Non-interconnected island markets not luring suppliers

Though the electricity markets of 30 non-interconnected islands are now fully liberalized as of January 1 – following the opening up of the electricity markets of Rhodes, last January, and Crete in August, 2016 –  independent suppliers, facing various obstacles, especially elevated wholesale prices, are hesitating to enter these new markets.

Negative factors affecting conditions in the thirty new island markets have also impacted independent electricity suppliers seeking to penetrate the markets of Rhodes and Crete. At present, independent suppliers on these two islands are moving conservatively in an effort to keep their ventures afloat rather than pursue more aggressive, and costly, marketing policies.

Independent electricity suppliers opting to enter the markets of non-interconnected islands have no choice but to purchase power directly from the grid at a high cost as no other alternatives, such as NOME auctions, exist. NOME electricity amounts acquired by independent suppliers are currently not being utilized for non-interconnected islands as these amounts concern demand in other markets.

In addition, Public Service Compensation (YKO) payments to independent suppliers are being delayed, which is forcing firms to rely on company resources for financing their actions.

Dodecannese, all Cyclades interconnections proposed

The findings of a scientific committee assembled by RAE, the Regulatory Authority for Energy, in December, 2015, to study the possibilities and feasibility of electricity interconnections at the country’s non-interconnected islands, call for the inclusion of the remainder of Cyclades islands still not included in the authority’s development plan as well as the addition of the Dodecannese.

The scientific committee has now forwarded the majority of its findings to RAE.

It has proposed the construction of new natural gas-fueled power stations for the north Aegean islands as the most feasible option. Alternative interconnection options are also being examined.

RAE is striving to include on its ten-year energy system development plan all island interconnection projects deemed necessary, with binding time frames, within 2018.

Though largely unknown, legislation ratifed last August gives RAE the authority and responsibility to determine optimal electrification solutions for the islands. RAE also reserves the right to revoke licenses of old petrol-fueled power stations currently operating on islands as a means of pressuring IPTO, the power grid operator, to develop interconnection projects at these locations, if deemed feasible.

RAE also maintains the right to offer contracts for needed interconnection projects to other companies shoud IPTO not prepared to develop these. In this case, IPTO would then be obligated to operate these interconnections.

RAE president Nikos Boulaxis recently expressed confidence in the development prospects of the country’s needed interconnections. He cited political will and IPTO’s reinvigorated activity as factors behind his positive outlook. China’s SGCC recently became IPTO’s strategic partner with a 24 percent stake.

Even so, Boulaxis has warned RAE would be prepared to take action, including legal, to push ahead interconnection projects.

The development of island interconenctions would greatly reduce current Public Service Compensation (YKO) payments included on electricity bills to primarily subsidize high-cost electricity production on Greece’s non-interconnected islands.

Power suppliers lack incentive to enter island markets

The elecricity markets of the country’s non-interconnected islands cannot open up to competition as of January 1, as is planned, because insurmountable obstacles are discouraging the entry of independent suppliers.

Though regulations for this prospect were established back in 2014 market liberalization has so far been restricted to the islands of Crete and Rhodes.

Crete’s electricity market was opened up to independent suppliers in August, 2016, while Rhodes followed last January.

Theoretically, as of January 1 consumers on the country’s 30 non-interconnected islands, not including Crete and Rhodes, will supposedly be free to choose electricity suppliers.

Independent suppliers made dynamic entries into the markets of the aforementioned islands, especially Crete, but the early enthusiasm has since faded.

Suppliers operating in these markets do not have access to any NOME auction equivalent and, as a result, are purchasing electricity from the system at high prices.

NOME auctions were introduced in Greece’s main electricity market just over a year ago to offer independent suppliers access to the main power utility PPC’s low-cost lignite and hydropower sources.

The lack of any NOME equivalent for the non-interconnected islands stands as a major disincentive for independent electricity suppliers eyeing the islands, especially those with developed tourism sectors.

The resulting hesitancy of independent suppliers is expected to become very apparent in the new year, when little is expected to change, despite the liberalization of island markets.


RAE pushing for more specific interconnection project targets

IPTO, the country’s power grid operator, is facing RAE (Regulatory Authority for Energy) pressure to establish more specific targets for the development of submarine island interconnection projects, especially those concerning Crete and the Cyclades, which are included in the operator’s ten-year plan (2018-2027), sources have informed.

RAE wants realistic target dates to be set, which, if missed, would lead to penalties, unless the delays are justified by certain circumstances, such as legal proceedings, for example.

The energy authority is increasing the pressure to avoid further delays, a common occurence at IPTO with major projects in the past.

Completion of the interconnection projects would reduce energy generation costs, a benefit that would be rolled over to consumers, currently covering high-cost electricity generation on the non-interconnected islands through Public Service Compensation (YKO) surcharges imposed on electricity bills.

Binding targets for IPTO are expected to come into effect in 2018 and include the Cretan interconnection project, to be developed over two stages (minor and major interconnections) and the Cyclades interconnection (second and third stages).

The new IPTO board, established following SGCC’s (State Grid Corporation of China) recent acquisition of a 24 percent stake, has already accelerated the pace at which the interconnection project is being handled by the operator, according to sources.

Prior to the arrival of IPTO’s Chinese strategic partner, RAE’s leadership often threatened to transfer the island interconnection projects to other companies. These threats are no longer being made.

According to IPTO’s current ten-year development plan, the minor Cretan interconnection (140-180 MW) is expected to link the island, Greece’s largest, with the Peloponnese by 2020, while the major interconnection (700 MW) is planned to link Crete with the wider Athens area by December, 2023. However, the operator has noted that Cretan electricity demand will not be fully integrated into the country’s grid until 2025, a prospect that has raised concerns.

Progress of the minor Cretan interconnection has been hampered as a result of legal action taken by residents of the Lakonia region’s Malea peninsula, where the submarine cable running from Crete is planned to reach the Peloponnese. Local residents are demanding revisions, including an alternate location, and have taken their case to the Council of State, Greece’s Supreme Administrative Court.


RAE preparing to set hybrid power plant output payment levels

RAE, the Regulatory Authority for Energy, is moving to soon determine payment levels for hybrid power plant output on the non-interconnected islands, keenly awaited by market players before they proceed with investment plans.

The authority has commissioned a National Technical University of Athens (NTUA) department to conduct a related study, whose findings, expected within the next two months, will serve to guide RAE in its hybrid power station output payment rate decisions.

According to recent data made available by HEDNO (Hellenic Electricity Distribution Network Operator), a total of 24 hybrid power station projects exist around the country, 18 of these on Crete, representing a total capacity of 571.5 MW; three on Rhodes with a total capacity of 36 MW; one on Tilos, offering 0.4 MW; one on Lesvos with a 15-MW capacity; and another on Ikaria, measuring 2.55 MW.

Besides the hybrid power station output payment rates, sector investors are also anticipating the development of interconnection projects to link the non-interconnected islands with the mainland. These projects, crucial for the sector, are behind schedule.

Hybrid power plants often contain a renewable energy component that is balanced via a second form of generation or storage such as a diesel genset, fuel cell or battery storage system.

All island electricity markets to be liberalized start of 2018

RAE, the Regulatory Authority for Energy, has decided to fully liberalize the retail electricity markets of all the country’s non-interconnected islands as of January 1, 2018, the authority’s chief officials announced yesterday at the ongoing Thessaloniki International Fair.

To date, Crete and Rhodes are the country’s only non-interconnected islands whose electricity markets have been fully liberalized.

Island consumers – households and businesses – on all of the country’s non-interconnected islands will be able to select their electricity supplier of choice as of the beginning of next year in a bid to reduce their energy costs, RAE chief Nikos Boulaxis informed.

The Cretan electricity market was liberalized in August, 2016, and Rhodes followed as of January 1 this year.

Approximately 17 percent of consumers on Crete have switched electricity suppliers while between 5 and 6 percent have shifted to alternate suppliers on Rhodes.


PPC granted permits for extra generating capacity on islands

RAE, the Regulatory Authority for Energy, has granted the main power utility PPC permission to increase electricity producing capacity on non-interconnected islands through the installation of additional generators, resolving a dispute between the two sides.

As a result, PPC can now increase its electricity generation capacities by 8 MW on Santorini, 20 MW on Rhodes, 3 MW on Ikaria, 3 MW on Mykonos, 1 MW on Antiparos and 2 MW on Karpathos.

Responding to the need for greater electricity generation on these islands, PPC had taken the initiative to boost the capacity of its generators prior to RAE’s issuance of the necessary licensing. This move caused friction between PPC and RAE.

PPC recently forwarded a letter to RAE urging the authority to deliver all necessary permits as soon as possible.

RAE also decided to grant PPC license extensions for two already-installed facilities at Soroni, Rhodes, a 25.18-MW capacity generator and a 23.6-MW wind-energy unit.


Island interconnections to slash public service expenses

The Greek government’s anticipated response to a RAE (Regulatory Authority for Energy) proposal calling for the country’s electricity-related social policy to be funded through a special consumption tax (EFK) imposed on fuel rather than the present public service compensation (YKO) surcharges added to electricity bills will indicate the administration’s preference as to who should foot the bill.

The tax-funded energy social policy proposal made by RAE would require approval from both the Greek government and European Commission if it is to be implemented.

The public service compensation accumulated through electricity bills in Greece is primarily used to subsidize high-cost electricity production on the country’s non-interconnected islands.

A new EU directive advising EU members states imposing public service compensation surcharges to instead finance energy-linked social policy costs through their state budgets is sure to generate wide debate in Greece.

Unlike other European countries whose territories include islands, Greece has yet to develop interconnection projects for lower-cost electricity supply to its numerous islands. Once interconnection projects serving these needs are completed, Greece’s annual public service compensation costs stand to drop from approximately 600 million euros at present to no more than 150 million euros.

An interconnection project to link the Cyclades with Greece’s mainland is expected to be completed by 2018, while Crete’s interconnection may be completed between 2020 and 2022, at best. The Dodecanese and northern Aegean island interconnections will then need to be developed, meaning that completion of the overall project will require anywhere between 10 to 15 more years.

In Spain, the most comparable European example to Greece in terms of geographical make-up, energy-related social policy costs are shared by the national budget and consumers. Though a late starter, Spain, from 2011 onwards, managed to develop interconnection projects covering many of its island complexes, thereby greatly reducing the country’s public service compensation costs.

Also in 2011, Italy developed an interconnection project linking Sardinia with the mainland, a move that also drastically reduced public service compensation charges for consumers. Other European countries whose territories include islands, such as Germany, the UK and the Scandinavian countries, developed their needed interconnection problems long ago.

ESAI producers group troubled by interconnection delays

ESAI, the Hellenic Association of Independent Power Producers, locally acronymed HAIPP, remains concerned by power grid operator IPTO’s ten-year plan, despite various improvements, including greater detail, following the association’s intial expression of concern a few months ago.

ESAI is concerned by what it sees as a discoordination issue concerning the wider Athens-Crete electricity system interconnection, a project planned to be finalized by 2023, and the inclusion of Crete’s entire electricty demand into the system in 2025.

The association is also troubled by delays concerning all other interconnection projects to link the Greek islands in the Aegean Sea with the mainland, except for the Paros, Naxos and Mykonos island projects.

The finalization of the interconnection projects concerning these three islands, located relatively closer to the mainland, is expected by 2019.

RAE to push for Dodecanese, north Aegean interconnections

RAE, the Regulatory Authority for Energy, intends to push hard for the development of submarine interconnections linking the islands of the Dodecanese and north Aegean with the mainland. Completion of these endeavors would offer electricity network links between the country’s mainland and virtually all of the islands as plans are already in progress for interconnections concerning the Cyclades and Crete.

Though not widely known, RAE, through a law ratified last August, has been given both the authority and responsibility to determine the best possible means of electrification for the Greek islands. The authority also has the right to revoke licenses issued for diesel-fueled power stations, costly electricity generation means, operating on islands if it deems interconnection projects may be developed. This would put the pressure on IPTO, the power grid operator, to act swiftly. RAE also has the right to commission the development of projects to others if IPTO is unable to do so. IPTO would then be obligated to operate these projects once completed.

RAE is expected to deliver a list detailing all moves needed for optimal electricity supply to the islands by the end of this year.

Officials at RAE have told energypress the authority is determined to use its powers to ensure that all needed interconnection projects are developed swiftly.

Older data and studies examined by RAE indicate that approximately 80 percent of electricity consumption on the Greek islands can be provided through mainland interconnections. Apart from some of the smaller islands, for which such projects would not be feasible, interconnections for all other islands would offer benefits, including the reduction of public service compensation (YKO) surchages. These are added to electricity bills to fund the costly island power units.

“Even now, at a time of relatively low oil prices, these interconnections are feasible, and would be even more sustainable should oil prices rise to levels of 90 and 100 dollars per barrel,” RAE chief Nikos Boulaxis recently told Greek parliament.

Priority should be given to the Dodecanese, to be interconnected with Crete or Athens, and north Aegean islands, RAE believes.

In comments yesterday, Prime Minister Alexis Tsipras said an agreement between the main power utility PPC and China’s SGCC (State Grid Corporation of China) for the latter’s acquisition of a 24 percent stake in IPTO, a PPC subsidiary, offers new prospects. SGCC’s leadership told Tsipras, on his recent visit to Beijing, the company is keen to further develop Greece’s electricity networks, including the island interconnections.




New software to aid team studying power supply to the islands

New software is being developed to support the efforts of a committee conducting a feasibility study for electricity supply options concerning Greece’s non-interconnected islands.

RAE, the Regulatory Authority for Energy, has commissioned the National Technical University of Athens to develop software for the study, whose cost has been estimated at 91,760 euros.

Once delivered, the software is expected to offer tremendous support to the committee, made up of twelve officials from various operators, whose role is to examine the technical and financial details of options concerning electricity supply to Greece’s non-interconnected islands. Findings are expected in about six months.

Linking the non-interconnected islands with the mainland grid is expected to resolve energy adequacy issues faced by the islands. Their interconnection is also seen as the only option for lower-cost electricity supply.

At present, the energy market for non-interconnected islands is comprised of 32 independent systems, some of which cover the needs of entire groups of islands. The energy market for the non-interconnected islands is operated and managed by DEDDIE, the Hellenic Electricity Distribution Network Operator, locally acronymed HEDNO.

Electricity used on the non-interconnected islands is primarily produced by local power units running on fuel, mazut and diesel, as well as renewable energy facilities, especially wind and solar farms.

The non-interconnected islands have remained disconnected from the mainland grid mainly as a result of technical and technological issues, as well as financial obstacles raised by the high cost of developing such projects.

At a recent news conference, Nikos Boulaxis, chairman at RAE, the Regulatory Authority for Energy, promised that part of the interconnection will have begun operating by early 2018, beginning with an underwater cable connection from coastal Lavrio, southeast of Athens, to the island Syros.





Brussels OK’s aid for non-interconnected island power units

The European Commission has found Greek plans to support the modernisation of power plants on non-interconnected Greek islands to be in line with EU state aid rules.

In December, 2015, Greece notified plans to grant the main power utility PPC a State guarantee, which would enable the company to secure a €190 million loan from the European Investment Bank (EIB). This loan will cover half of the costs for the necessary upgrade, expansion and refurbishment of existing power plants on 18 islands not connected to the electricity grid of the mainland.

PPC will finance the other half of the costs from its own budget. The measure involves state aid, because the terms of the public loan are more favourable than those a commercial operator would have accepted.

The Commission found that this aid is in line with EU rules, in particular the Commission’s 2011 rules on services of general economic interest, since the measure is necessary to allow PPC to continue to supply consumers on the islands concerned with affordable electricity. It ensures the availability of the required electricity generation capacity on the islands concerned.

RES support plan terms set for non-interconnected islands

Installation and tariff payment details for renewable energy source (RES) units to be installed at non-interconected islands are included in a new legal framework for the RES support mechanism to soon be forwarded for public consultation by the energy ministry.

According to energypress sources, until the electricity market begins functioning on non-interconected islands with offers from suppliers and producers, all new RES and combined heat and power (CHP) units activated on these islands will be inducted into a support mechanism based on a fixed price. This payment system will apply until all necessary details have been completed to permit daily electricity markets to function.

Based on the new plan, wind-energy facilities with installed capacities of less than three MW and all other RES and CHP units with capacities below 500 KW may be inducted into the new support mechanism.