Strategic Reserve Mechanism

Strategic reserve mechanism application to be withdrawn

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The energy ministry intends to withdraw its application submitted to the European Commission for a strategic reserve mechanism as a result of the government’s recent decision to revise its withdrawal plan for the country’s lignite-fired power stations in order to permit operations until 2028 instead of 2025, as was planned.

Under the original plan, the strategic reserve mechanism would have been introduced to maintain lignite-fired power stations under the control of power grid operator IPTO for energy contributions during periods of high demand.

Within the framework of these developments, the government is also considering to withdraw a compensation application for power utility PPC’s premature withdrawal of lignite-fired power stations.

PPC’s plan entailed shutting down all existing lignite-fired power stations by the end of 2023.

However, the government is being forced to delay its decarbonization strategy as a result of the steep rise in gas prices prompted by Russia’s war on Ukraine.

Strategic reserve procedure for PPC lignite units hastened

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The energy ministry, driven by the EU’s decision to end its reliance on Russian natural gas as soon as possible, is striving to hasten procedures aiming for European Commission approval of a strategic reserve mechanism concerning power utility PPC’s lignite-fired power stations.

The ministry is now completing certain required studies and pending procedures in preparation for Athens’ official application to Brussels.

Even so, government officials remain adamant that Athens’ decision to end all lignite-based electricity generation by the end of 2028 does not need to change, and must not change, even though the EU now appears more tolerant towards the use of coal.

The government officials also believe that no revisions are needed for an even more ambitious lignite phase-out plan set by PPC, according to which all the utility’s lignite facilities will be withdrawn by 2023, except for a new unit, Ptolemaida V, planned to switch from lignite to natural gas in 2025.

Power grid operator IPTO plans to deliver an energy sufficiency study to the energy ministry within the next ten days, while the ministry may be ready to submit its package of prerequisites to Brussels by the end of the month.

This would pave the way for Athens to lodge an official application for a strategic reserve mechanism, as well as a capacity remuneration mechanism.

Market Reform Plan, Adequacy Report by month’s end

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Power grid operator IPTO is working on revisions to its Market Reform Plan, following observations by the European Commission, and an updated Adequacy Report, the aim being to have submitted both to Brussels by the end of this month.

Both these documents are prerequisites for the energy ministry’s delivery of a Strategic Reserve Mechanism and a Capacity Remuneration Mechanism (CRM).

The ministry’s successful completion of the two mechanisms will still require many months of negotiations with Brussels authorities before the European Commission, notorious for slow-moving processing, approves the two mechanisms, sources closely following developments on these matters have noted.

The European Commission usually has reservations about support mechanisms, so it could take time before the Greek requests are approved.

It still remains unclear when the Strategic Reserve Mechanism and a CRM could be launched. Some latency is likely following their anticipated approval.

The ministry is aiming to apply the Strategic Reserve Mechanism until 2023, when it would be succeeded by the CRM.

IPTO’s Adequacy Report for reserve mechanism, CRM near

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Power grid operator IPTO is close to completing its updated grid Adequacy Report, expected to be ready within December for delivery to the European Commission. The report is needed to determine the shape of Greece’s proposals for a Strategic Reserve Mechanism and a Capacity Remuneration Mechanism (CRM).

The way towards completing the Adequacy Report was paved by the recent establishment of three required indices –  CONE (Cost of New Entry), VOLL (Value of Lost Load) and Reliability Standard – by RAE, the Regulatory Authority for Energy, and the energy ministry. These indices need to be factored into calculations before the Adequacy Report can be completed.

Plans for two new gas-fueled power stations, one by a TERNA-Motor Oil partnership, the other by the Copelouzos group, have emerged since assumptions made for IPTO’s study, which had been put to public consultation.

The launch of the two new units over the next few years is expected to greatly contribute to the grid’s reliability.

Negotiations ongoing for Strategic Reserve, CRM

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Energy ministry officials are engaged in ongoing talks with the European Commission’s Directorate-General for Competition and ACER, Europe’s Agency for the Cooperation of Energy Regulators, to determine the shape of Greece’s proposals for a Strategic Reserve Mechanism and a Capacity Remuneration Mechanism (CRM) before their plans are officially submitted to Brussels for approval.

Greece still needs to deliver an Adequacy Report before the two mechanism plans can be pushed forward. Three indices – CONE (Cost of New Entry), VOLL (Value of Lost Load) and Reliability Standard – need to be factored into calculations before the Adequacy Report can be completed.

According to energypress sources, RAE, the Regulatory Authority for Energy, has already completed work on the VOLL calculations and expects to have all required data needed for the Reliability Standard calculations during the week. RAE will then forward a related report to the energy ministry.

The Greek mechanism requests are expected to be submitted soon so as to enable the European Commission to respond by late November or early December.

The Strategic Reserve Mechanism, planned to remunerate power-generating units made available by electricity producers for grid back-up services is expected to be launched early in 2022 for a duration until 2023 before it is succeeded by the CRM.

 

Minister calls for swifter Brussels support on new RES auctions plan

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Energy minister Kostas Skrekas has requested swifter support from the European Commission, in the form of a comfort letter, on a plan concerning Greece’s new RES auctions, as well as auctions for the installation of hybrid stations on islands.

The minister made the request to European Commission deputy Margrethe Vestager, also Brussel’s Commissioner for Competition, during an online meeting between the two officials on Friday.

During the session, Vestager is believed to have expressed satisfaction over Athens’ implementation of a plan offering third parties access to state-controlled power utility PPC’s lignite-fired power production, an issue that had remained unresolved for many years.

PPC sold a first electricity package at a discount price on Friday, as part of the government’s agreement with the European Commission.

Greece’s energy minister also urged for efficient cooperation with the Directorate General for Competition on an ongoing effort aiming for the introduction, by the end of the year, of a Strategic Reserve mechanism.

The mechanism is planned to compensate PPC for its maintenance, as grid back-up, of lignite-fired power stations headed for withdrawal. The availability of these units is still needed to ensure grid sufficiency and stability.

 

 

Strategic Reserve Mechanism by early ’22 requires much work

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Athens and Brussels have agreed on an early-2022 launch for Greece’s Strategic Reserve Mechanism, planned to remunerate power-generating units made available by electricity producers for grid back-up services, but, even so, a considerable amount of work lies ahead.

The European Commission plans to make an official announcement on the Strategic Reserve Mechanism between late November and early December, ahead of the mechanism’s approval by the Directorate-General for Competition.

Authorities in Athens and Brussels are still engaged in talks aiming to finalize the shape of the mechanism, while, at the same time, preparations are in progress for the submission of a new Adequacy Report by power grid operator IPTO, a prerequisite for the approval of Greece’s Market Reform Plan, needed for the new strategic reserve mechanism’s implementation.

At present, Greek officials are preparing responses to a set of second-round questions forwarded by the European Commission. As was the case with the first round, the questioning is extensive. Many of the Brussels questions concern financial details linked to the operation of lignite-fired power stations.

The ongoing Athens-Brussels talks are based on a new draft for the mechanism delivered by the Greek government last May. It includes a proposal for demand-response incorporation into the new strategic reserve mechanism.

 

Brussels launches consultation for Greece’s Market Reform Plan

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The European Commission has uploaded, for public consultation, a Market Reform Plan  submitted by Greece proposing electricity market revisions.

The public consultation procedure’s feedback will assist Brussels’ assessment of the Greek reform plan. Participants have until September 6 to deliver their responses.

Brussels’ endorsement of the Market Reform Plan is one of two prerequisites needed before Greece can submit an application for a capacity mechanism – either a Strategic Reserve or Capacity Remuneration Mechanism (CRM).

The second prerequisite entails Brussels’ approval of an Adequacy Report, currently being prepared by power grid operator IPTO. The operator initially planned to deliver this report by the end of July but a few more weeks are still needed for its completion.

Greece will be able to apply for a capacity mechanism once the two prerequisites have been satisfied.

The energy ministry and European Commission have agreed on a schedule for the approval of a capacity mechanism by the end of this year and its launch early in 2022.

However, maintenance of this schedule will be difficult given the European Commission’s demands, complex and time-consuming, when examining member-state capacity mechanism plans, officials monitoring the Greek effort have noted.

 

Strategic reserve necessary, exchange reacts satisfactorily

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The end of the Greek energy system’s reliance on lignite, being phased out to help the global climate change effort, needs to be accompanied by a strategic reserve mechanism, which would maintain certain generation capacities outside the electricity market for operation during emergency cases until the ongoing transition to cleaner energy sources has been completed, the extreme heatwave conditions around the country over the past few days have highlighted.

Record-level electricity consumption, combined with power line damages caused by major fires, pushed the grid to the limit, raising fears of widespread power outages.

The government, currently seeking the establishment of a strategic reserve mechanism as part of a Capacity Remuneration Mechanism (CRM), needing European Commission approval, will need to highlight the heatwave-related events that have occurred in Greece over the past ten days.

Sidelined lignite-fired power stations needed to be brought back into action to help the grid meet electricity demand. They offered crucial production contributions representing between 14 and 18 percent of the energy mix.

Lignite-generated output also played a key part in the effort to maintain energy sufficiency last winter, in February, during heavy snowfall that damaged power infrastructure.

The energy exchange has performed rationally during the heatwave conditions, proving its ability to respond to the market’s demand and supply. Day-ahead market price levels rose sharply during the heatwave’s peak and are now subsiding.

 

 

EVIKEN expresses support for strategic reserve, opposes CRM

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EVIKEN, the Association of Industrial Energy Consumers, has expressed support for the establishment of a strategic reserve mechanism but opposes a Capacity Remuneration Mechanism (CRM).

There is no immediate need for a CRM as current remuneration available to natural gas-fueled power stations through the balancing market ensures their profitability, EVIKEN members supported.

Both mechanisms have been included in the Market Reform Plan shaped by the government.

EVIKEN has rejected a related study’s findings contending that natural gas-fueled power stations are currently incurring losses.

The industrial energy consumers group called for measures that would transform the market so that it can operate at standards set by other European markets before talks can begin to seek additional remuneration for energy producers.

PPC’s hefty lignite costs lend credibility to strategic reserve mechanism request

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Grid needs requiring power utility PPC to operate its lignite-fired power stations have cost the company considerably, lending credibility to the country’s request for a strategic reserve mechanism, a study containing revenue and cost details concerning all of Greece’s power stations over the past six months has shown.

This study has been forwarded to the European Commission as a preliminary step in the establishment of a Market Reform Plan being discussed between Athens and Brussels officials.

PPC has called for a sooner-than-planned withdrawal of its lignite-fired power stations as a result of the elevated cost entailed in operating these units, pushed higher by rising carbon emission right costs.

But the grid’s needs, as highlighted over the past few days of heatwave conditions, are preventing PPC from withdrawing lignite-fired units sooner.

Given the situation, the introduction of a strategic reserve mechanism, over a two-year period covering 2021 and 2022, has emerged as an alternative solution. This mechanism would enable PPC to seek compensation for maintaining its lignite-fired power stations on emergency stand-by.

The implementation of a capacity remuneration mechanism (CRM) will, according to Greece’s plan, ensue and offer incentive for new investments in projects such as gas-fueled power stations and energy storage.

The incorporation, into the strategic reserve mechanism, of the demand response system and natural gas-fired power stations is also being considered.

Athens and Brussels officials are striving for a finalized strategic reserve mechanism plan by the end of the year, which would enable its launch at the beginning of 2022.

Market Reform Plan draft at EC, strategic reserve by end of year

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A draft of the country’s Market Reform Plan, whose finalized version will carry target model market revisions for Greece, has been forwarded, by the energy ministry, to the European Commission for consultation between the two sides, expected to begin without delay.

The energy ministry and Brussels have also agreed on a timeline concerning Athens’ submission and examination of a proposal for a Strategic Reserve Mechanism, needed to ensure electricity supply security through the market’s transition and reforms.

Based on this schedule, the two sides will strive to have finalized the Strategic Reserve Mechanism by the end of the year, so that it may be launched in early 2022.

Brussels’ Directorate-General for Competition plans to begin its consultation for the Market Reform Plan in July. The procedure is expected to last four months, before target model market revisions are implemented.

As part of the overall effort, Pantelis Kapros, Professor of Energy Economics at the National Technical University of Athens, conducted a study – commissioned by RAE, the Regulatory Authority for Energy – serving as a road map for the Greek wholesale electricity market’s revisions, the objective being to fine-tune the target model.

Power grid operator IPTO will concurrently conduct a new adequacy report, including reliability standards, to accompany the Greek plan.

IPTO factors Balkans into adequacy report calculations

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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.

 

Strategic reserve milestones set for next two months

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A series of milestones have been set until autumn in preparation for Greece’s prospective Strategic Reserve Mechanism, which, if achieved, will enable its launch towards the end of the year.

The timeline and milestones leading to the possible launch of a Strategic reserve mechanism, keeping certain generation capacities outside the electricity market for operation only in emergencies, was discussed in detail during an online meeting yesterday between energy minister Kostas Skrekas and European Commission authorities.

Strategic reserves can be necessary to ensure security of electricity supply when electricity markets are undergoing transitions and reforms and are meant to insure against the risk of a severe supply crisis during such transitions.

Three main prerequisites will need to be satisfied by the end of July, the first being the completion of a market reform plan, intended to intensify competition in the wholesale electricity market.

The plan’s preparations will include the involvement of Pantelis Kapros, Professor of Energy Economics at the National Technical University of Athens, according to sources.

A new adequacy report, or updated study on grid sufficiency proving the need for the introduction of a Strategic Reserve mechanism, will also be needed.

Thirdly, the energy ministry will need to have fully responded, within the next month, to an extensive set of questions forwarded by European Commission officials on the prospective mechanism.

If these steps go well, an indefinite prospect at present, then a clearer picture on the mechanism’s details should have emerged by early autumn.

Any Strategic Reserve formula reached will need to be applied for a brief period so that an ensuing Capacity Remuneration Mechanism, to support new natural gas-fueled power stations, can immediately follow, the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, appears to have made clear to Skrekas, the energy minister, at a recent meeting.

Meanwhile, power utility PPC’s updated decarbonization plan is aiming for a withdrawal of all its lignite-fired power stations by 2025, at the very latest.

 

Brussels strategic reserve conditions discussed by RAE, IPTO, ministry

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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 strategic reserve, lignite exit compensation hopes fade

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Power utility PPC’s prospects for some type of compensation in the foreseeable future, either through the Strategic Reserve Mechanism for the corporation’s withdrawal of units from the market and availability for back-up services, or for the utility’s earlier-than-planned closures of lignite-fired power stations, appear to have dwindled.

The reduced likelihood of any such compensation money for PPC became apparent at a meeting yesterday between energy minister Kostas Skrekas and the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition.

Progress was made on an antitrust remedy, through which PPC will soon begin offering rival suppliers lignite-based electricity packages, but the same cannot be said of the strategic reserve.

Vestager made clear, during yesterday’s session, that a strategic reserve plan proposed by the Greek government cannot be approved by the European Commission. Instead, she noted, a new grid sufficiency plan, one aligned with EU directives, will need to be prepared to enable the implementation of an acceptable mechanism.

Subsequently, a strategic reserve plan must be  prepared from scratch, incorporating, besides PPC’s facilities, the demand response mechanism.

According to estimates by some officials, Brussels’ approval of a finalized strategic reserve proposal, requiring considerable work, could take as long as a year.

PPC lignite electricity packages through futures market

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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 favors uniting Strategic Reserve Mechanism, CRM

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The European Commission is supporting the incorporation of a grid back-up model as part of a wider Capacity Remuneration Mechanism (CRM), energypress sources have informed.

A Greek government proposal for a separate Strategic Reserve Mechanism remunerating units made available by electricity producers for grid back-up services – an idea that has been backed by the energy ministry for quite some time now – does not appear likely to be approved by the European Commission, latest online talks between technocrats in Athens and Brussels have indicated.

Under the Strategic Reserve Mechanism, power utility 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.

Instead, the European Commission has tabled a proposal for the establishment of a single system that would include both a Capacity Remuneration Mechanism and a Strategic Reserve Mechanism, as two distinct components, respectively remunerating units active in the market and those maintained as reserves and used only when IPTO requires their services.

Athens and Brussels technocrats are holding these mechanism talks ahead of a forthcoming visit to Athens by the European Commission’s Vice-President Margrethe Vestager, also Brussel’s Commissioner for Competition, scheduled for May 13.