified the UNCLOS by virtue of Law 2321/1995. Recently, by virtue of Law 4767/2021, Greece has expanded its territorial sea to twelve (12) nautical miles in the whole of the Ionian Sea area up to the Cape Tainaron in south Peloponnese, while it is reiterated therein Greece’s sovereign rights to do the same with all other sea areas, including the Aegean Sea, being the area with the highest offshore wind potential.

However, given the historical tension between Greece and Turkey concerning the Aegean Sea, it is rather questionable whether Greece will finally decide to exercise such sovereign rights and expand its territorial sea to twelve (12) nautical miles also in the Aegean Sea, according to the UNCLOS, in the years to come. In this respect, it is reasonably expected that any development of offshore wind projects in the Aegean Sea will need to be limited within the six (6) nautical miles zone. Further, the establishment and delimitation of the Greek exclusive economic zone by means of valid and legally binding agreements with neighbouring states pursuant to the UNCLOS is still pending too, save for the recent agreements with Italy in the Ionian Sea and Egypt in part of the Mediterranean Sea south-east of the island of Crete.

Proper support scheme for offshore wind

The new support scheme for renewables in Greece introduced by virtue of Law 4414/2016 in line with the European Commission’s Guidelines on State aid for environmental protection and energy for the period 2014 – 2020 provides for operating aid to renewables through a technology-specific sliding feed-in premium (FiP) scheme for the vast majority of new projects which is added as a premium to wholesale market revenues and thus tops up their market revenues in order for the operating aid to reach an acceptable level of support measured against a technology-specific reference tariff (RT).

Aside from small scale and experimental projects, since 2017 the RTs are set through competitive bidding processes (auctions) on project basis for the two mature technologies (i.e. onshore wind and solar photovoltaic) in technology-specific and technology-neutral auctions run by RAE. In the event that the wholesale market price of a renewable technology exceeds the applicable RT, the excess is rebated to a special account for renewables kept by the RES operator and aggregator of last resort (DAPEEP) and hence the operating aid contract is a standardised two-way contract for differences (CfD) between the applicable RT (as strike price) and the producer’s revenues from the wholesale electricity market.

The auctions scheme is expected to extend beyond 2020, likely up to 2024 and for a certain overall capacity threshold not in excess of 2.1 GW, in accordance with the relevant statements made by the Minister of Environment and Energy in mid-November 2020.  However, technology-specific auctions for offshore wind or technology-neutral auctions including offshore wind are not likely to be feasible for Greece in this time schedule. In the meantime, previous auctions for renewable electricity have resulted in applicable RTs for onshore wind and solar photovoltaic projects below wholesale market prices for certain time periods. Therefore, alternative revenue structures involving corporate renewable power purchase agreements (PPA) cannot be excluded for onshore wind and solar photovoltaic or offshore wind projects in Greece in common with other countries where such alternatives are already pursued for some years now in the onshore wind and solar photovoltaic sectors, and recently also in the offshore wind sector. However, such structures are hardly suitable or bankable during the early days of a new sector development like offshore wind.

Optionally, individual aid without an auction process is also possible for renewable energy projects (including offshore wind) exceeding 250 MW or clusters of projects exceeding 250 MW and sharing common interconnection with the transmission system according to the said guidelines on State aid and Article 4 para 12 of Law 4414/2016. Individual aid requires prior notification to and approval from the European Commission. An implementing ministerial decision is still pending (para 12 was added to Article 4 of Law 4414/2016 in end-2019) for all renewable energy projects or clusters of such scale and importance for national and EU renewable energy targets, but it is reasonably expected soon. This option is reasonably considered more suitable, especially for floating offshore wind projects, and certainly more bankable at the early stages of any new renewable technology.

Moreover, Greece could consider when developing its national recovery and resilience plan in the context of the EU Recovery and Resilience Facility possible priority actions in order to facilitate the development of offshore wind projects in the country.

Grid connection

However, unlocking the great wind potential of the Greek seas and islands depends on the development of some critical interconnections, some of which are expected in the short to medium term. The anticipated completion of the interconnection of the island of Crete with the high-voltage system in the Athens metropolitan area by 2023 and of all Cycladic islands by 2024 will enable the significant development of new wind power capacity on these islands but also in the sea areas around them covering a significant part of the south Aegean Sea.

Moreover, ADMIE, the Greek TSO, has included in its current ten-year development plan the progressive interconnection of all other major islands in the south-eastern and north Aegean Sea, such as the islands of Rhodes, Kos, Karpathos Lemnos, Lesvos, Samos and Chios by 2029,  covering therefore though such plan the remaining of the Aegean Sea.

ADMIE is actively participating in the discussions held for the formulation of the offshore-wind specific framework and clearly, one of the key issues which need to be addressed therein is the interlink of any offshore wind investment projects with ADMIE’s development plan and its role in the design, construction and financing of the necessary grid expansion and reinforcement works.

Strategic investments programme and offshore wind

Since 2011, Greece has had in place an investments facilitation programme whereby productive investments (private or public ones, foreign or domestic) which generate quantitative and qualitative results of major significance for the national economy (including other criteria on investment budget, employment creation, innovation and sustainability) are qualified by an inter-ministerial committee as ‘strategic investments’ and are entitled to one-stop-shop and fast-track licensing and development procedures, including environmental and spatial planning ones as well as land expropriation related ones and dispute resolution provisions.

Part B of Law 4608/2019 on attracting strategic investments aims at modernising, improving and enhancing the scope of application and the fast-track licensing and development procedures in favour of strategic investments. These new provisions include: special spatial plans on project basis; tax benefits (as individual State aid subject to applicable EU regulations); one-stop-shop and fast-track licensing within 45 calendar days per licence, permit, opinion or approval (subject to special EU law provisions and procedures, e.g. public awareness on environmental matters), and overall within three (3) years from the MoU between the strategic investor and the Minister of Finance and Development on the time schedules and mutual obligations; cash grants for research and development (R&D) projects, and a UNCITRAL arbitration clause for disputes relating to the said MoU. On the other hand, applications for qualification under the new programme can be filed until the end of 2023.

Greece’s strategic investments programme has facilitated to some extent the spatial planning and licensing of a number of investments, mainly in tourism and other commercial sectors including some solar photovoltaic and solar thermal projects of scale and clusters of onshore wind projects. However, it has been limited to licensing aspects thereof and it does not address operating aid or other economic support aspects. Furthermore, it captures urban or onshore (including seashore) spatial planning, but it does not capture offshore aspects and maritime spatial planning that is still pending as described above. Therefore, account taken of the end-2023 current deadline for applications under the new programme, it is yet to be considered in more detail how the new programme for strategic investments in Greece could facilitate offshore wind. A recent positive development though is the special benefit conferred now under the programme to innovative renewable projects, amongst which offshore wind projects, in relation to their priority for grid connection over other projects using more typical renewable energy technologies, such as onshore wind and solar photovoltaic projects.

The way forward    

Experience from other jurisdictions has shown that formulating a comprehensive and appropriate legal framework for offshore wind in any given country is a challenging multi-disciplinary exercise. Structured public discussions with interested investors and stakeholders are ongoing in Greece during and have been for the last couple of years. Specific proposals are also being put forward for public consultation by stakeholders like the Hellenic Wind Energy Association but also from major global offshore wind developers. The Ministry of Environment and Energy has also announced that it will present a legislative proposal for offshore wind by mid-2021 taking into account the particularities of the Aegean Sea and international experience in offshore wind industry and technologies. We are confident that the ongoing process will result in a comprehensive legislative proposal for an offshore wind-specific framework. However, time and planning are of the essence for long lead capital intensive infrastructure investments like offshore wind to materialise within a certain time schedule, e.g. by 2030, on legally sound and commercially sensible and therefore bankable conditions in order to pursue successfully the national and EU energy, climate and environmental policies.

 

RAE incentives-based plan for IPTO as part of new policy for operators

RAE, the Regulatory Authority for Energy, is set to forward a package of incentives for power grid operator IPTO designed to influence the operator’s annual earnings when specific objectives are achieved or missed.

This move by the authority comes as part of its wider effort offering incentives to electricity and gas market operators.

RAE, at its latest board meeting, approved a first set of incentives proposed for IPTO by an external consultant, energypress sources have informed. This set of incentives is expected to be forwarded to IPTO within the next few days for observations and comments.

The regulatory authority is aiming to forward the package of IPTO incentives for public consultation towards the end of this month, before it is endorsed by the board and published in the government gazette by the end of June, and implemented six months later.

The authority is essentially aiming for the package to be implemented by January 1, 2022, as part of a new framework covering 2022 to 2025.

The same external consultant was hired for a similar-minded set of incentives concerning the electricity distribution network operator DEDDIE/HEDNO.

RAE’s chief executive Thanassis Dagoumas recently told a news conference that the authority intends to adopt an incentives-based strategy for all operators with the aim of improving their services.

The authority will intensify its monitoring of operator projects in development and ultimately hand out bonuses or penalties, depending on the degree of progress, he noted.

For the time being, the incentives-based strategy applies for DEDDIE/HEDNO, as well as the gas distribution operators (DEDA, EDA Attiki, EDA THESS), offering extra WACC for the achievement of objectives concerning gas market penetration and distribution cost reduction for consumers.

 

Abolition of non-binding grid connection offers proposed

The abolition of non-binding (preliminary) grid connection offers is among a list of legislative proposals made by the energy ministry’s RES licensing committee, the objective being to further simplify the RES licensing process.

As part of the overall effort, RES production licenses have been replaced by RES producer certificates, obtained through a simpler online process.

The proposal to abolish non-binding (preliminary) grid connection offers means that RES investors will be able to apply to the distribution network operator DEDDIE/HEDNO (if projects are up to 8 MW) or the power grid operator IPTO for finalized grid connection offers once they have obtained producer certificates and environmental permits.

In another committee proposal, DEDDIE/HEDNO, during its examination of grid connection offers, will no longer be responsible for land title audits in cases where land to be used for RES project installations is privately owned. This task, according to the proposal, will be taken on by external lawyers.

Grant Thornton Hellas developing Greek offshore wind farm framework

Business adviser Grant Thornton Hellas, commissioned and funded by the European Bank for Reconstruction and Development, has taken on the development of an institutional, legal and regulatory framework for offshore wind farms in Greece, in support of an overall effort being made by the energy ministry, energypress sources have informed.

Grant Thornton Hellas has already received an assortment of proposals, including on spatial and licensing matters, from interested parties, among them ELETAEN (Greek Wind Energy Association), ESIAPE (Greek Association of Renewable Energy Source Electricity Producers), EDEY (Greek Hydrocarbon Management Company), and IPTO (power grid operator).

Grant Thornton Hellas intends to also examine frameworks developed by other countries for their offshore wind farm sectors.

The energy ministry is striving to finalize the Greek framework’s key sections by June, as has been announced by ministry officials, or, at the very latest, within the summer, ahead of legislative procedures by the government.

A high-level plan, the framework’s nucleus, is planned to be completed within May so that legislative procedures can take place in June, sources said.

To serve as a road map, the high-level plan will need to provide details on: the selection criteria to be applied when choosing offshore areas to host initial projects; licensing steps for investors; the agency to be given responsibility of the licensing and project maturity processes; and the timing of auctions for tariffs.

 

EVIKEN: Medium-voltage surcharge costs excessive

Formulas applied to calculate system usage and distribution network surcharges for medium-voltage industrial consumers are now outdated, resulting in disproportionate overcharging for this consumer category, EVIKEN, the Association of Industrial Energy Consumers, has pointed out in a letter forwarded to RAE, the Regulatory Authority for Energy.

The association called for medium-voltage industrial consumer charging formulas to be harmonized with those used for high-voltage consumers, which offer incentives preventing excessive demand peaks.

EVIKEN also forwarded the letter to power grid operator IPTO and distribution network operator DEDDIE/HEDNO.

Public service compensation account deficit of €36m in 2020

The public service compensation account ended 2020 with a deficit of 35.96 million euros, according to latest data provided by distribution network operator DEDDIE/HEDNO.

The account’s deficit was greatly restricted by the settlement of transactions concerning 2017, which led to an additional influx of 72 million euros.

At the other end, a settlement of payments concerning 2012-2016, plus an additional settlement for 2014-2016, led to respective account outflow of 21.9 and 21.7 million euros.

The public service compensation account received a 116.7 million-euro injection from the state budget in 2020.

An extensive investment plan being carried out by power grid operator IPTO will greatly reduce the public service compensation account’s financial needs over the next few years, according to Thanassis Dagoumas, chief executive of RAE, the Regulatory Authority for Energy.

Public service compensation account (YKO) surcharges included on electricity bills are used to primarily subsidize high-cost electricity generation on Greece’s non-interconnected islands.

RAE is expected to soon reach a decision on YKO surcharges concerning 2019.

EuroAsia taking on extra compatibility costs for Cyprus-Crete grid link

RAE, the Regulatory Authority for Energy, has updated details of a Cross Border Cost Allocation (CBCA) agreement concerning the Cyprus-Crete electricity grid interconnection plan, committing the project’s promoter, EuroAsia Interconnector, a consortium of Cypriot interests, to assume any additional compatibility costs that may arise during the development of this segment.

The development eliminates the prospect of action by EuroAsia against Greece following a decision by the Greek government, over a year ago, to detach the Crete-Athens segment from EuroAsia’s wider project, planned to link Greece, from Crete, with Cyprus and Israel.

As a result of the withdrawal, the Crete-Athens segment is now being independently developed by IPTO, Greece’s power grid operator.

Project disagreements between Greek and Cypriot officials have persisted for years but escalated into legal threats and action when, during his recent tenure as energy minister, Costis Hatzidakis decided to withdraw the Crete-Athens segment for independent development.

Following more recent negotiations, EuroAsia appears to have fully accepted the removal of the Athens-Crete segment from the wider project it is spearheading.

Israel, for some time now, has made clear its interest to link the Cyprus-Israel grid interconnection with the Crete-Athens section.

RAE to intensify its operator monitoring, starting with gas

RAE, the Regulatory Authority for Energy, is gearing up to intensify its monitoring of the Greek energy market’s gas and electricity operators with the aim of minimizing operator surcharges for consumers and helping improve operator services, the authority’s chief executive, Thanassis Dagoumas, has told a news conference, reiterating the intention, also stressed during a recent presentation of its annual report.

The regulatory authority’s plan includes commissioning certified auditors to inspect the financial data of market operators.

Gas grid operator DESFA, gas distributors EDA Attiki, EDA THESS and DEDA, as well as the power grid operator IPTO and electricity distribution network operator DEDDIE can, as a result, expected closer inspections.

The authority intends to commence its intensified monitoring effort with the natural gas sector, where numerous new projects are planned for development, in an effort to ensure fair surcharge costs for consumers.

Dagoumas, at the news conference, reiterated that the operators, whose revenues are regulated, cannot enjoy wider profit margins than other market players.

Operators will be offered incentives for swifter completion of projects, which, combined with the stricter monitoring effort, will result in either bonuses or penalties, depending on the degree of progress made, the RAE chief highlighted once again.

RAE intends to introduce incentive-based policies, standard practice around Europe, for all energy market operators active in transmission and distribution.

 

Prioritization for RES projects with producer certificates proposed

The energy ministry’s RES licensing committee has recommended a four-month prioritization period by power grid operator IPTO in its processing of connection term applications submitted by investors already holding producer certificates. This prioritization would be implemented at the expense of small-scale RES unit applications, which have swamped licensing system and caused problems.

The proposal, presented at a committee meeting yesterday, would effectively push forward, by four months, connection term applications submitted for projects already issued producer certificates.

The main topic of yesterday’s committee meeting concerned a presentation of this body’s proposal for RES licensing simplification procedures, during the latter stages, such as when finalized connection terms are offered and operating licenses are issued.

 

Target model non-compliance cost formula effective, IPTO notes

A new target model formula calculating discrepancy cost is proving effective as, in most cases, it is impacting the finances of electricity producers and suppliers when they deviate from distribution orders and loading plans, power grid operator IPTO has noted.

As a result, the discrepancy cost formula should, for the time being, continue to apply for both electricity producers and suppliers as it appears to be offering a balancing incentive, the operator has recommended.

IPTO’s proposal has been forwarded to public consultation, taking place until May 7, for a scheduled reassessment of factors concerning non-compliance charges following the target model’s recent launch.

RAE launches inquiry into ‘western corridor’ grid delay

RAE, the Regulatory Authority for Energy, has launched an enquiry into the delay of Greece’s “western corridor” power grid project, now behind schedule and posing a serious threat to the national grid’s overall operating ability.

The corridor’s delayed delivery has been linked to objections raised by a small group of nuns at a monastery in the northern Peloponnese’s Kalavryta area, opposing the installation of several  remaining pylons needed for the project’s completion.

Power grid operator IPTO has provided RAE with an extensive report, hundreds of pages long, detailing the project’s entire course, following a request made by the regulatory authority.

The “western corridor” is now behind schedule as envisaged in the operator’s 10-year development plan.

RAE has also requested an explanation from IPTO as to why it did not promptly inform the regulatory authority on the project’s delay, given that it was full aware of the nearby monastery’s stance, so that possible alternative solutions could be explored.

IPTO contends all its actions, from the moment the monastery-related problem arose, have been carried out in accordance with energy ministry instructions, as is the case with all matters of strategic importance.