RES grid injection cuts

RES operating restrictions influencing bank financing

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Grid-injection limits faced by renewable energy facilities are being factored into formulas applied by banks when considering loan requests for RES projects, banking industry executives have told energypress.

This increased-risk factor being taken into account by banks has, so far, not denied renewable energy project investors of loans, the banking sources noted.

Investments are being examined on a case-by-case basis and any precautionary financing measures taken reflect the respective profiles of investors, the sources added.

Banks are subjecting RES project loan requests to a full range of scenarios, including worst-case scenarios, regarding the impact of operating restrictions on revenues throughout entire loan periods.

Banks are still waiting for policymakers to crystallize RES operating restriction rules before deciding on whether to make further changes to their lending formulas for the RES sector.

In any case, borrowing terms appear to have become tougher for smaller market players as they possess less flexibility than larger players, who, despite operating restrictions, can maintain robust credit profiles through other activities in their portfolios and, as a result, keep borrowing on favorable, lower-risk terms.

Most recently, foreign investors have shown greater apprehension towards RES investments in Greece by delaying decisions while seeking to achieve better understanding of local market conditions.

 

Prospective RES projects worth €12bn, investor clarity needed

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A big wave of RES projects planned for development offers an upbeat picture of the sector, but further clarity concerning rules and operating restrictions such as mandatory grid-injection cuts will be needed if investors are to push ahead with plans.

RES projects (wind and PV projects) possessing connection terms yet still undeveloped or at early stages of development are worth 12 billion euros, market officials have estimated.

This prospective turnover figure stands to increase further if new RES projects set to be granted connection terms in return for PPAs established with industrial consumers are also taken into account.

A total of 3,673 RES projects representing a capacity of 12,876 MW (wind energy: 2,567 MW, PVs: 10,309 MW) received connection terms between 2020 and 2023, according to data presented by power grid operator IPTO’s Konstantinos Tsirekis, Director of Strategy & System Development Planning, at an annual event staged recently by POSPIEF, the Pan-Hellenic Federation of Photovoltaic Producer Societies.

This pipeline of prospective RES projects could be stifled if investors lack clarity on grid-injection cut rules as such operating restrictions affect earnings potential of projects, and, by extension, the willingness of banks to finance projects.

RES units over 1 MW face real-time grid-injection cuts

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RES units with capacities of 1 MW and above will be subjected to real-time grid-injection cuts by distribution network operator DEDDIE/HEDNO, while smaller RES units of between 400 KW and 1 MW will not face such cuts, according to an energy ministry bill currently being discussed in Parliament and expected to soon be implemented.

However, smaller units spared of grid-injection cuts will need to compensate larger units for output they would normally inject into the grid, according to the injecting-cutting plan’s framework.

RES units with capacities exceeding 1 MW will need to have injection-cutting equipment installed within a six-month period beginning May 1, according to the draft bill.

DEDDIE/HEDNO will manage this new grid injection-cutting system, based on a model already adopted by power grid operator IPTO, for projects representing a capacity of between 2.5 and 3 GW.

The decision to restrict the grid injection-cutting system to RES units of 1 MW and above is favored at the ministry as it will be easier to implement, given the large number of PVs with capacities below 1 MW.

Energy multi-bill submitted to Parliament, no major changes

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An energy ministry multi-bill submitted to Parliament yesterday includes a model for the country’s next wave of RES auctions that offers renewable-energy producers operating support based on incentives for electrical-grid capacity savings.

RES projects currently being developed and already holding connection terms will be offered premiums as incentives encouraging their respective investors to accept greater grid-injection restrictions, or to equip their projects with batteries.

Other multi-bill details include terms for an SPV to be established by EDEYEP, the Hellenic Hydrocarbons and Energy Resources Management Company, for offshore wind farms; floating PV provisions; as well as revised action on electricity theft and the universal electricity supply service provided to black-listed consumers no longer accepted by electricity suppliers.

No major changes have been made to the multi-bill’s content following consultation and the procedure’s numerous comments.

Special parliamentary committees will begin discussing the multi-bill’s details tomorrow. The energy ministry aims to have it ratified by the middle of next week.

Multi-bill terms abolishing RES grid-injection limits

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An energy ministry multi-bill includes a provision abolishing grid-injection upper limits imposed on RES units to maintain a balance between production and demand and help counter local grid congestion. Consultation on the multi-bill ended this morning.

Limits imposed on RES units through legislation ratified in 2022 subjected their grid injections to 5 percent limits of annual production capacity.

According to this limit’s details, the grid operator was not required to offer compensation to RES producers regarding grid-injection restrictions. However, compensation details still need to be clarified.

Under the new terms, the existing 5 percent grid-injection limit will only be maintained for permanent restrictions, as is the case with PVs linked to the grid, facing a 72 percent restriction, and wind energy facilities, permitted to inject 80 percent of capacity between 8am-11am, 65 percent between 11am-3pm, and 80 percent between 3pm-5pm.

 

Grid injection cuts to sharply increase over next two years

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Grid-injection cuts of renewable energy production offered to the grid will increase considerably over the next couple of years as a result of a greater presence of operating renewables combined with relatively slower incorporation of energy storage units to the grid, formulas applied to calculate prospective cuts have shown.

RES grid-injection cuts totaled 228 GW in 2023 but are expected to more than double this year, reaching over 500 GW, before skyrocketing to more than 1.5 TWh in 2025, according to projections, which is unfavorable news for RES producers and consumers, who would both benefit if this output were fully utilized.

A first wave of energy storage units is not expected to be linked to the grid until early 2026, meaning grid operators will have no choice but to dump excess renewable energy production made available over the next two years.

At present, RES facilities in operation offer a total production capacity of between 11.5 and 12 GW, while the market penetration rate of new units entering the grid totals 2 GW, annually, and consists mostly of PVs.

At this rate, RES facility additions to the country’s grid are expected to total roughly 16 GW by 2026.

Over this period, electricity demand is projected to grow modestly, from 49 TWh in 2023 to 49.5 TWh in 2024 and 51 TWh in 2025. Such demand levels will be insufficient to fully absorb the additional RES output expected to be made available over the same period.

 

PV growth rate readjustment to 1 GW, annually, expected

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New PV installations are expected to reach a lofty level of nearly 2 GW this year before adjusting to an annual growth rate of about 1 GW thereafter.

Energy consultant Stelios Psomas, speaking at the recently staged Renewable Energy Tech event staged by energypress, noted he expects a robust readjustment, close to annual levels of 1 GW, in the forthcoming years as a result of prevailing market conditions and an increase in RES grid-injection cuts.

An annual PV installation growth rate of approximately 1 GW would still make Greece a major European market, the official noted.

“The market is currently surviving as a result of major projects that secured connection terms in the past and are currently under construction,” Psomas told the Renewable Energy Tech event. “We are a small country with relatively low demand and we still don’t have sufficient interconnections. The market will inevitably calm down a bit from now on, but it will continue growing at a rate of 1 GW, which is still a very good figure,” he added.

 

 

RES injection cuts at 228 GWh in ’23, bigger cuts in 2024-25

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Renewable energy output not injected into the grid last year, to keep the market balanced, reached a considerable sum of 228 GWh, roughly 1.1 percent of overall renewable-energy output in 2023, while the level of grid-injection cuts is expected to rise further in 2024 and 2025.

At present, power grid operator IPTO is making these grid-injection cuts horizontally and proportionally, limiting the production capacities of RES facilities in operation. Also, cuts are being made at projects enabling remote intervention.

The 228 GWh of renewable energy output not injected into the grid in 2023 resulted from a need to maintain a balance between excess production and demand, as well as to keep imports and exports at an equilibrium – not to prevent grid congestion.

Further grid-injection cuts are anticipated over the next couple of years as RES penetration will increase significantly but electricity demand is seen remaining relatively unchanged.

These grid-injection cuts cuts are expected to drop considerably as of 2026, when a first wave of energy storage units is planned to be launched.

A special framework being developed by a project-management division at the energy ministry will also help subdue these cuts as it should offer clarity to investors by offering a far clearer picture on the proportion of RES output that will not be injected into the system and for which, therefore, they will not be compensated, meaning investors will be able to shape business plans without threatening the financial viability of their projects.

Ministry determined to ensure PPAs for industrial consumers

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The energy ministry appears determined to ensure renewable-energy PPAs for industry and intends to incorporate all required measures into an overall plan being developed for the liberalization of grid space.

However, the ministry has a conundrum to resolve as it must combine increased grid-injection restrictions for RES units obtaining connection terms from now on with the need to keep prices low for PPAs involving RES producers and industry.

These increased grid-injection restrictions for RES units come as a challenge for renewable-energy PPAs already established, among them agreements between power utility PPC with metal processing company Viohalco and cement producer Titan.

Besides modifying RES output, these restrictions also affect data used by parties involved in PPAs to reach agreements on electricity purchase prices.

To offset negative impact, the ministry is considering to subsidize behind-the-meter battery additions to projects. This would enable RES producers to meet the energy needs of industries at latter dates should PV production exceed upper limits.

A subsidy-support solution would require the European Commission’s approval as it is considered a form of state aid.

 

Stricter RES project timeline considered to free up capacity

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The energy ministry is considering to introduce stricter timelines for the completion of RES projects possessing connection terms, the initiative’s aim being to free up grid capacity.

As part of the effort, the energy ministry has asked for power grid operator IPTO’s opinion on whether existing RES project development timelines should be made tighter in order to eliminate projects that have stalled for a variety of reasons.

The ministry believes that a proportion of grid space that would become available through the implementation of a tighter development schedule for RES projects should be allocated to the distribution network for the development of small-scale photovoltaics. Priority would be given to self-consumption applications.

Deputy energy minister Alexandra Sdoukou presented the fundamentals of the overall plan at a recent event staged by SEF, the Hellenic Association of Photovoltaic Companies. Releasing grid space and distributing this capacity to new projects are the plan’s two key aspects, she explained.

Greater grid-injection restrictions for renewables and the addition of batteries to RES projects with connection terms are paramount in the effort to broaden available capacity, Sdoukou reiterated.

RES project battery-addition feasibility sought by investors

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Investors generally view battery additions to RES projects as beneficial as, despite ongoing RES sector ambiguities, these upgrades ensure greater IRR figures, market officials have told energypress.

Market players are now working on taking crucial sustainability-related decisions concerning battery additions to RES projects ahead of forthcoming auctions and as a result of increased grid-injection limits being imposed in the market.

Investors, in collaboration with consulting companies, are engaging in calculations to assess the revenues resulting from integrating batteries into RES projects. This process includes identifying various factors that impact revenues and determining the extent of their influence.

RES investors are also making an effort to establish more specific information on variable costs that may arise, even though the sector’s regulatory framework is not yet entirely clear and concrete.

In conducting their calculations, investors are assuming that RES units will, from now onwards, operate under conditions of greater grid-injection restrictions and production cuts.

Technology enabling offsite RES-injection cuts considered

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The energy ministry is considering to promote more extensive use of remote technology that would enable distribution network operator DEDDIE/HEDNO to cut and restrict grid injections of renewable energy output from offsite locations.

The plan would oblige both DEDDIE/HEDNO and PV units with capacities of over 400 KW to install remote systems enabling the operator to control RES production injected into the grid via offsite management.

At present, DEDDIE/HEDNO is able to remotely manage grid-injection curtailment for a RES portfolio of about 1.5 GW from approximately 5.8 GW in RES projects in operation. As for the remainder, cuts can currently only be made onsite by operator crews.

As part of the overall plan, the energy ministry intends to offer compensation packages to investors behind RES units that would be required to install remote technology systems for grid-injection cuts.

RES cuts more cost-efficient than battery installations

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RES cuts, to prevent grid overloads, appear to be the most competitive option available to small and medium-sized photovoltaics given the current cost of installing batteries behind the meter.

In the majority of cases, battery systems capable of providing stored energy to the grid over two-hour periods end up doubling the CAPEX cost of RES projects.

This essentially means that, at an operational level, without any state support for battery costs, tariffs would need to be doubled, especially in the cases of non-vertically integrated players, as was recently pointed out by Stelios Loumakis, president of SPEF, the Hellenic Association of Photovoltaic Energy Producers, during a presentation.

On the other hand, cutting RES grid input by 50 percent would result in annual PV park production losses of 20 percent, which could be compensated through a 25 percent tariff increase, a SPEF study showed, making this a more cost-efficient solution, the association’s president noted.

RES cuts, the SPF chief stressed, do not constitute a long-term viable solution as they restrict renewable energy supply, a pivotal factor if green energy is to further penetrate the system.

 

 

Fixed RES tariffs for bigger grid input limitations, batteries

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The energy ministry plans to offer fixed tariffs, at RES auctions as of 2024, as an incentive to investors behind RES projects accepting increased grid injection limitations or an obligation to incorporate batteries, measures that would save grid capacity.

Deputy energy minister Alexandra Sdoukou announced this plan at a three-day energy conference, “Energy Security and Green Growth”, organized by the energy ministry.

A grid injection limitation of 50 percent of RES output is expected to be imposed on RES projects as a prerequisite for fixed tariffs. It remains unclear if the auctions offering these fixed tariffs will be technology-specific or mixed. According to energypress sources, the new auctions could only concern photovoltaics. Also the ministry is believed to be considering to offer a total capacity of 2 GW for fixed tariffs, though this, too, remains unfinalized.

Existing legislation covering RES auctions will need to be amended to facilitate the ministry’s fixed-tariffs plan.

 

 

 

Project group to prepare framework for RES output cuts

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A project management group recently founded by the energy ministry will, as its first task, prepare a recommendation for the ministry concerning the establishment of framework regulating green-energy output cuts over a long-term period, meeting the grid’s needs and further RES penetration for at least ten to fifteen years.

The group, led by head coordinator Stavros Papathanasiou, professor at the National Technical University of Athens, includes officials from the energy ministry, energy exchange, power grid operator IPTO, distribution network operator DEDDIE/HEDNO, and RES market operator DAPEEP.

The proposed permanent framework is expected to distribute RES output cuts across various project categories.

The group will also consider whether RES projects not injecting output into the system should be compensated, under specific terms and conditions.

Grid injection limitation for new PVs to be revised to 50%

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A grid injection limitation for new PV projects will be revised to 50 percent as a connection term condition for RES projects seeking to secure grid capacity, while certain PV categories, still undetermined, will also be required to incorporate batteries into their systems, the energy ministry has decided, according to sources.

A previous grid injection limitation of 72 percent applied for new PVs which, up until July 4, 2022, had either not established connection term agreements or not submitted completed requests for connection term contracts.

Projects needing to be equipped with batteries will need to meet minimum technical specifications concerning choice of battery.

As for PV projects that will not be required to be equipped with batteries, it remains uncertain if they could secure financial viability with a grid injection limitation at a level of 50 percent.

RES producers will certainly be taking into consideration the course of battery costs over the next few years, while projects mature in terms of licensing and are ready to be developed, before reaching decisions on whether to incorporate batteries into their projects or not.

No grid injection limitation revisions are expected for wind energy facilities.

Framework to offer investors RES grid-injection cut support

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The energy ministry is preparing to form a working group that will be tasked with establishing a sustainable framework to support essential reductions in renewable energy source (RES) grid injections, for the prevention of grid overloads.

This working group will also shape incentives for ongoing RES projects, so that batteries may be integrated into these investments.

Energy ministry officials as well as representatives of all the country’s market operators – Regulatory Authority for Energy, Environment, and Water; power grid operator IPTO; distribution network operator DEDDIE/HEDNO; RES market operator DAPEEP – are expected to participate in the working group.

In addition, market players will be invited to offer regular views on the work being carried out by the working group, to ensure that the investment community’s positions have also been taken into consideration.

The working group’s interventions are planned to mitigate the impact of RES grid-injection cuts on investors, and also to ensure that investments in new RES plants will possess the required predictability in terms of project cash inflow.

ESIAPE: IPTO’s RES grid injection cut plan deviates from EU rules

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A set of rules proposed by power grid operator IPTO on RES unit injection cuts concerning the Greek electricity system deviates from European regulations and practices followed in other European countries, according to ESIAPE, the Greek Association of Renewable Energy Source Electricity Producers.

Expressing its views in related consultation staged by RAAEY, the Regulatory Authority for Waste, Energy and Water, ESIAPE noted that Greece’s regulatory framework does not provide for any compensation when RES unit grid injection cuts are ordered, which runs contrary to regulations and practices followed by other European countries.

The current regulatory framework in Greece creates conditions that lead to potential distortions of competition, ESIAPE noted.

In its intervention, ESIAPE offered, as a comparison, detailed presentations of practices followed by five other European countries – France, Germany, UK, Spain and Italy – all offering compensation for RES unit grid injection cuts, when requested by authorities, to prevent grid overloading.