Market players fear European energy inaccuracies could lead to further woes

Major energy market players agree European energy consumers could face many more rounds of pressure over the next few years as a result of errors and inaccuracies plaguing the EU’s energy transition plan towards renewables.

Energy market players are not doubting the EU’s decarbonization goal, seeing it as irreversible, but do believe the European Commission must rectify, as soon as possible, current mechanism faults and market distortions whose resulting deficiencies are being exploited by traders and monopolies, such as Russian gas giant Gazprom, earning excessive revenues at present.

Europe appears to have trapped itself in mechanisms that do not seem to be working, fueling rising concerns among enterprises and industrial players.

Measures must be taken right now at national and European levels. For instance, windfall profits, sparked by sharp wholesale price increases, need to be stopped through the introduction of related taxes, as has been the case in Spain, market players suggest.

Also, electricity prices need to cease reflecting the spot market’s surging prices and instead be shaped by the actual cost of the energy mix, comprised of low-cost renewables (30-35%), high-cost natural gas (30%), lignite (10%), hydropower (10%), plus imports.

In addition, green PPAs reflecting actual cost need to player a bigger role. In Germany, for example, 90 percent of electricity supply is currently made available through PPAs.

Fearing this crisis could last, industrial players in Greece are moving to secure futures contracts covering supply for the next three to four years.

 

PPAs soon as measure against higher industrial energy costs

A model for green-energy power purchase agreements (PPAs) will be preannounced to the European Commission by the end of next week in an effort for a swift approval, energy minister Kostas Skrekas told a news conference yesterday, held for an update on measures being prepared to lessen the burden of increased energy costs for consumers.

The minister offered an update on the green PPA plan when asked about government measures that could protect large enterprises against increased energy costs.

The energy ministry sees the green PPAs as a cost-reduction tool for industrial energy as industrial consumers will be able to cover a significant percentage of their energy needs using RES-based electricity, a lower-cost option. The effort is expected to be based on a Green Pool model.

 

 

PPC industrial supply deals last act ahead of market share dive

Power utility PPC’s latest supply agreements with industrial consumers, finalized just days ago with steel producer Viohalco, Titan cement and building materials group, as well as all other industrial players, following a preceding deal with Aluminium of Greece, a member of the Mytilineos group, represent, barring unexpected developments, the final act ahead of major market changes that will dramatically reduce the utility’s market share beyond December 31, 2023, when these new high-voltage supply agreements expire.

They are PPC’s last industrial supply agreements offering fixed tariffs. As of 2024, PPC will offer indexed tariff prices that will be pegged to the wholesale electricity market’s monthly clearing price in the day-ahead market.

This change will most likely prompt industrial consumers to seek alternative electricity supply solutions.

Aluminium of Greece has already done so, as it plans to receive electricity from the Mytilineos group’s new natural gas-fired power plant being developed in the Agios Nikolaos industrial zone in Viotia’s Agios Nikolaos area, northwest of Athens, to be direct cable-linked to the Aluminium of Greece facility, as well as through RES production, ending a 60-year association with PPC.

At present, PPC sells an annual electricity amount of between 63 to 64 TWh, of which approximately 5 TWh concern high-voltage electricity. If energy-intensive consumers leave PPC from 2024 onwards, to avoid indexed tariffs, the utility’s electricity sales will drop to between 58 and 59 TWh, and, by extension, its retail market share will contract to about 50 percent from 64 percent at present.

This is the state-controlled utility’s aim as an evenly divided electricity market in which PPC will hold a market share of about 50 percent and the independent suppliers the other 50 percent will end the DG Comp’s frequent interventions over the utility’s excessive retail market share.

The energy ministry is aiming for green-energy power purchase agreements (PPAs) to cover 20 percent of industrial electricity demand by next year.

 

‘DAPEEP should manage PPAs platform, not energy exchange’

Preparations for the country’s Market Reform Plan, expected to soon be submitted to the European Commission for approval, have prompted a reaction from RES market operator DAPEEP, asserting it should be appointed operator of green-energy power purchase agreements (PPAs) instead of the energy exchange, as has been stipulated in the plan, now undergoing public consultation.

DAPEEP’s objection to the PPA plan, included in the Market Reform Plan, emerged at a meeting staged by RAE, the Regulatory Authority for Energy, uring discussion on the road map for domestic wholesale electricity market revisions.

DAPEEP’s operator’s chief official Yiannis Giarentis protested that the operator has supported the RES sector’s development for years, being at the helm of this market for 20 years, but has now been sidelined as green-energy PPAs, to facilitate bilateral agreements between RES producers and industrial consumers, are about to come into the picture.

RAE will now examine various proposals and views before taking a stance on the matter.

Target model revisions to enable new player entries, market coupling

The country’s Market Reform Plan, forwarded by RAE, the Regulatory Authority for Energy, for publication consultation, includes a road map for target model interventions, designed, amongst other things, to facilitate the target model market entry of new players as well as ensuing market coupling steps with neighboring countries.

This road map also includes a plan to lift existing target model restrictions, including a 20 percent upper limit for PPAs that is currently valid without any expiry date.

Another revision included in the Market Reform Plan is intended to separate energy used for balancing purposes and energy used for unit loading revisions during re-dispatching procedures for grid security or sufficiency reasons.

This separation process is planned to be implemented as of December 1, beginning with flagging of quantities activated as a result of loading revisions.

A second stage is planned to be introduced March 31, 2022, when clearing procedures for these quantities will be launched.

Power grid operator IPTO is expected to submit, today, its proposal concerning the first stage.

As for the revisions to facilitate the target model entry of new players, a demand response mechanism concerning all markets, not just the balancing market, is planned to be implemented February 1, 2022.

Just over a month later, on March 8, RES market balancing services will also be introduced, according to the road map.

Intraday market coupling of the Greek, Italian and Slovenia intraday markets is planned for September 21, through complementary regional intraday auctions (CRIDAs), a further step towards full unification of the European electricity market.

 

Green PPAs exchange platform, industrial subsidies in making

A Market Reform Plan being prepared by the government, to be submitted to the European Commission, includes provisions for the establishment of an energy exchange transaction platform concerning power purchase agreements (PPAs) between RES producers, as well as green aggregators, with suppliers and major-scale consumers.

The green PPAs, when concerning energy-intensive industrial enterprises, will receive state support, while a subsidy package for this category of agreements is also in the making, according to the plan.

Funds stemming from the recovery fund, the green fund as well as the RES special account will be used to fund the subsidy package, according to the government plan.

The aim of the effort is to ensure, in advance, the sale of prospective energy to be produced by new RES units, the intention being to  facilitate bank financing for their development given the fact that they will no longer be entitled to fixed tariffs, through auctions, over 20-year periods, as has been the case until now.

The plan is expected to result in lower-priced green energy for industrial consumers and also facilitate the development of new RES investments.

Many RES plans will be shelved as competition intensifies

A sizeable number of RES plans, especially smaller-scale projects, face dead-end paths as new market conditions now being shaped undoubtedly favor the big players, domestic and foreign.

The limited RES capacity to be offered at ensuing RES auctions, lower tariff prices expected at these sessions as a result of intensified competition, also seen lowering power purchase agreement (PPA) levels for RES producers, are all contributing to this changing market scene.

Only a small fraction of the abundant RES investment plans that have emerged will end up being developed, once they have secured lower-level tariffs, offering narrower profit margins, at the next RES auctions.

RES projects representing a total capacity of approximately 3.1 GW are planned to secure tariffs, for their output, at auctions over the next three years.

Stressing the diminished prospects for most RES investment plans, over 3,000 producer-certificate applications for units representing a total capacity of 71 GW were submitted to local authorities in last December’s cycle alone.

PPC-Aluminium of Greece agreement paves way for other major consumers

The forthcoming end of a long-lasting business association between Aluminium of Greece, a member of the Mytilineos group, and power utility PPC, announced at the former’s general shareholders’ meeting yesterday, marks the end of an era in the energy ties between the country’s biggest electricity consumer and the Greek market’s dominant supplier.

In 2023, Aluminium of Greece will no longer depend on PPC’s supply, a development concurrently marking the beginning of its goal to become the first eco-friendly aluminium producer.

The latest PPC-Aluminium of Greece agreement promises to pave the way for solutions in negotiations currently in progress between the power utility and other energy-intensive industrial producers.

Other than the fact that the duration of Aluminium of Greece’s new supply agreement with PPC will run until 2023, no other details have been disclosed. Its expiration in two years’ time will mark the end of a 60-year association between the two companies.

One thing already clear is that Aluminium of Greece, beyond 2023, will receive electricity from the Mytilineos group’s new natural gas-fired power plant being developed in the Agios Nikolaos industrial zone in Viotia’s Agios Nikolaos area, northwest of Athens, to be direct cable-linked to the Aluminium of Greece facility, as well as through RES production.

The combination of these two electricity sources will offer Aluminium of Greece greater energy-source flexibility, the group’s chairman and CEO Evangelos Mytilineos noted yesterday.

PPC’s administration, headed by chief executive Giorgos Stassis, displayed realism that will “help industry, as a whole, move ahead with the energy transition that is inevitably approaching,” Mytilineos acknowledged. “We can establish PPAs at good price levels, and we will play a significant role in this domain,” he added.

 

PPC hold of industry ending, energy groups entering picture

The approaching end of a 60-year business association between power utility PPC and Aluminium of Greece, a member of the Mytilineos group, announced yesterday by the group’s chairman and CEO Evangelos Mytilineos, marks the end of an era with wider implications, as all the country’s energy and industrial groups are heading in the same direction.

“In 2023, Aluminium of Greece will no longer depend on PPC. It is moving into a new era as, for the first time since its establishment, the company will be freed from PPC in terms of electricity supply,” Mytilineos announced at a general shareholders’ meeting.

The future belongs to the vertically integrated groups, smaller versions of the power utility, set to enter and cover market needs.

Some enterprises have already prepared and positioned themselves for the new era, in which major-scale electricity consumers will no longer depend on PPC, instead covering needs through PPAs.

Companies that have been slower to incorporate Greece’s energy transition into their strategies must now move fast if they want to remain on the map.

The developments offer a glimpse of the energy sector’s new era. A more efficient PPC will no longer be weighed down by dependencies and compromises, private-sector groups will be structured for greener policies, RES investors will not depend on tariffs at RES auctions, but, instead, establish PPAs with industrial consumers, and competition will intensify through the many changes coming into play, such as the target model markets and the Capacity Remuneration Mechanism (CRM).

Green-energy investments, breaking one record after another, now appear likely to achieve a 2030 objective aiming for eco-friendly energy coverage of the country’s total energy demand at a level of 63 percent.

This essentially means that RES facilities offering a total capacity of 17 GW will be operating by the end of this decade, lessening the need for natural gas-fired power stations, which will become unsustainable, in market terms, as a large proportion of energy exchange transactions will be covered by increasingly competitive RES units.

 

RES investors keen to talk PPAs with suppliers, industry

RES investors, especially from the solar energy field, but also wind energy, are engaging in talks with electricity supply companies and industrial enterprises to establish power purchase agreements (PPAs) for their future or under-construction projects as they anticipate a reduction in capacities at forthcoming RES auctions and even lower tariff prices than the low levels registered at the most recent auction.

This increased focus on PPAs highlights the major shift taking place in green-energy production as fixed tariffs, at auction, are gradually being phased out and the energy-exchange era is taking over.

RES producers need to establish contracts for the sale of their output in order to develop their projects as banks are not willing to finance such investments if potential earnings, at sufficient levels, have not been secured in advance.

No bilateral PPAs have yet been established, but the negotiations are continual and tenacious.

Potential RES producers have – since the previous RES auction – been willing to accept lower prices, proposing levels of as low as 40 euros per MWh attached with demands for shorter contracts, including five-year periods, sources have informed.

Market officials expect PPAs to start emerging over the next six months, noting that banks will play a decisive role in the price levels to be established as their project financing decisions will depend on profit margins presented by investors.

RES licensing procedure revision plan troubling players

A new RES licensing model being worked on by the energy ministry, especially two aspects, one requiring letters of guarantee from investors even if they have previously obtained production certificates, and the other, offering licensing-procedure priority to investors who opt to negotiate and establish bilateral power purchase agreements (PPAs) with industrial consumers rather than secure fixed tariffs through RES auctions, are details troubling players.

Under current licensing rules, RES investors must submit letters of guarantee only when connection terms have been signed, in other words, at the very end of the procedure.

This order of things is saturating the market as players not fully committed to their investment plans are haphazardly submitting licensing applications and occupying capacity that is valuable for investors with serious intentions.

The energy ministry now intends to revise this procedure so that RES investors submit their letters of guarantee at the beginning of the licensing process.

Over the past few weeks, the energy ministry has examined the prospect of requiring investors, old and new, to forward letters of guarantee along with their producer certificate applications. This ministry plan, still lacking full clarity, has unsettled market players.

The ministry’s plan to offer favorable licensing procedure treatment to RES investors opting to negotiate PPAs with industrial consumers rather than seek fixed tariffs at auction has also raised concerns. The resulting monitoring effort to be needed could be complicated and uncertain, players and critics fear.

Licensing procedure priority for RES investors holding PPAs

RES investors opting to establish bilateral power purchase agreements (PPAs) with industrial consumers will be given licensing priority for the projects over peers planning to secure tariffs the customary way, through RES auctions staged by RAE, the Regulatory Authority for Energy, according to an energy-sector bill expected to be submitted to Parliament in June.

This plan essentially aims to offer investors incentive to stop focusing their efforts on how they will secure fixed tariffs for their RES projects by offering favorable licensing treatment for projects holding bilateral tariff agreements.

Over the next three years, a RES capacity totaling 3.5 GW is expected to be offered by authorities to investors.

It should be pointed out that projects linked to fixed tariffs gained through RES auctions are likely to enjoy more favorable bank treatment for project financing. On the contrary, RES investors holding PPAs will need to have struck handsome deals to convince banks for money.

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.

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.

Brussels insists on PPC sale of lignite power packages to rivals

Power utility PPC must soon start offering rival suppliers portions of its lignite-based electricity production, as specified in an antitrust agreement, despite subdued interest by possible buyers expressed in a February market test, the European Commission insists.

The subject, which has remained stagnant for months following slow development over the past 13 years or so – ever since legal action was taken against PPC in 2008 over its lignite monopoly – will be one of the topics to be discussed at a meeting today between energy minister Kostas Skrekas and the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition.

Given Brussels’ insistence, the energy ministry has devoted considerable time over the past few weeks to shape a lignite electricity sale plan, based on a January agreement between the minister and the country’s creditor institutions, that could finally settle the dispute.

The January agreement calls for the sale of energy packages, either quarterly or annually, representing, in 2021, 50 percent of the previous year’s lignite-based production.

The percentage of PPC’s lignite-based electricity quantities to be offered to rival suppliers in 2022 and 2023 should be reduced to 40 percent of the previous year’s output, according to the agreement.

These amounts are seen as insufficient to make any real impact on the retail electricity market’s standings.

Other issues to be discussed at today’s meeting between Skrekas and Vestager include Brussels’ support for a grid back-up model as part of a wider Capacity Remuneration Mechanism (CRM). Athens favors a separate Strategic Reserve Mechanism to remunerate units that are made available by electricity producers for grid back-up services.

Skrekas is also striving to establish a mechanism that would subsidize RES producers for power purchase agreements (PPAs) with energy-intensive industrial enterprises.

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.

 

PPC Renewables consortium for offshore wind farm projects

PPC Renewables, a subsidiary of power utility PPC, plans to establish a consortium for offshore wind farm investments and is preparing, for this year, a tender for RES projects totaling 100 MW, the subsidiary’s chief executive Konstantinos Mavros (photo) has informed two energy conferences, the 11th Annual Sustainability Forum, organized by Capital Link, and the Athens bourse’s 1st Energy Conference, both held yesterday.

The company head’s update comes as further proof of the power utility PPC group’s intensifying effort for a leading role in the green energy sector.

Offshore wind farm projects demand major investment synergies and “we will seek to establish a consortium” for this purpose, the PPC Renewables chief told the first of the two conferences.

Speaking later at the Athens bourse conference, Mavros also informed that PPC Renewables plans to stage a tender for a total of 100 MW in new RES projects. One of these projects will be a large-scale solar farm, he noted without elaborating. According to energypress sources, PPC Renewables will also develop a big wind farm.

The PPC group is also moving ahead with a plan to establish Greece’s first ever power purchase agreement (PPA), as a RES producer, with industrial consumers. PPC and PPC Renewables plan to establish a PPA in July for 50 MW through a solar farm in Megalopoli, Peloponnese.

Mechanisms, competition on Vestager agenda, here May 13

Energy minister Kostas Skrekas intends to present his case for the introduction of five support mechanisms encouraging energy-sector investments in Greece’s ongoing transition towards carbon neutrality to the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, on the occasion of the official’s upcoming visit to Athens, scheduled for May 13.

Vestager will be in the Greek capital with an agenda featuring two pending competition issues concerning state-controlled power utility PPC.

Greece has faced charges for PPC’s monopoly of the country’s lignite sources but an agreement was reached to end the case by introducing a mechanism offering the power utility’s rivals access to lignite-generated electricity.

A market test for this mechanism was completed some time ago but failed to attract any real interest from rival suppliers.

The percentage of lignite-based electricity made available by PPC, initially set at 50 percent of total lignite-fired output and then lowered to 40 percent, is viewed, by third parties, as too small for any real gains.

The second PPC-related matter to be discussed during Vestager’s visit concerns a recently initiated investigation by Brussels seeking to determine whether the power utility has engaged in activities impeding market competition.

Private-sector investors are pushing for a capacity remuneration mechanism (CRM) in order to go ahead with the development of natural gas-fueled power stations, needed as Greece heads towards a post-lignite era. Skrekas, the energy minister, has repeatedly said a CRM will be launched in June.

The minister also supports a strategic reserve mechanism to compensate PPC’s lignite-fired power stations, still needed for back-up services but nowadays loss-incurring as a result of higher CO2 emission right costs.

In addition, the government is seeking compensation for the premature closure of PPC’s lignite-fired power stations and related mines, being phased out until 2023.

The minister also supports a support framework for hybrid units on non-interconnected islands combining RES electricity generation and energy storage.

Skrekas is also striving to establish a mechanism that would subsidize RES producers for power purchase agreements (PPAs) with energy-intensive industrial enterprises as well as suppliers selling to major-scale consumers.