Lignite-fired electricity packages to PPC rivals by fourth quarter

The energy ministry plans to soon submit to Parliament a legislative revision for a mechanism offering third parties access to power utility PPC’s lignite-fired electricity production. This move will enable the implementation of an agreement on the matter between the government and the European Commission as a remedy to a long-running antitrust case concerning PPC’s monopoly in the lignite sector.

Officials are aiming for a first round of lignite-produced electricity packages to become available to third parties imminently, by the fourth quarter of this year.

All electricity suppliers will be entitled to purchase these packages, to have three-month durations.

Electricity quantities planned to be offered to suppliers through the mechanism in the fourth quarter this year will be calculated to represent 50 percent of lignite-fired output in the equivalent period of 2020. Then, for every quarter in 2022 and 2023, lignite-fired packages to be offered to PPC’s rivals will represent 40 percent of lignite-based production in equivalent quarters of the respective previous years.

According to the country’s decarbonization plan, all existing lignite-fired power stations will cease operating and no longer participate in the electricity market by the end of 2023.

A prospective PPC facility, Ptolemaida V, is planned to be launched as a lignite-fired power station early in 2023 before it is withdrawn in December, 2024 for a fuel conversion and reintroduction.

 

 

Second market test launched for PPC lignite power packages

The European Commission has launched a second and revised market test to measure the level of interest of independent suppliers in power utility PPC’s lignite-generated electricity packages.

Suppliers have received a questionnaire as part of the procedure, staged following a subdued response to a first test in which participants more or less wrote off PPC lignite-generated electricity packages as a measure that could intensify competition in the electricity market. Participants have until July 14 to forward their responses.

A final antitrust agreement was reached at a mid-May meeting in Athens between energy minister Kostas Skrekas and the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition.

Some revisions have been introduced to the lignite-based electricity package solution now being tested. The PPC packages would be offered through the energy exchange futures market, not through bilateral contracts with independent suppliers, as was originally proposed.

A second important revision concerns the pricing formula for these packages. It will now be determined through direct negotiation between the buyer and PPC through the futures market, without a market prices floor. Under the previous model, the price of the packages was based on the wholesale price minus a discount.

According to sources, the mechanism offering lignite electricity packages will remain valid until December, 2024, or, otherwise, will expire as soon as the country’s final lignite-fired power station has been withdrawn, if this precedes the aforementioned date.

Given these dates, the output of PPC’s Ptolemaida V, expected to be launched in 2023, initially as a lignite-fired unit before it converts to gas in 2026, will contribute to the lignite electricity packages.

IPTO factors Balkans into adequacy report calculations

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

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

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

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

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

 

Ptolemaida V gas conversion board decision end of June

Power utility PPC is moving swiftly towards a finalized investment decision on a fuel-conversion plan for its prospective Ptolemaida V facility in northern Greece, to begin operating as a lignite-fired power station in 2022 before converting, a few years later, to a natural gas-fired facility equipped with infrastructure also enabling the use of hydrogen.

PPC’s chief executive Giorgos Stassis will present the plan to the company board at a meeting scheduled for the end of June, when it is expected to be approved, sources informed.

The plan will include schedules and financial studies for the conversion of Ptolemaida V, Greece’s last lignite-fired power station in development.

The PPC board is expected to stick to its plan of operating Ptolemaida V as a lignite-fired power station until 2025, instead of 2028, as was initially planned, before making the fuel switch to natural gas.

The country’s ambitious decarbonization targets and rallying CO2 emission right prices, currently at lofty levels ranging between 40 and 44 euros per ton, prompted Stassis, the CEO, to hasten PPC’s withdrawal of lignite units.

Ptolemaida V will be loss-incurring as a lignite-fired facility, the chief executive told analysts, responding to questions, during a recent presentation of the company’s financial results.

PPC also plans to increase the production capacity of Ptolemaida V to 1,000 MW from 660 MW. The facility will be flexible, possessing the ability to swiftly increase output from 300 to 1,000 MW within 30 minutes to an hour.

The facility’s fuel conversion cost is estimated at 250 million euros, sources have informed.

Stassis told analysts Ptolemaida V will be competitive even without support from the Capacity Remuneration Mechanism (CRM), being sought by the government from the European Commission as support for flexibility.

 

Greece carbon-free by 2025, among 20 fastest movers

Twelve European countries have, to date, fully withdrawn their coal-fired facilities, while a further seven, including Greece, have committed to do so by 2025.

A coal-free status in Greece is expected by 2025 as state-controlled power utility PPC has decided to convert its Ptolemaida V power station to a natural gas/hydrogen-run unit within the next four-and-a-half years, PPC’s chief executive Giorgos Stassis told analysts yesterday, during a presentation of the company’s 2020 results.

The Greek power utility is currently phasing out all other lignite-fired power stations and related mines until 2023.

Besides sparing PPC of certain losses, given an anticipated sharp rise in CO2 emission right costs, this course yet again reaffirms, to investors, PPC’s plan to transform into an eco-friendly corporation.

In addition, the prospect places PPC and Greece among the world’s fastest movers towards decarbonization.

Austria, Albania, Belgium, Cyprus, Estonia, Iceland, Latvia, Lithuania, Luxembourg, Malta, Sweden and Switzerland are all now carbon-free.

France is expected to be added to this list this year, Portugal and Slovakia anticipate their entries in 2023, the UK is seen turning carbon-free in 2024, while Greece, Hungary, Ireland and Italy are planned to join the carbon-free club in 2025.

PPC’s Kardia III and IV lignite power stations set for April 17 withdrawal

Power utility PPC’s Kardia III and IV lignite-fired power stations are nearing withdrawal as the two facilities are due to clock up 32,000 hours of operating time, their limit, on April 17.

PPC has scheduled to close down the two power stations this year as part of a decarbonization plan the company had announced in December, 2019. This plan was included in the National Energy and Climate Plan (NECP).

The two imminent power-station withdrawals, representing a capacity loss of 540 MW, will follow a first stage of exits carried out last year by PPC, when its withdrawal of Amynteo I and II, totaling 546 MW, launched the country’s decarbonization effort.

Besides producing electricity, the two Kardia units, located in Greece’s north, have also been used to provide district heating. Local authorities have asked the energy ministry to keep the two units on standby for a few more weeks until the early spring’s chilly weather is well and truly over.

PPC’s prospective Ptolemaida V unit will eventually take over district heating services following the adoption of intermediate solutions to cover next winter.

PPC also plans to withdraw Megalopoli III, in the Peloponnese, this year, earlier than the 2022 objective listed in the NECP.

IPTO warns PPC against Megalopoli III closure this year

Power utility PPC’s Megalopoli III lignite-fired power station must not be withdrawn within 2021 – let alone about now, as the utility had initially planned – for reasons of grid sufficiency, the power grid operator IPTO has advised in a letter forwarded to PPC and RAE, the Regulatory Authority for Energy.

IPTO, in its letter, warns against the consequences of two PPC plans, the first, an intention to shut down Megalopoli III by the end of March, and, the second, premature withdrawal of its entire portfolio of lignite-fired power stations by the end of this coming August, or to the extent that is feasible, given grid sufficiency requirements.

Premature withdrawal, this summer, of all the lignite units would result in a capacity shortage measuring approximately 1,000 MW, which would need to be covered by electricity imports, IPTO has warned.

PPC’s chief executive Giorgos Stassis refenced the IPTO letter during yesterday’s Power and Gas Supply Forum, an online event staged by energypress, while commenting on the need to maintain lignite-fired power stations for grid stability, even if these units are now loss-incurring because of elevated CO2 emission right costs.

IPTO does not consent to any lignite unit withdrawals that would be ahead of schedule – based on a PPC plan for 2021 to 2023 – the power utility’s boss stressed during yesterday’s forum.

As a result, Stassis added, PPC will need to be compensated by the European Commission, through a support mechanism proposed by Greek officials, for needing to maintain loss-incurring units.

IPTO, in its letter, reiterated the findings of recent grid sufficiency study, noting that the two-year period from 2021 to 2022, especially the current year, will be crucial. The grid would be particularly exposed to deficiencies if generating capacity is reduced without replacement, the operator warned.

The Mytilineos group plans to launch a new 826-MW combined cycle gas turbine (CCGT) plant next year. Testing is expected to begin in the fourth quarter this year. Also next year, PPC plans to launch its Ptolemaida V unit, initially as a lignite-fired power station.

PPC seeks IPTO support for EC lignite compensation request

Power utility PPC wants power grid operator IPTO to provide a statement declaring whether the power utility’s lignite-fired power stations, nowadays loss-incurring units as a result of elevated carbon emission right costs, are still necessary for the achievement of grid sufficiency, the utility’s objective being to gain support for a lignite compensation request submitted to the European Commission, not to immediately shut down its lignite units, sources have informed.

Brussels has been examining the PPC compensation request for months, initially as part of a package incorporating the European Commission’s lignite antitrust case against Greece, and more recently, following settlement of the latter, as a separate issue that has dragged on.

Throughout the entire period, officials in Greece have needed to respond to extensive Brussels questioning over PPC’s compensation request. Most recently, the European Commission is reported to have informed PPC, by email, that it would deliver a decision as soon as possible, once all information has been processed.

PPC, in its letter to IPTO, informs that it would be prepared to shut down the lignite units now if the operator considers them unnecessary for grid sufficiency as they are the cause of losses on a daily basis.

The power utility has planned a phaseout of its lignite facilities over the next three years, as part of the country’s decarbonization effort.

IPTO, in a grid-sufficiency study covering 2020 to 2030, conducted within the framework of the National Energy and Climate Plan, has stressed the period between 2021 and 2024 will be crucial as a result of PPC’s planned phaseout of lignite-fired power stations.

Subsequently, the grid’s sufficiency will depend on how soon three new gas-fueled power stations with a capacity totaling 2,150 MW – PPC’s Ptolemaida V, and units being developed by Mytilineos and TERNA – will be ready for launch, IPTO’s NECP-linked study noted.

PPC holding back on Ptolemaida V fuel decision

Power utility PPC will take ongoing global technological developments and their comparative costs into account to decide, in approximately a year’s time, on the fuel to be used at its prospective Ptolemaida V power station in northern Greece from 2028 onwards, when a switch from lignite has been scheduled.

The facility, expected to be completed in 2022, is initially planned to operate as a lignite-fired power station for a six-year period before switching to another fuel or fuels.

All options are being left open, meaning that, beyond 2028, Ptolemaida V could run on natural gas, biomass, waste-to-energy or a combination of these energy sources.

Biomass represents an advantageous option as it can be produced at the utility’s older lignite-fired units in the area, PPC’s chief executive Giorgos Stassis has pointed out.

If a biomass option is chosen, PPC intends to provide land for farmers and cooperatives to cultivate plants for energy production. Yield potential and the local climate promise to be the two main factors behind PPC’s selection of plant species to be cultivated for biomass purposes.

Japan’s Mitsubishi, providing the new facility’s electromechanical equipment, was commissioned, some time ago, to conduct a study determining the optimal choice of fuel for Ptolemaida V beyond 2028.

Continued use of lignite, after 2028, at Ptolemaida V has also been tabled as a possibility if carbon-capture utilization and storage (CCUS) technology is applied for a zero net carbon footprint.

In such a case, the CCUS technology could be applied on a wider scale to lure industrial units to the region for the establishment of a new industrial zone.

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.

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.

 

Post-lignite era fuel decision for Ptolemaida V next September

Power utility PPC is expected to have reached a decision by next September on the fuel mix to be used at its prospective lignite-fired power station Ptolemaida V beyond 2028, when this facility’s lignite-based operation is planned to end and complete the government’s decarbonization process.

The decision is expected to coincide with next September’s planned launch for Ptolemaida V, currently being constructed as a lignite-fired unit. The government has announced a plan to withdraw all of PPC’s existing coal generators by the end of 2023.

PPC is now looking to make project adjustments at Ptolemaida V that will enable a fuel conversion at the facility for lignite-free operation beyond 2028. Natural gas, biomass and waste-to-energy incineration, even a combination of all three generation methods, have been included as possible options in state-controlled PPC’s new business plan.

The power utility has requested a study from Mitsubishi-Hitachi, constructing the Ptolemaida V project, on future fuel alternatives for the facility. Finalized decisions will be made once the study has been delivered.

PPC chief executive Giorgos Stassis, speaking at a recent general shareholders’ meeting, assured a decision will be made by September, 2020 once all alternatives have been examined for an optimal solution, both technically and economically.

Ptolemaida V, a project with a 0.61-GW capacity budgeted at 1.5 billion euros, is expected to post operating profit before interest, taxes and depreciation if CO2 emission right costs range between 30 and 35 euros per ton, Stassis has noted.

 

Carbon-capture option latest proposal for Ptolemaida V

A carbon-capture proposal that would enable power utility PPC’s Ptolemaida V plant, currently under construction, to keep operating beyond 2028, a decarbonization deadline set by the government, has emerged as the latest option for the project’s future.

Carbon capture, a process preventing carbon dioxide from entering the atmosphere, would limit emissions by approximately 80 percent, making the Ptolemaida unit in Greece’s north, close to Kozani, feasible amid an environment of escalating CO2 emission right costs.

It is believed opting for a carbon-capture solution would equate Ptolemaida V’s emission-related costs with those of a natural gas-fired unit. Carbon storage is also being examined.

Ptolemaida V was initially planned as a coal generator but a number of alternatives, including a switch to natural gas powering, are now being considered, especially since the government’s recent pledge of a decarbonized Greek energy sector by 2028.

PPC and energy ministry officials have received the carbon capture proposal for Ptolemaida V.

Greek government MP Giorgos Amanatidis, representing the lignite-rich Kozani constituency, has contacted a scientific team behind the development of a major carbon-capture project in Texas, USA.

The MP has also spoken with investors interested in such a solution for Ptolemaida V.

A carbon-capture option would enable the continuation of lignite mining in the Kozani area, seen as key support for the local economy.

 

Ptolemaida V picture unclear but definitely lignite-free beyond 2028

Though some time is still needed to examine all possible scenarios concerning the future of power utility PPC’s planned Ptolemaida V lignite-fired power station, now under construction, one thing is already clear, the facility will not be lignite-powered beyond 2028.

A highly ranked energy ministry official, speaking to journalists yesterday at the opening ceremony of Greece’s biggest wind energy complex – developed by Italy’s Enel Green Power on the island Evia, slightly northeast of Athens – indicated Ptolemaida V will not be lignite-fired following 2028.

The ministry official reiterated a recent objective set by Prime Minister Kyriakos Mitsotakis for full decarbonization in Greece by 2028.

All possibilities remain open for Ptolemaida V, from a non-lignite launch of the facility to its eventual conversion from lignite to biomass or natural gas by the 2028 decarbonization goal, the ministry official noted.

“Nothing is certain at the moment as the data, not at all simple, has not been calculated,” the official remarked.

All Ptolemaida V options now being officially examined

A development decision on power utility PPC’s planned lignite-fired Ptolemaida V power station is now officially preoccupying authorities, examining various options, including a fuel switch to natural gas.

All appears possible at this stage. Besides an in-progress report from the McKinsey consulting firm, examining all possible scenarios for the unit along with PPC, Prime Minister Kyriakos Mitsotakis made reference to the matter for the first time yesterday while speaking at the UN Climate Change Summit. He spoke of total decarbonization in Greece by 2028.

Echoing this remark, energy minister Costis Hatzidakis left open the possibility of a zero-lignite energy mix by 2030 when asked if Greece’s new National Energy and Climate Plan, to soon be submitted to Brussels, would include such a target.

Hatzidakis hinted that such a prospect is possible. However, he did not commit on how the government would choose to handle Ptolemaida V.

“If you were to ask me about the existing lignite-fired power stations, I would have answered that we will have a clear picture on how many of these units are sustainable in three to four weeks,” Hatzidakis noted. “But this is not so for Ptolemaida V, where the matter is very complicated. At this stage, nobody can talk of an optimal solution.”

Contrary to the previous PPC administration, the power utility’s new leadership, headed by Giorgos Stassis, does not consider the Ptolemaida V investment a certainty. However, Stassis and his associates are also aware of how complex the matter is, making abandonment difficult.

For example, abandoning the Ptolemaida V project would severely impact the northern region’s local economy, dependent on lignite activity. Also, PPC has already spent close to 950 million euros. Turbine and generator orders have arrived, while agreements, including EPC contracts, have been signed.

As for the thoughts of a fuel switch, from lignite to natural gas, PPC would be better off building a new gas-fired power station in Lavrio, southeast of Athens, close to gas sources and urban centers consuming considerable electricity amounts.

 

PPC scrutinizing Ptolemaida V power station prospects

Power utility PPC’s new leadership has requested a study examining all data and the potential of its prospective Ptolemaida V power station from consulting firm McKinsey, already commissioned with a wider task of preparing the utility’s new strategic development plan.

The previous PPC administration had ruled out abandoning the Ptolemaida V project or a fuel switch from lignite to natural gas. Though these scenarios will be scrutinized in McKinsey’s study, well-informed sources, in comments to energypress, noted both prospects are highly unlikely.

PPC has already spent between 900 and 950 million euros, needing a further sum of approximately 400 million euros, while turbines and generators have already been ordered and received, sources pointed out.

Also, a fuel switch for Ptolemaida V at this stage would be like developing a natural gas-fired facility from scratch, the only savings being certain building and land costs, estimated to be worth a maximum amount of 50 million euros, the sources added.

Even so, PPC’s chief executive Giorgos Stassis will refuse to consider the Ptolemaida V project a certainty unless the financial impact of various factors – including non-eligibility for CAT remuneration and higher CO2 emission right costs – has been thoroughly examined.

“We don’t know what the preferred choice will be, but must examine all scenarios without any taboos,” a highly ranked PPC official told energypress.

PPC took a decision to develop Ptolemaida V back in 2010 for a variety of reasons, including national energy security and continued lignite activity in Greece’s west Macedonia region.

 

PPC working on withdrawal plan for lignite power stations

Power utility PPC’s newly appointed administration is preparing to commission a cost-benefit analysis (CBA) to determine the order of lignite-fired power station withdrawals, as well as a follow-up plan for workers stationed at these facilities and related telethermal issues.

The withdrawal of old lignite-fired power stations represents a key part of the wider restructuring plan at PPC, under financial pressure and in need of a reshape.

The CBA is part of a new business plan being prepared by PPC for presentation around the end of the year.

Polluting levels of lignite-fired power stations will be a key factor in the order of withdrawals. State-controlled PPC’s Amynteo and Kardia units, operating virtually illegally following dubious extensions granted by the previous government’s energy ministry, are expected to be placed at the top of the withdrawal list.

The withdrawal of lignite units promises to represent a key bargaining tool in the energy ministry’s forthcoming negotiations in Athens with European Commission officials on electricity market reforms and the market position of PPC, still the dominant retail player on the strength of distorted terms not taking into account actual market conditions. These talks are expected to commence September 16.

The closure of older power stations could represent a last chance for PPC to keep alive its hopes of developing Ptolemaida V, a lignite-fired power station investment budgeted at 1.4 billion euros.

Talks between Greek officials and the European Commission aimed at boosting the country’s impetus towards a post-lignite era are already underway, sources informed.

 

EU’s new CAT rules launched, no sign of aid for Ptolemaida V

A new European Commission regulation concerning CATs came into effect a few days ago, on July 4, without any sign of support for the main power utility PPC’s prospective Ptolemaida V power station, now being developed but in danger of an unsustainable future.

The outgoing Syriza government’s energy ministry recently ratified a related bill believing this could ensure CAT eligibility for Ptolemaida V. But Brussels did not endorse the Greek CAT plan by the crucial July 4 date, and even more importantly, has not delivered any comfort letter that could be seen as notification for eventual approval.

According to the European Commission’s clean energy package, EU support mechanism subsidies are reserved for units whose CO2 emissions do not exceed 550 grams per KWh. Units beginning their commercial operations any time after the July 4 date and which exceed this upper limit are not entitled to CAT mechanism remuneration, according to the EU regulation.

In a recent letter to Margrethe Vestager, the European Commissioner for Competition, PPC’s chief executive Manolis Panagiotakis stressed that CAT eligibility is crucial for the sustainability of Ptolemaida V, a 1.4 billion-euro investment. Otherwise, PPC would face catastrophic consequences with a knock-on effect for the Greek energy market and national economy, given the role and size of the corporation, he added.

 

‘No chance’ of Brussels approving CAT plan by July 4

Greece’s CAT remuneration mechanism proposal stands no chance of being granted European Commission approval by July 4, when new European regulations on the matter come into effect, nor should the country expect any comfort letter by this date on the proposal’s near-term prospects, well-informed sources have told energypress.

Speaking yesterday, power utility PPC’s chief executive Manolis Panagiotakis stressed this would be a crucial week for Greece’s CAT prospects at the European Commission’s Directorate-General for Competition.

However, there has been no indication of any extraordinary meeting this week between energy ministry and Brussels officials, the sources informed.

In a letter to Margrethe Vestager, the European Commissioner for Competition, the PPC boss has stressed that the sustainability of PPC’s Ptolemaida V power station, a 1.4 billion-euro investment now being developed and expected to be launched in 2022, will depend on CAT eligibility.

Panagiotakis yesterday expressed serious doubts as to whether a recent legislative revision endorsing Greece’s CAT plan in Parliament would suffice without EU approval.

 

Brussels CAT restriction a setback for Ptolemaida V

The European Commission has announced tough CAT remuneration mechanism restrictions for lignite-based power stations, effective as of July 4, a major setback for the CAT eligibility prospects of power utility PPC’s Ptolemaida V unit, now being developed.

According to some sources, the new capacity mechanism restrictions, announced in the Official Journal of the European Union last Friday, end all CAT qualification hopes for Ptolemaida V.

Despite this latest unfavorable development, state-controlled PPC and the energy ministry have remained optimistic and contend hope remains under certain conditions.

Power stations emitting over 550 grams of CO2 per kilowatt-hour will no longer be eligible for the capacity mechanism, according to the new restrictions.

Greek Parliament recently ratified a related energy ministry bill without prior EU approval.

Capacity mechanisms have been used by EU member states to fund electricity generation that may not be cost-effective or as clean as renewable power but is needed to guarantee supply during periods of peak demand.

Brussels tight-lipped on Greek CAT mechanism approval

The European Commission has remained tight-lipped as to if, when and under what conditions it intends to endorse Greece’s proposal for a permanent CAT remuneration mechanism.

The plan, attached to a wider draft bill prepared by the energy ministry, was ratified in Greek Parliament last week just ahead of the house’s closure for upcoming snap elections on July 7, the intention being to secure CAT remuneration and sustainability for the power utility PPC’s prospective Ptolemaida V power station, when the facility is launched.

Brussels has maintained a rigid stance on the matter, adopting an aggressive interpretation of regulations and guidelines, sources have informed.

Greece’s implementation of the target model, aiming for market coupling, or harmonization of EU wholesale markets, is believed to be one of the conditions demanded by Brussels for the CAT mechanism’s approval. Implementation of the target model within 2019 is seen as a highly unlikely prospect.

There have been no indications as to when the European Commission may deliver a comfort letter to Greece on the CAT remuneration mechanism.

The matter may be urgent for Greece but the new European Commission being pieced together following the recent European elections means slower progress in Brussels at present.

 

Ministry forging ahead with urgently needed energy sector revisions

Energy ministry officials are busy preparing legislative amendments for a series of urgently needed matters, most of which will be submitted to parliament tomorrow for debate and a ratification effort by Friday.

The revisions, part of the government’s wider drive to settle pending issues seen as crucial ahead of the country’s snap elections scheduled for July 7, include the adoption of a fixed capacity sufficiency mechanism that will enable the power utility PPC to seek CAT remuneration for its prospective power station Ptolemaida V, crucial for its sustainability.

Ongoing talks between the energy ministry and the European Commission are positive, ministry officials noted.

Other energy sector amendments to be discussed in parliament by Friday include RES revisions concerning the designation of forest areas; RES project connection application extensions; work contract extensions for 55 staff members at RAE, the Regulatory Authority for Energy, needed to ensure the authority’s ability to function efficiently; as well as a lifeline extension for PPC’s diesel-fueled power stations on Crete, facing an EU withdrawal deadline, for environmental reasons, by the end of this year.

Ptolemaida V CATs jeopardized by PPC action against TFRM

A delay by the European Commission in endorsing the country’s permanent CAT capacity mechanism is jeopardizing the main power utility PPC’s new Ptolemaida V power station from being included in this mechanism.

A mechanism induction agreement for Ptolemaida V needs to be signed by the end of the year if this new lignite-fired unit is to be eligible.

A rigid interpretation by Brussels of regulations and directives concerning the matter has market officials already believing the deadline will be missed.

The European Commission has set the implementation of the target model as a prerequisite for the CAT mechanism to be approved. This practically means that participants cannot sign mechanism agreements before January of February, at best, when the dry run begins.

PPC’s position on the transitory flexibility remuneration mechanism (TFRM) is also crucial to the matter.

The power utility has taken European Court action against the TFRM seeking its non-implementation and, instead, a direct transition to the permanent mechanism by contending, amongst other things, that market reforms are in progress through target model requirements. PPC has also questioned the necessity of the TFRM.

A withdrawal of PPC’s legal action would lead to a more flexible interpretation of regulations by the European Commission on the permanent CAT capacity mechanism, pundits believe.

Finalized CAT agreement expected within fortnight

Greece and the European Commission are no more than a fortnight’s time away from reaching a deal on the country’s CAT mechanism, reliable sources closely following ongoing negotiations on the matter between the energy ministry and Brussels officials have informed.

Once an agreement is finalized, Brussels will deliver its notification, in other words a finalized list of observations on the Greek CAT plan. Its finalized look, to emerge following any needed adjustments, could be announced by the end of March, barring unexpected developments.

A certain period of time, depending on the pace of bureaucratic procedures in Brussels, will then be needed for the plan’s approval by the European Commission. This will enable preparations for the first CAT auction, expected, without a doubt, within 2019.

The nucleus of the Greek CAT plan, based on an Italian model that has already been endorsed, complies with EU directives, the European Commission has already recognized. Brussels officials have apparently requested revisions from Greece that will result in a CAT mechanism version sharing an even greater amount of similarities with its Italian equivalent.

Greece’s new CAT plan mainly concerns private-sector thermal electricity producers and the main power utility PPC as it will greatly shape their operating conditions over the next decade.

Investors considering PPC’s Megalopoli and Meliti power stations included in an ongoing bailout-required disinvestment of lignite units are also monitoring developments as the resulting CAT plan will greatly determine the earning potential of these units.

The PPC’s Ptolemaida V power station, now under construction, is expected to be among the units to qualify for CAT remuneration.

CAT eligibility prospects for PPC’s Ptolemaida V favorable

The main power utility’s prospective Ptolemaida V power station, now being developed, will most likely be eligible for CAT remuneration, the European Commission’s Permanent Representatives Committee (COREPER) has indicated.

According to the European Commission’s clean energy package, now being shaped, EU support mechanism subsidies will be reserved for units whose CO2 emissions do not exceed 550 grams per KWh. This upper limit promises to exclude units driven by fossil fuels such as carbon and lignite.

The clean energy rule is expected to soon be implemented for all new power stations and also apply for existing units as of July 1, 2025. From this date onward, units fueled by fossil fuels will no longer be valid for CAT remuneration.

Luckily for PPC’s Ptolemaida V project, the European Commission decided, in December, to offer exemptions to the rule as a result of a request made by Poland, whose economy and electricity production are heavily reliant on coal. This sets a precedent. PPC’s effort to ensure CAT remuneration for Ptolemaida V, expected to be launched in 2021, stands to benefit from the development.