PPC lignite compensation effort key to Brussels negotiations

Greek authorities have taken to a higher European Commission level a compensation request by the state-controlled power utility PPC, seeking 200 million euros, annually, for the gradual withdrawal of its loss-incurring lignite-fired power stations between 2021 and 2023, hoping for a favorable outcome with the next two months.

If, however, the effort fails to produce a positive result, Greece’s ten-year dispute with the European Commission over the country’s continued reliance on lignite for electricity generation could drag on.

In this case, Greece will probably not agree to settle a long-running antitrust case that has prompted the government to offer PPC’s rivals 40 percent of the utility’s lignite-based generation until the lignite-fired power stations are withdrawn.

Greece cannot be expected to adopt a mechanism offering PPC’s rivals access to lignite-based output if the European Commission refuses to approve cost-offsetting measures for the utility, as has been the case in other EU member states, local sources contend.

Germany and Dutch energy companies have benefited from such offsetting measures in the past.

All issues will need to be resolved as one package deal or there will be no deal at all, sources said.

At this stage, a new European Court antitrust case against Greece, for PPC’s lignite monopoly, would make little, if any, sense as the country’s lignite-based generation will have greatly diminished by the time the case is heard.

PPC changing company logo to symbolize RES transformation

Power utility PPC plans to unveil a new company logo within the next month that will symbolize the corporation’s shift from lignite to renewable energy and also signal its transformation into a company offering a range of domestic services, including maintenance and repair work, such as electrical and plumbing.

Announced late last year, this transformation is now approaching its launch. PPC recently completed a tender for a partner to support the company’s emergency domestic technical services program.

This program, part of PPC’s new commercial policy, will enable customers who have taken up a related insurance policy to call a hotline at all times for emergency help. Insurance fees for this policy, to cover annual periods, will be payable through monthly installments.

Most major energy firms in Europe offer customers supplementary services such home insurance and energy efficiency equipment.

PPC recently also announced an online appointments program for personalized service over the internet.

Though the company does not intend to back these initiatives with any major promotional campaign, they do represent elements building PPC’s new commercial policy.

Brussels considering PPC compensation for lignite units

Certain European Commission officials are believed to be considering a compensation request made by power utility PPC for its three-year phase-out, between 2021 and 2023, of all existing lignite-fired power stations, severely burdened by elevated CO2 emission right costs.

Brussels officials had flatly rejected a compensation request made by PPC nearly a year ago. However, a shift by Brussels has become apparent in recognition of the Greek decarbonization effort’s progress.

The European Commission has offered compensation elsewhere for lignite units withdrawals. Last May, Brussels made available compensation worth 52.5 million euros for the Netherlands as a result of the country’s premature closure of its Hemweg coal-fired facilities.

At the time, the European Commissioner for Competition Margrethe Vestager had declared EU member states may need to compensate companies for their efforts to end their coal reliance, adding that the Dutch compensation amount does not threaten to cause market distortions at a European level.

PPC officials expect European Commission developments on the issue during the final quarter of this year.

Taking into account Brussels’ handling of such issues in the past, PPC officials also believe an antitrust case concerning the Greek power utility’s lignite monopoly and the corporation’s compensation request could be resolved simultaneously.

Excessive cost, for PPC, of running lignite-fired units hastening exit plan

The financial burden on power utility PPC as a result of its continued use of lignite-fired power stations at a time when the EU is racing towards climate neutrality has prompted the utility to revise its lignite unit phase-out plan for power stations in northern Greece’s west Macedonia region and Megalopoli in the Peloponnese.

According to latest information, PPC’s administration is planning further premature withdrawals of lignite-fired power stations after announcing a precipitated exit of its Megalopoli III unit, as was reported by energypress yesterday.

The Megalopoli III unit will be shut down six months sooner, in mid-2021, instead of early 2022. This 250-MW lignite-fired facility has operated for just six hours since April.

The average variable cost of lignite-based energy generation is €0.80 per MWh, well over the System Marginal Price of €0.45 per MWh, according to data presented by energy minister Costis Hatzidakis.

According to some sources, PPC has once again raised, to the European Commission, a compensation claim for being required to keep operating high-cost power stations in order to secure grid sufficiency and security.

PPC will be forced to proceed with swifter lignite unit exits if this compensation request is not satisfied, pundits said.

Power grid operator IPTO has the final say on the assessment of energy security matters.

PPC’s lignite-fired power stations covered just 36.8 percent of the country’s overall electricity demand in the first half, its lignite units playing a diminished role.

 

Ministry proposal seen ending PPC lignite monopoly case

Independent electricity retailers would be entitled to lignite-generated electricity supply from power utility PPC at a predetermined price, definitely not below cost for the utility, in quantities constituting 40 percent of each lignite-fired power station’s production, to be distributed to suppliers in proportion to their respective retail electricity market shares, until 2023, when  lignite-fired units are expected to have been phased out as part of the country’s decarbonization plan, according to a finalized proposal forwarded by the energy ministry to the European Commission’s Directorate-General for Competition a fortnight ago in an effort to resolve a long-running antitrust case.

Energy ministry officials are confident this formula will end the antitrust dispute, now a decade long, concerning’s PPC’s lignite sector monopoly.

Back in 2010, lignite dominated Greece’s energy mix but there is now much less at stake as lignite-fired power stations are being phased out over the next three years.

PPC’s lignite-fired electricity generation dropped 47.8 percent in the first half, diving 70 percent in the second quarter, the utility announced just days ago when presenting its first-half results.

PPC’s lignite-based output totaled 3,000 GWh in the first half and just 756 GWh in the second quarter.

Energy ministry officials believe the Directorate-General for Competition will not resist accepting the Athens proposal as a rejection would take the dispute back to European Court, meaning a case would not be heard any sooner than late-2021. By then, PPC’s lignite-fired power stations Kardia III and IV and Megalopoli III will have all been withdrawn, according to the latest schedule announced by energy minister Costis Hatzidakis earlier this week.

 

PPC power demand coverage down to 36.8%, lignite savings

Power utility PPC’s lignite-fired electricity production plunged 70 percent in the second quarter of 2020, its generation covered just 36.8 percent of overall electricity demand in the first half, while the corporation’s retail electricity market share has contracted to 69.9 percent, first-half company results have shown.

These shifts highlight the major changes occurring in Greece’s energy market – in terms of energy mix and retail competition.

PPC’s retail electricity market share drop to 69.9 percent followed a 77 percent share reported for the equivalent period a year earlier.

Electricity demand fell just 1.7 percent in the first quarter before sliding 12.7 percent in the second quarter, the PPC results showed.

A significant part of the corporation’s recurring EBITDA figure of 457.3 million euros reported for the first half was attributed to the utility’s diminished reliance on lignite-fired generation, until recently Greece’s dominant energy source. PPC’s lignite units have been kept shut or used minimally, saving the corporation from losses.

However, this is one side of the story for PPC. The company’s reduced reliance on lignite may be saving the power utility considerable amounts, but its coverage of overall electricity demand has dropped to 36.8 percent in the first half, from 46.9 percent in the first half last year. Gas-fired and hydropower generation have been low.

This downward slide at PPC is expected to continue until the corporation’s green energy output rises to between 2,000 and 3,000 MW, a level that would take the company into a new era. A period of at least two to three years will be needed before this can be achieved.

The pandemic and its downward pressure on energy price levels has helped PPC. Company outlays for fuels, natural gas, CO2 emission rights and electricity purchases fell by 33.7 percent, or 561.3 million euros, in the first half, compared to the equivalent period a year earlier.

PPC saved 95 million euros on fuel costs, 110.2 million euros on natural gas costs, approximately 80 million euros on CO2 emission rights, and 260.2 million euros on electricity purchases, the first half results showed.

Energy products may rebound in the second half, meaning PPC has no other choice but to accelerate its foray into the RES sector.

Despite the encouraging first-half results, there is no room for complacency, PPC’s chief executive Giorgos Stassis stressed.

 

 

PPC CO2 emissions down 71.1%, lignite-fired output fades

Power utility PPC’s CO2 emissions plunged 71.1 percent in the first half, from 1.97 million tons in January to 568,900 tons in June, reflecting the significantly diminished role of lignite in generation.

Lignite’s dominant energy mix role has been taken over by natural gas, supported by rising RES output and electricity imports.

Lignite-based electricity generation slid for most of the six-month period between January and June, dropping to 1.41 million tons in February, 882,240 tons in March, 730,970 tons in April and 564,900 tons in May before edging up to 568,900 tons in June.

CO2 emission right costs have been on an upward trajectory over the past couple of months, rising well over customary levels of about 20 euros per ton to reach as high as 29.66 euros per ton. Current levels appear to have stabilized at between 26 and 27 euros per ton.

Despite these higher CO2 emission right price levels, PPC’s operating costs are not expected to rise as a result of its big cutback on lignite-fired production.

PPC’s share of overall electricity production is projected to keep falling as independent producers and traders move in to fill the lignite void through natural gas and RES generation, plus electricity imports.

Wholesale electricity prices down considerably in first half

The System Marginal Price, or wholesale electricity price, has fallen considerably and consistently throughout the first half of the year, driven down by lower natural gas prices and a dramatic contraction of lignite-fired generation, now a costly option.

Official data released by the energy exchange shows lignite’s energy mix dominance is fading and renewable energy sources are gaining ground, while natural gas-fueled generation is consistently at the helm. 

The SMP fell throughout the first-half period, falling 22.45 percent to 59.68 euros per MWh in January, compared to the equivalent month a year earlier; 28.55 percent to 49.23 euros per MWh in February; 43.65 percent to 43.65 euros per MWh in March; 54.31 percent to 28.51 euros per MWh in April; 48 percent to 34.27 euros per MWh in May; and 50.04 percent to 34.04 euros per MWh in June.

The SMP is primarily determined by natural gas-fueled power stations, their price-setting involvement measuring 60 percent in June, the energy exchange data showed.

Also in June, natural gas was responsible for 48.06 percent of overall generation, the RES sector generated 34.74 percent of total production, hydropower contributed 9.77 percent, while lignite-fired generation was limited to 7.42 percent.

Gas, renewables cover 76% of electricity demand in June

Natural gas and renewable energy sources covered 76 percent of electricity demand in June, limiting lignite’s contribution to a mere 5 percent, latest figures provided by power grid operator IPTO have shown.

The development highlights the fast-approaching end of the lignite era in Greece, currently in transition towards green energy.

Natural gas-fueled generation in June covered 37 percent of electricity demand, plus 2 percent contributed by cooling, heating and power (CCHP) generation, while renewables contributed 37 percent, including hydropower input of 9 percent.

Highlighting lignite’s severely diminished role in generation, PPC restricted its lignite-fired generation last month by 75 percent compared to the equivalent month a year earlier.

During this same one-year period, renewable energy source generation increased by 7.6 percent, while natural gas-based electricity production was up by a milder 1.2 percent, the IPTO data showed.

In another noteworthy statistic, all of the country’s lignite units were switched off for 40 hours, continuously, for the first time in June.

Rising CO2 right prices signal irreversible post-lignite course

Higher CO2 emission right costs, forecast to rise even further over the next few years, and this trend’s growing cost for power utility PPC’s lignite-fired power stations, highlight the country’s irreversible course towards the post-lignite era.

CO2 emission right costs have climbed to levels of about 30 euros per ton, the highest since 2006, Nikos Mantzaris, policy analyst at The Green Tank, an independent, non-profit environmental think tank, noted yesterday during a presentation of a new report, by the think tank, on Just Transition, the EU policy to end lignite dependence in Europe.

CO2 emission right prices will increase further over the next five years to reach levels of 35 to 40 euros per ton, sector experts have projected, Mantzaris said.

Stricter CO2 emission right regulations to be implemented by the European Commission in 2021 will push prices even higher, Mantzaris supported.

This upward trajectory of CO2 emission right costs is weighing heavy on PPC. Energy minister Costis Hatzidakis has estimated that PPC’s CO2-related costs in 2020 will amount to at least 300 million euros, a repeat of last year.

PPC has already made moves to restrict its lignite-fired generation for the grid. “The downward trend became even steeper following a full decarbonization decision announced [by the government] in September, 2019, which led, in May, 2020, to lignite covering just 6 percent of electricity demand on the grid, a historic low,” according to the latest Green Tank report.

For the first time in seven decades, not a single lignite-fired power station in Greece’s west Macedonia region operated on May 20 this year, while, between June 7 and 9, all the country’s lignite-fired power stations did not operate for 40 hours, the report noted.

 

 

Power demand dives 14.61% in June as tourism slumps

Electricity demand slumped 14.61 percent in June, compared to a year earlier, despite the month’s lifting of lockdown measures, latest Greek energy exchange figures have shown.

June’s drop in power demand, attributed to the unprecedented decline in tourism activity, was even bigger than the declines registered in April and May, 13 percent and 9 percent, respectively.

Numerous hotels and other tourism industry units have not opened for business. Also, flight bans were essentially not lifted until the beginning of this month.

Responding to the drop in electricity demand, energy producers have restricted output by 16 percent.

Natural gas and renewables dominated electricity generation in June. Natural gas-fueled generation covered 36.56 percent of demand, while RES production covered 26.43 percent, the energy exchange’s June report showed. Electricity imports covered 23.93 percent, hydropower 7.43 percent and lignite-fired production 5.64 percent.

 

 

Grid passes summer’s first test, demand at 7,600 MW today

The country’s grid is set to face increased pressure as temperatures rise throughout the country and are forecast to reach as high as 39 degrees Celsius today. Electricity demand is expected to rise to 7,600 MW.

The country’s grid coped well during yesterday’s first major test for the summer. Electricity demand reached 7,300 MW amid temperatures marginally lower than the levels forecast for today.

The power utility PPC was forced to use its hydropower facilities. Water deposit levels have been extremely low this year. Further usage of the hydropower facilities will be needed today but PPC is expected to act cautiously as it awaits tougher days ahead.

PPC anticipates it may need to use 50 to 60 percent of its 3,171-MW total hydropower capacity in July.

The heat-related rise in electricity demand has coincided with increased wholesale electricity prices over the past week. They rose sharply from 28.62 euros per MWh on June 28 to 44.52 euros per MWh on Tuesday and 45.01 euros per MWh yesterday.

This first summer test for the grid has once again highlighted the extremely high costs entailed in operating lignite-fired power stations. Their generation costs are now between 90 and 100 euros per MWh.

During this heatwave, PPC, currently moving to withdraw most of its lignite units over the next three years, has opted to minimize its reliance on lignite, preferring instead to cover its generation needs through its natural gas units and hydropower stations.

 

 

 

Telethermal plan for the north enables faster lignite unit exits

Power utility PPC’s prospective combined cooling, heat and power plant in Kardia, northern Greece, will be designed to operate both independently and in connection with Ptolemaida V and provide telethermal needs to the regional provincial cities Ptolemaida and Kozani, seen as vital coverage that will enable the power utility to withdraw lignite-fired units, cost-incurring facilities, sooner than planned.

Ptolemaida V, a new facility nearing its launch and planned to remain as the power utility’s last lignite-fired power station, will spare PPC’s other lignite-fired units in the region from telethermal responsibilities.

This overall plan was agreed to yesterday by the government, municipal authorities, PPC and gas grid operator DESFA.

Ptolemaida V, when operating, will provide necessary telethermal energy through pipelines to the Kardia CCHP unit, which, in turn, will offer heating.

Even when Ptolemaida V is not generating electricity, the prospective Kardia CCHP unit, to run on natural gas, will be able to function independently and offer telethermal needs to residents in the region.

Authorities are pushing for the Kardia unit’s completion and launch by 2022, admitting that it could take until 2023.

One PPC rate for consumption above, below 2,000 kWh

Power utility PPC will continue offering a single tariff rate for consumption levels above and below 2,000 kWh per four-month billing period once the utility’s lockdown-related support package expires on June 26, sources have informed.

During lockdown, PPC offered an 8 percent tariff discount for consumption levels of more than 2,000 kWh per four-month billion period. This offer’s resulting tariff rate, 0.11058 euros per kWh, is being kept.

Prior to the lockdown package’s introduction, lasting three months, PPC customers were charge 0.11936 euros per kWh for consumption over 2,000 kWh. The lower rate also applies for consumption levels below 2,000 kWh.

PPC’s new pricing policy, still undisclosed, is also expected to offer benefits to customers paying their electricity bills on time.

The power utility’s independent rivals are offering like-minded packages. For at least one month now, independent suppliers have offered considerable tariff discounts at par with lower nighttime rates. These offers are valid for new customers as long as payment punctuality is maintained.

Energy costs – natural gas and wholesale electricity prices – fell considerably during the lockdown period, providing suppliers leeway for lower-price offers to customers.

According to the Greek energy exchange, the System Marginal Price (wholesale electricity price) ended May at 34.27 euros per MWh, down from 65.91 euros per MWh in the equivalent month a year earlier, a 48 percent year-on-year drop.

In May, natural gas-fueled power stations were responsible for 50.1 percent of Greece’s overall electricity generation, and RES facilities contributed 38.54 percent.

PPC’s high-cost lignite-fired power stations, once the country’s dominant generating source, contributed just 3.46 percent in May, an 87 percent year-on-year drop.

 

Post-lignite plan to Boston Consulting, Grant Thorton

Boston Consulting and Grant Thorton have been awarded contracts by Greece’s privatization fund to prepare a master plan for Greece’s post-lignite era, due at the end of 2020, energypress sources have informed.

The two professional services companies, awarded deals totaling 200,000 euros plus VAT, will need to deliver a draft of their master plan to a coordinating committee heading the task around early autumn, three months after contracts have been signed.

Their finalized version must be completed and delivered six months from now, or roughly at the end of the year.

The master plan will include policies to tackle job losses as a result of Greece’s decarbonization policy, as well as policies for the establishment of new businesses and jobs in Greece’s west Macedonia and Megalopoli areas, both lignite-dependent local economies that will be severely impacted by the decarbonization plan.

Boston Consulting and Grant Thorton will need to analyze all related data, including  demographics and infrastructure-related data, and identify competitive advantages offered by the two aforementioned regions.

Industrial infrastructure, farming, research and innovation, tourism, logistics, energy and the environment, as well as social policies will all be examined for sustainable growth not requiring state support following the post-lignite transition.

Most of power utility PPC’s lignite units are expected to be phased out by the end of 2023.

PPC to report better 1Q results, approve voluntary exit plan

Power utility PPC will, later today, report significantly improved financial results for the first quarter, compared to the equivalent period a year earlier, sources have informed.

The results, to show higher operating profit and a sustained rebound following a downward trajectory experienced in the final quarter of 2019, according to the sources, will be officially announced once the day’s trading session at the Athens stock exchange has ended.

PPC’s improved results will reflect the positive impact of a series of changes made by the power utility’s new administration last August, especially a decision to increase tariffs, the sources noted.

Interestingly, the financial effects of the pandemic have been subdued as a reduction in electricity-bill collections was far lower than feared, the sources said.

State-controlled PPC may also announce a 160 million-euro financing plan stemming from a European financial institution as a measure to boost the corporation’s cash flow.

The first-quarter results will be accompanied by a PPC announcement on the corporation’s ongoing implementation of initiatives for restructuring and adjustment to modern energy-transition demands, the sourced informed.

Also today, the PPC board is expected to approve a voluntary exit plan for between 700 and 1,000 of approximately 4,500 employees working at the corporation’s lignite-fired power stations units, all headed for closure by 2023. Ptolemaida V, now under construction, will keep operating until 2028, according to the government’s decarbonization plan.

 

Natural gas in Greece: The bridge to decarbonization

Authors: Dr Valentina Dedi, Head of Global Operations, Greek Energy Forum; Panagiotis Mavroeidis-Kamperis, Associate, Greek Energy Forum

Last December, in alignment with the European Union (EU) legislation, Greece submitted a revised version of its 10-year National Plan for Energy and Climate (NEPC) to the EU Commission. The “fairly well-developed” document, as quoted in the summary of the Commission’s assessment, set out an ambitious roadmap for specific national energy and climate objectives to be met by 2030, committing the country to the bloc’s wider pledge to a clean energy transition.

Of the key targets outlined in the document, the reduction of greenhouse gas emissions was the main element of the NECP structure, with the Greek government targeting a reduction of more than 42% compared to 1990 levels. The lignite phase-out commitment was another key objective set in the plan, aiming at putting a complete end to the use of lignite in Greece by 2028. The increase of renewables’ share in the country’s total energy consumption to 35%, up from about 13% currently, was further included.

To work toward the achievement of those targets in this relatively ‘short’ timeframe, it seems imperative that Greece uses all its available tools. Natural gas, considered as by far the cleanest fossil fuel, can play its part in this transition process. The role of gas as a bridge to decarbonization has been advocated for a long time, especially that of fuel switching primarily from coal.

The revived momentum

Natural gas penetrated the Greek energy market in 1986. The introduction of gas at that time was seen not only as a way of diversifying energy sources in the country, which would lead to reduced oil dependency, but it would more importantly give Greece the opportunity to establish itself in the European energy map. Moreover, gas would help the country to improve its environmental credentials in accordance with the EU regulations.

Despite the positive momentum during the first years of its inception, natural gas maintained a minor share in the Greek energy market, at about 0.2%, till 1996, with its use mainly limited to power generation. Gas started gaining some ground in the market over the following decade or so, especially after the commissioning of the first LNG terminal in Revythoussa in 2000, which was followed by some initial efforts for the liberalization of the market, but its consumption soon stalled as the country was entering into a decade-long economic crisis. As of today, one could argue that natural gas, with a market share of just 13% of total energy demand, never met those initial aspirations.

A number of recent developments, though, seem to have revived its growth prospects, facilitating its contribution to the country’s broader decarbonization efforts. After Greece’s emergence from the final bailout program in 2018, the investment climate has seen signs of improvement, with gas being among those feeling the benefits. The long-delayed privatization of the state-owned gas distribution network was finally materialized, with the stake majority being sold to a consortium of three major European natural gas transmission companies. A few months later, in January 2019, the European Investment Bank (EIB) agreed on the financing of the construction of a new LNG bunkering vessel in Greece, which is expected to be a first-of-its kind in the broader Eastern Mediterranean region, further pledging to the transformation of Greece into a regional hub.

Abundance and affordability

The latest domestic developments have coincided with a situation of global abundance and affordability, especially following the US shale revolution which brought in new supplies and added downward pressure to global gas prices. Also, the country’s geographical position to resource-rich areas makes it another determining factor for the fuel’s affordability in the country as transportation – either by pipeline or as LNG – takes a relatively high share of the delivered cost.

The country currently receives gas indirectly from Russia, with a capacity of 6.8 bcm per annum. In 2018, the expansion of Revythoussa LNG import terminal was also finalized, increasing capacity by 50% and adding another 8.3 bcm per annum to the market. Some 2 bcm per annum of Azeri gas delivered through the Trans-Antriantic Pipeline (TAP) have further been booked for Greece’s domestic market, expected to commence in mid-2021. Supplies of up to 2.6 bcm per annum could be further added through the Alexandroupolis Floating Storage Regasification Unit (FSRU) (Alexandroupolis LNG) based on the bidding offers following the completion of the binding phase of the market test in March 2019.

With potential supplies reaching up to 19 bcm per annum over the next few years, Greece would gain access to a sufficiently deep gas market, able to cover current gas demand by factor of more than 3. The projected depth of the Greek gas market, in turn, would increase price competition domestically, favoring the wider deployment of natural gas in the country.

Fuel Switching

The bigger prospect of natural gas as a key fuel in the decarbonization is in fuel switching (lignite-to-gas), leaving significant prospects for CO2 emissions savings. Lignite, a domestically produced form of coal, has been the backbone of the country’s power generation for many decades now, as well as the main source of heat for industry and buildings.

According to the IEA, on average, coal-to-gas switching reduces emissions by 50% when producing electricity and by 33% when providing heat, which could be translated to total CO2 emissions savings of about 10% in today’s power and heat sectors in Greece. By switching from lignite to existing gas-fired plants, there is a potential to reduce around 4% of the country’s total CO2 emissions.

In 2019, lignite power plants supplied a fifth of the total power generation after recording a substantial drop of 4.5 TWh from 2018 levels on higher CO2 prices, in tandem with increasing generation from wind, decreasing continental gas prices and slightly higher net imports (Figure 3). However, about 10 TWh of lignite power generation are still to be eliminated by 2028, requiring alternative sources to step up their production to substitute it. Natural gas can be the fuel that can compensate for the lost lignite production with the existing gas-fired plants. Even in the extreme scenario where all lignite production is terminated in a single year, domestic gas supplies can still successfully cover the baseload demand. That would require about 25 TWh of gas-fired production, which would see gas-fired utilization rates of existing plants increasing to 60% till 2022 and 50% afterwards following the construction of the new 826MW Combined Cycle Gas Turbine (CCGT) station in the country.

Gas can also contribute to less carbon in the heating segment, mainly in the residential sector where a further penetration of about 30% is estimated by the Regional Distributor System Operators (DSO) in areas connected to the main gas grid such as Thessaloniki, Attiki (wider Athens area) and Thessalia by 2025. Industrial gas demand seems to have reached a peak with a rather stable demand projected over the next decade or so. 

A quick win

With a global and domestic abundance of natural gas, a high price competitive market is expected, creating a favorable scenario needed for the wider natural gas development in Greece. A projected bullish trajectory of CO2 prices in Europe is further expected to facilitate the transition to gas as higher CO2 prices will add financial burden on lignite power plants.

Switching between fossil fuels, on its own, does not provide a long-term answer to climate change, especially considering the country’s privileged position in the potential growth of its renewable capacity. However, given the time it takes to build up new renewables and with the increasing penetration of renewables creating a greater volatility due to the lack of a stable and predictable production, natural gas represents a potential quick win for emissions reductions in the medium-term.

PPC, seeking key electric car market role, to announce MoUs

Power utility PPC is expected to soon announce two MoUs signed with private-sector companies for collaboration in the nascent electric vehicles market, a domain the utility is looking to dominate in the years ahead.

The power utility’s MoUs, believed to have been signed with Greek companies, concern recharging station installations and a range of electric vehicle services, as foreseen in a PPC business plan presented last December.

According to the plan, PPC intends to install 1,000 recharging stations around Greece over the next two to three years as well as a further 10,000 stations in the medium term.

The company is now assembling a new electric vehicles division in the lead-up to its latest business endeavor.

PPC’s wider plan could even entail collaboration with a specialized partner for production of electric vehicle parts at new plants in west Macedonia and Megalopoli, both lignite-dependent local economies in the country’s north and the Peloponnese, respectively, now being decarbonized.

A related draft bill being prepared by the government will feature incentives for the establishment of new production units at these locations.

Prime Minister Kyriakos Mitsotakis is scheduled to present the government’s ambitious plan for electric vehicle market growth this Friday. The development of a recharging network is crucial for this plan.

Electric vehicles bill to include production line incentives

A draft bill being prepared by the government to promote growth for Greece’s embryonic electric vehicle sector will not only include incentives for buyers and users but also producers, energypress has been informed.

Producers establishing production lines for electric vehicle parts, including batteries, transformers and recharging units, will be offered incentives in the form of lower tax rates and reduced social security system contributions for employees, the sources said.

However, eligibility for these incentives will be conditional and require producers to establish their production facilities in either northern Greece’s west Macedonia region or Megalopoli in the Peloponnese, both lignite-dependent local economies headed for decarbonization.

The incentives are expected to include subsidies of between 4,500 and 5,000 euros for purchases of zero or low-emission electric cars, approximately 1,000 euros for electric scooters and 800 euros for electric bicycles.

Government officials plan to submit the draft bill on electric vehicles to Parliament in June.

Besides seeking to promote industrial development in current lignite areas, the master plan will also aim to make the most of early interest expressed by foreign investors.

One of these, Tesla, has, for months now, expressed interest to the Greek government for development of a fast-recharge network at Greece’s highways, a project budgeted at 10 million euros. This project is envisioned as part of a wider plan stretching from Portugal to Spain, France, Italy, Greece and Turkey.

Pricing, distribution pending in PPC lignite access case

Despite definite progress confirmed in a latest Brussels report, Greece still needs to resolve two pending issues concerning pricing and distribution in a long-running antitrust case with the European Commission over state-controlled power utility PPC’s lignite monopoly, which Brussels demands must be opened up to third parties.

Brussels insists on the sale of tailor-made electricity packages to electricity suppliers and industrial enterprises, adjusted accordingly to meet their respective needs. Pricing details must also be worked out.

The antitrust case has dragged on over the past decade or so. The European Commission wants it closed by the end of this year.

In the lead-up, a market test needs to be staged with the participation of all interested parties, the intention being to test in practice the proposal described in the Brussels report.

The plan envisions a mechanism designed to offer PPC’s rivals access to a share of the utility’s lignite-based generation. The extent of this access will be correlated with the progress of the power utility’s decarbonization effort.

Transparent, competitive procedures, as well as lignite access to smaller-scale suppliers, must be assured, the Brussels report notes.

The Greek government and the European Commission are currently discussing the market test’s details.

 

Wholesale electricity prices rising, up to €47.30/MWh today

Wholesale electricity prices, determined by the System Marginal Price, are rebounding following a significant drop over the past few weeks.

The rise is being fueled by an anticipated increase in demand. A sidelined 600-MW line linking Greece with Bulgaria, depriving the system of electricity imports via this route, as well as a disruption in operations at an Elpedison power plant in Thessaloniki are two other contributing factors.

In addition, the Revythoussa LNG terminal just off Athens is not under any pressure, a factor subduing gas-fired unit bids and subsequently lowering the SMP.

Based on grid orders placed for today, the SMP has climbed to 47.30 euros per MWh, up from a level of around 30 euros per MWh five days earlier and 14.20 euros per MWh on May 1. Bidding by units has gradually risen since early May.

Demand, today, for domestic consumption and exports is estimated to reach 127 GWh, 40 percent of which is planned to be covered by natural gas-fired power stations, 30 percent by RES and hydropower plants, 23 percent by electricity imports, and 7 percent by lignite-fired power stations.

The SMP level will be determined by gas-fired power stations for 22 hours today, lignite-based generation will shape the price for one hour and imports for the remaining hour.

Suppliers also given lignite access by DG-Comp agreement

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

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

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

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

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

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

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

Decarbonization an independent business plan linked to NSRF

The decarbonization master plan for the west Macedonian region in Greece’s north and Megalopoli in the Peloponnese, both lignite dependent local economies, will be an independent business plan linked to the new National Strategic Reference Framework, running from 2021 to 2027, exclusively funded and based on four main axes, sources have informed energypress.

A draft of the master plan has already been prepared and endorsed by the development ministry, while a competitive procedure will be staged for the shaping of the finalized plan.

A special advisory committee will present its opinion to the privatization fund, involved in the process, for the hiring of a consultant and development of the decarbonization master plan.

Its four main axes will be comprised of industry, the primary sector, tourism-culture and differentiation of lignite area energy identities, the sources said.

Though specific plans have yet to be set out as to how the country’s two main lignite zones will be restored, a tendency towards industrial development is already emerging.

The decarbonization project’s progress to date, procedural matters and its four axes will be discussed by the coordinating committee of the fair development plan at its next meeting, scheduled for this Friday.

PPC, decarbonizing, to hire consultant for worker exits

Power utility PPC has decided to soon hire a consultant to help shape a voluntary exit plan for employees working in the corporation’s lignite sector, set to gradually wind down as a result of the country’s decarbonization policy.

The consultant’s efforts will focus on the structure of the voluntary exit plan, its incentives, timing and extent within PPC’s workforce, not including employees eligible for retirement and workers to be transferred to other company units.

PPC plans to appoint a consultant in the immediate future with the objective of announcing the full details of its voluntary exit plan towards the end of this year.

PPC’s voluntary exit plan is intended to stretch over a number of years as a gradual process aligned with the decarbonization effort.

Severance payments, according to a company announcement made several months ago, currently total 22,000 euros per employee.

PPC’s objective is to reduce its workforce to 11,500 by 2024 from 15,300 at the end of 2019, according the company’s new business plan.

The Amynteo lignite-fired power station in Greece’s north is at the top of PPC’s withdrawal list, but it now remains unclear when this exit can take place.

Amynteo was originally scheduled to be withdrawn by April 30, tomorrow, but this exit may be postponed until next year. The completion, by local authorities, of regional projects securing telethermal services is a key factor. PPC is currently awaiting an update on these projects.

 

 

DESFA 10-year plan approved, virtual pipelines not included

Gas grid operator DESFA’s ten-year development plan has been approved by RAE, the Regulatory Authority for Energy, following a lengthy procedure, including consultation, that lasted several months.

A virtual pipeline proposal envisioning LNG supply to Crete, the north Aegean islands and the Dodecanese via tankers from the operator’s Revythoussa terminal just off Athens was left out of the approved plan. This is the ten-year plan’s only notable change compared to the draft forwarded for consultation.

LNG virtual pipelines serve as a substitute for conventional gas pipelines to enable the transport of LNG to points of use by sea, road or a combination of these.

The virtual pipeline proposal was removed from the DESFA ten-year plan following concerns expressed by consultation participants over higher surcharge costs for consumers that could have been imposed as part of the project’s cost recovery procedure.

The gas grid operator’s ten-year plan includes, for the first time, a natural gas outlet along the TAP route for the west Macedonia region in Greece’s north.

This TAP outlet, a project budgeted at 3 million euros and expected to be launched late in 2022, is intended to supply natural gas to the area’s provincial cities of Kozani, Ptolemaida, Florina and Amynteo for use at telethermal facilities as well as other energy needs in the post-lignite era.

The area’s telethermal system currently relies on energy produced by power utility PPC’s lignite-fired power stations, soon set for withdrawal as part of the country’s decarbonization effort.

 

PPC boss: Oil cost benefits outweigh pandemic’s damage

Benefits offered by the sharp drop in oil prices promise to outweigh the negative impact of pandemic-related tariff discounts offered to customers and lower revenues, power utility PPC’s chief executive Giorgos Stassis highlighted to analysts and investors during a two-hour virtual conference held yesterday.

Company financial figures for 2020 and the first half of 2021 have needed to be revised but the coronavirus lockdown measures imposed until now do not appear to have negatively impacted the corporate group, the CEO informed.

On the contrary, operating profit has risen as a result of a significant reduction of energy costs, Stassis explained, noting this gain is greater than reduced turnover figures prompted by lower energy consumption during the pandemic as well as the consequences of electricity bill payment delays by customers.

PPC’s energy expenses rose by 425 million euros in 2019, according to yesterday’s presentation.

The state-controlled corporation’s decarbonization schedule, or withdrawal of lignite facilities, will not be postponed by the pandemic, Stassis noted, responding to related questions.

PPC plans to soon withdraw its Amynteo facility from the grid, while the corporation’s lignite-based electricity generation has been significantly reduced, according to recent company announcements.

Lignite-based production at PPC has dropped by 65 percent compared to last year, according to a monthly report released by the Greek energy exchange in March.

PPC’s lignite facilities financially burden the corporation by 200 to 300 million euros per year, analysts were told yesterday.

The power utility’s retail electricity market share is expected to keep falling in 2020 but an attempt will be made to limit this slide through a new commercial policy, Stassis told analysts.

The company’s renewable energy portfolio will grow to 650 MW from a current capacity of 160 MW over the next three years, he noted.

RES generation in EU captures record share of energy mix

Renewable energy generation captured a record-high 35 percent share of the EU’s energy mix in the fourth quarter of 2019, up from 31 percent a year earlier, primarily as a result of record generation levels registered by the hydropower and wind energy sectors, latest European Commission data has shown.

Hydropower production rose significantly, by over 16 TWh year to year, while major gains were achieved by the wind energy sector, whose onshore wind farms grew by 9 TWh, or 9 percent year to year, and offshore wind farms registered a record year-to-year increase of 3.3 TWh, 18 percent.

Overall RES generation in December totaled 105 TWh, a new record level for the month, as a result of favorable conditions for wind farms and record hydropower production levels.

On the contrary, the energy mix share of fossil fuel fell to 39 percent in the fourth quarter of 2019, down from 42 percent a year earlier.

Greenhouse gas emissions in EU electricity generation fell by approximately 12 percent in 2019 as a result of the increase in RES production and a turn from coal to gas.

CO2 emission right costs increased by 57 percent year to year, to 25 euros per ton, according to the European Commission data.

 

 

Industrial sector needs delayed demand response mechanism

The country’s energy-intensive industrial enterprises are keen to accept a solution that would also offer independent electricity suppliers access to power utility PPC’s lignite-based generation, acknowledging that delays in the government’s ongoing negotiations with the European Commission on across-the-board lignite issues will consequently delay Brussels’ approval of Greece’s request for an extension of the demand response mechanism, a key energy-saving tool for the industrial sector, and threaten the sustainability of a number of producers.

EVIKEN, the Association of Industrial Energy Consumers, recently informed the energy ministry of its position in writing.

Greece’s lignite-issue negotiations with the European Commission have dragged on for some time. Athens has received a list of new questions after responding to a dense set of previous questions.

The government’s proposal for an extension of the demand response mechanism was forwarded to Brussels late December following lengthy consultation with European Commission officials to ensure its details would be aligned with Brussels’ directives.

Even so, Greece’s industrial enterprises have been left without the support of demand response mechanism since February 7. Worse still, a new measure promising to reduce the cost, for industry, of a RES-supporting ETMEAR surcharge, has yet to be implemented.

As a result, certain industrial sectors, namely steel and cement, have slid further in terms of competitiveness while, in some cases, sustainability and job maintenance are also at stake.

Pundits believe Brussels has bundled together all of Athens’ pending energy sector issues.

COVID-19 crisis creates new base for energy negotiations

The European Commission’s pause on tough fiscal rules, officially announced yesterday as a result of the coronavirus impact on economies, sets a new negotiating base for a range of unresolved matters, including energy issues.

Though Brussels’ temporary suspension of the Stability and Growth Pact purely concerns budgetary discipline, it is estimated that this decision will temporarily increase the EU’s tolerance of member-state demands on schedules and other issues such as energy.

Even if the DG Comp’s hardliners insist that a loosening of fiscal rules does not change member state obligations to individual funds, it is still estimated that the new landscape offers space for Greek officials to explore new possibilities.

The government, if it is deemed feasible, could seek greater flexibility on proposals that have been flatly rejected until now by the Directorate-General for Competition, including ideas tabled for power utility PPC’s lignite monopoly, which Brussels wants ended.

Brussels has insisted that Greece has not complied with a European Court decision ordering lignite access for third parties. Brussels has directly linked this demand to PPC’s binding target for an electricity market share contraction to less than 50 percent in 2020.

Brussels is not convinced the Greek government will manage to swiftly decarbonize, as the administration has announced. This lack of faith, combined with the government’s recent unilateral decision to abandon NOME auctions and the previous administration’s failed sale effort of lignite units has led to a call, by Brussels, for alternative restructuring measures between now and 2023.

A team of energy ministry officials is scheduled to be in Brussels this Thursday for an official presentation of a recent proposal entailing the participation of electricity suppliers in PPC’s lignite production.

New lignite access proposal offered ahead of Brussels talks

Electricity suppliers could be granted access to power utility PPC’s lignite-related electricity production until 2023, when all the utility’s existing lignite units are scheduled to have been withdrawn, according to a new proposal forwarded by Greek authorities to the European Commission’s Directorate-General for Competition, energypress sources have informed.

The energy ministry delivered this transitional mechanism proposal to Brussels last week after a previous plan appears to have been blocked.

The initial proposal, delivered last December, called for the formation of an SPV by the country’s energy-intensive industrial enterprises to be supplied satisfactory electricity amounts from PPC’s lignite-fired power stations.

However, this proposal appears to have been rejected by Brussels as it focused entirely on industry and excluded retail suppliers, seen as a breach of competition rules because it would not help further open up Greece’s electricity market.

The new Greek proposal is expected to serve as the basis of a new round of talks with the European Commission, scheduled to begin around mid-March. It remains unclear if the new proposal stands a chance of being approved by Brussels competition authorities.

Brussels officials, for quite some time now, have made note of Greece’s failure to comply with a European Court ruling on lignite access for third parties, directly linking this shortcoming with the country’s commitment to a retail electricity market share contraction target at state-controlled PPC to a level of less than 50 percent this year.

The European Commission wants alternative measures implemented between now and 2023 as a result of Greece’s failure to sell PPC lignite units and unilateral termination of NOME auctions.