Greece, a member of the European Union since 1981 and the Eurozone from January 2001, has a population of about 11 million, according to the census of 2001. Greece has enjoyed strong economic growth over the past decade mainly due to the major investment for the Athens 2004 Olympic Games and the implementation of infrastructure projects financed by the Community Supporting Framework (CSF).
In 2005, Greece’s real gross domestic product (GDP) was 3.7% – a modest decline from 4.2% in 2004, but still the highest GDP increase among EU Member States and almost triple the average European percentage growth of 1.4% in 2005. Energy played a crucial role in this economic growth.
The Greek energy market
Greece has limited oil reserves of only seven million barrels. In 2005, Greece produced 6400 barrels per day from offshore areas in the Aegean Sea off the coast of Kavala. However, Greece depends heavily on imports – 439,000 barrels/day in 2005 – to meet its demand for oil. Oil is imported primarily from Iran, Saudi Arabia, Libya and Egypt – though Russia could become a more important oil supplier in the coming years as new pipelines are built (see Figure 1).
Figure 1. Greek oil production and consumption, 1980-2000
A significant project for the whole of south-east Europe is the planned euro – €460 million, 300 km pipeline that will carry crude oil between Burgas in Bulgaria and Alexandroupolis in Greece. This pipeline will allow Russia to export crude oil through the Mediterranean Sea, avoiding the over-crowded Bosporus Straits. The Russian, Bulgarian and Greek governments had been discussing the details of the project agreement for some time, concerning the merits of each partner of the newly created joint-stock company. The final agreement was signed by the three state heads in early March this year in Athens. The works will start very soon.
Hellenic Petroleum (HP) dominates Greece’s oil industry. The company was formed in 1998 from the state oil company, Public Petroleum Corporation (DEP), and is now partially privatized (in 2005, the state holding was 59.9%). HP conducts oil exploration, imports crude oil and operates three refineries. These have a total capacity of 313,500 barrels/day, giving HP 75% of Greece’s refining capacity of 413,000 barrels/day. The company also distributes and markets oil products. HP constructed and operates a €75 million, 230 km pipeline that carries almost 50,200 barrels/day of crude oil from Thessaloniki to its Okta refinery near Skopje in the former Yugoslav Republic of Macedonia (FYROM).
With gas reserves of only 35 billion cubic feet (bcf) or 990 million m3, Greece produces negligible amounts of natural gas. However, due to the completion of new pipelines, natural gas consumption has increased significantly over the past years, from only 1 bcf (28.3 million m3) in 1996 to 95 bcf (2.7 billion m3) in 2004. This trend is expected to continue.
Expansion of Greece’s natural gas network and other developments are expected to improve the country’s uptake of CHP like this micro-CHP installation on top of a hotel
DEPA dominates the natural gas market in Greece and is involved in its import, distribution and storage. HP and the Greek government currently own 35% and 65% of DEPA respectively.
About 80% of Greece’s natural gas imports come through a pipeline from Russia and 20% from Algeria as liquefied natural gas (LNG).
DEPA began importing natural gas from Russia via Ukraine, Romania and Bulgaria in July 1997. Greece has a 20-year contract with Russia’s Gazexport (a subsidiary of Gazprom) to purchase approximately 99 bcf/year of natural gas. This contract expires in 2016.
Greece received its first LNG shipment in November 1999, beginning a 21-year contractual agreement between Algeria’s Sonatrach and DEPA. Greece has one LNG terminal at Revithoussa, near Athens, with a capacity of 23 Bcf/year. In 2006, a €70 million project to upgrade the terminal and increase its capacity to 185 bcf/year was approved.
In April 2006, Greece was censured by the European Commission for the lack of freedom to choose a supplier in the natural gas market. A law passed in mid-2006 to deregulate the energy market was the final legislative step needed to begin opening the natural gas market in Greece to competition. DEPA is in the process of unbundling its natural gas transmission and distribution network so that large users and power generators consuming over 100,000 MWh/year can choose their own gas supplier.
Under an agreement signed with DEPA, three companies operate low-pressure natural gas distribution networks – mainly for the tertiary and domestic sectors – in Athens, Thessaloniki, and Larissa and Volos respectively. These companies are investing million of Euros and adding kilometres to these networks in order to reach much of the region’s population and satisfy demand. DEPA has an exclusive contract to supply the three distribution networks for 15 years.
Recent improvements in Greek-Turkish relations are facilitating co-operation in the energy field. In 2000, the two countries agreed to join forces to develop connections between their natural gas networks within the EU-sponsored Interstate Oil Gas Transport to Europe (INOGATE) project. Greece will be connected to Turkey, Italy (via an undersea pipeline) and to the wider European natural gas network by 2010. BOTAS, Turkey’s natural gas company, is scheduled to complete the construction of its section of the Turkey-Greece pipeline by mid-2007; the Greek section is almost complete.
The South Caucus Pipeline (SCP), which will transport Azerbaijani natural gas through Karacabey in Turkey to Komotini in Greece – and from there to the main Greek network – is scheduled to begin operating in 2007. Construction of the 300 km pipeline began in July 2005 and is tied to the start-up of the Shah Deniz field in Azerbaijan’s section of the Caspian Sea. The SCP will have an initial capacity of 124 bcf (3.5 billion m3) per year and will reach up to 406 bcf (11.5 billion m3 per year at full capacity. The completion and the operation of the SCP will also strengthen Greece’s geopolitical role in the security of energy supplies.
In 2005, DEPA signed a €290 million agreement with Italy’s Edison group to extend the Aegean pipeline to Italy; the 210 km Greek-Italian pipeline will have a capacity of up to 370 bcf/year. The pipeline will stretch across the Adriatic Sea, reaching the Italian coast in the Apulia Region in the south. Construction work is scheduled to begin in 2008 and to be completed by 2011. The pipeline will be connected to the SCP.
In March 2001, Greece signed an agreement with Armenia and Iran to strengthen economic and energy co-operation. Discussions included the possibility of an EU-subsidized natural gas pipeline from Iran, through Turkey and Greece to reach European markets.
Greece plans to become a major transit route for Caspian and Iranian gas, and thus a strategic partner in natural gas supply security for other EU members as part of the South European Gas Ring (SEGR).
Greece’s lignite or ‘brown coal’ reserves of 4300 million tonnes are its only significant fossil fuel source. The largest deposits are at Ptolemais and Amintaio in north-western Greece. The country has no hard coal reserves and imports this resource from Russia and Latin America. Domestic production has been partly opened to private companies, but the Public Power Corporation (PPC) is still the largest producer and consumer.
In 2004, Greece generated 55.5 billion kWh of electricity, of which 87% was thermal, 10.8% hydropower (HP) and about 2.4% from renewable energy sources (RES) (Figure 2). Most of the thermal is lignite-fired. There is also some oil-fired generation. All new power plants will be fired by natural gas (NG).
Figure 2. Energy sources for electricity generation in Greece, 2003-2005
Electricity demand in Greece has been growing steadily. According to RAE (the Greek energy regulator), the medium-term growth prediction of 4.0% per year means that some 6000 MW of additional capacity will be needed to guarantee supply through to 2015.
PPC was a state-owned power monopoly until the introduction of the liberalization of electricity market in February 2001, which opened up 37% of the power market in Greece. It then became a private power company and was floated on the Athens and New York stock exchanges. PPC remains the sole distributor, in accordance with Directive 96/92/EC (concerning common rules for the internal market in electricity), producing 96% of kilowatt-hours sold in Greece.
Greece is involved in numerous projects to link its electricity grid with those of neighbouring countries. Its power network is currently connected with the networks of Albania, FYROM and Bulgaria. This allows Greece to export/import electricity to/from Serbia and Kosovo – even though transmission problems in these countries sometimes prevent much of this electricity reaching its intended recipients.
Greece and Italy are linked via an undersea 165 km, 500 MW cable linking Otranto in Italy with Aetos in Greece. The project is a joint venture between ENEL (75%) and PPC (25%), and has supplied electricity to many countries in south-east Europe since mid-2002.
Improved Greek-Turkish relations are also affecting the electricity sector. Electricity will be exported via a 400 kV transmission line between Filippoi (Greece) and Hamidabad (Turkey), which is expected to be operational by 2007. In addition, a new cross-border interconnection with Bulgaria is planned to relieve import congestion, as well as a second grid connection with Italy.
In October 2005, Greece signed the Treaty establishing the Energy Community between the EU and south-eastern European countries. The other parties to the Treaty are Albania, Bosnia-Herzegovina, Bulgaria, Croatia, FYROM, Montenegro, Romania, Serbia and the UN Interim Administration in Kosovo. The Energy Community is the world’s largest integrated competitive electricity market, with approximately 500 million consumers.
The number of renewable electricity generation projects is increasing in Greece. In response to the targets set by EU directives, the Greek government promotes renewable energy through incentives – either from the CSF or national funds – and has introduced legislation promoting the use of RES, with profitable pricing for ‘green’ electricity (see box ‘New legislation for Greece’).
The installed capacity of Greece’s wind parks now amounts to over 560 MW, while more than 20% of households use solar water heaters. The installed capacity of small hydro plants exceeds 140 MW and the potential for biomass is notable but not explored. The use of photovoltaic (PV) systems for electricity production is expected to rise rapidly due to a favourable tariff for PV-produced kWh, as part of Law 3468 passed last year.
The role of cogeneration in Greece
CHP in a monopoly situation
Until 1994 and the implementation of Law 2244/94, CHP developed slowly in Greece as PPC was not supportive. During the last decade, the prospects for CHP improved with:
- the arrival of piped natural gas from Russia
- financial support for CHP systems from EU-funded programmes (such as CSF) and national funds (the normal subsidy was 35% of the total cost of the investment, with a minimum equity participation of 20% and a maximum loan of 45%)
- the diffusion of the advantages of CHP into Greek technical and market worlds.
Table 1 shows the numbers of CHP systems operating in different industrial sectors in Greece in 1999 (no CHP systems were installed in the tertiary and domestic sector at this time).
Legal framework for CHP between 1994 and 2006
Until June 2006, Law 2244/94 set out a legal framework for CHP in Greece. This Law (Regulation of issues regarding electricity production from RES and other conventional fuels) came into effect in October 1994. It introduced the distinction between autoproducers and independent producers to the Greek CHP market, and allowed the installation of CHP plants by autoproducers (autonomous or connected with PPC). For conventional fuels, the capacity of the CHP plant could not exceed the autoproducer’s thermal or cooling load.
The Law also specified the tariff structure for the electricity purchased or sold by cogenerators. It introduced the obligation of PPC to buy excess electricity from CHP systems and prohibited autoproducers from selling electricity to third parties; PPC had the sole right to purchase excess electricity under an agreement between PPC and the autoproducer. The tariff for surplus power purchasing was based on PPC’s selling tariff and was expressed as a percentage of its selling price; it varied between 60% and 70% of this price.
Law 2244/94 allowed the installation of CHP plants by independent producers that sold their entire production and had no consumption of their own. In addition, PPC was the only buyer. Natural gas was the only fuel that the independent producers could use and the capacity of the CHP plant could not exceed the sum of thermal loads of the enterprises supplied with heat by the independent producer.
The energy component of the price at which the independent producers sold electricity to PPC was 70% of the existing tariff for low voltage (LV), medium voltage (MV) or high voltage (HV) respectively. The capacity component was equal to 50% of the corresponding tariff. Different Ministerial Decrees specified:
- the procedures and documents required to issue a licence for the CHP scheme
- the requirements for a system to be considered as a CHP system, with respect to its efficiency, i.e. the nominal total efficiency of the system had to at least 65% and the total operating efficiency each month had to be at least 60%.
Barriers to the development of CHP during 1994-2006
During this period, the main obstacles for the promotion of CHP were administrative. Several Agencies and Ministries were involved in the process. The Ministry of Environment, Planning and Public Works was responsible for issuing the environmental permits. The Ministry for Development had a positive attitude towards CHP and promoted it in all its operational programmes with incentives of 35%-40% of the total cost of investment. However, the Ministry favoured centralized procedures controlled by its units, which created lengthy delays and frustrated investors. PPC was not fully supportive of CHP and adopted a monopolistic attitude and low electricity prices for end-users. DEPA had no tariff and contract policy towards CHP investors.
The whole procedure to be able to operate a CHP system was therefore centralized and long-winded, with a long period between securing all the relevant permits and beginning work on the CHP installation.
Another problem was grid connection of a CHP system to the national network. A major issue was that the price offered by the utility to the cogenerators was a direct function of the voltage at which the cogenerator was connected to the grid. This, in turn, made the cogenerator heavily dependent on the national utility company (PPC), mainly due to the large difference between the tariffs at various voltages. For example, no CHP project was financially viable if it was connected to the HV network because PPC offered very low purchase prices to the cogenerator.
The Hellenic Association for the Cogeneration of Heat and Power (HACHP) was formed in 1996 to promote CHP in Greece. It identified a number of other barriers including:
- long payback periods on investment
- high fuel/low electricity prices, creating financially non-viable CHP projects
- lack of support from utility companies, such as stable grid connection procedures
- environmental regulations forbidding any CHP installation to the urban area of Athens (the reason for no CHP plants in the tertiary and domestic sectors).
- high fuel prices (especially of natural gas)
- no stable rules for connection of CHP to the electricity network
- low electricity prices
- complicated contract between DEPA and the cogenerator
- lengthy permit procedures.
All these lead to a long payback period on investments.
CHP potential in Greece
Excluding the investment in Aluminium de Grèce, studies have shown that the potential for CHP in the industrial sector in Greece could reach 450 MWe. However, much of Greek industry consists of small- and medium-sized companies (SMEs), indicating the need for small- to medium-scale CHP installations that can cover the electrical, heating, steam and cooling loads of these companies effectively. The market potential for CHP solutions up to 5 MWe is therefore expected to expand rapidly.
The potential for CHP evolvement in the tertiary sector, which includes commercial and state-owned buildings, is estimated to be 150 MWe. This growth will be assisted by the new low-pressure natural gas network in the four main cities of Greece, which will increase opportunities for micro and small-scale CHP – primarily in the tertiary and domestic sectors, as well trigeneration projects.
According to HACHP, there are three main reasons why market prospects for CHP in Greece for the next decade will show a constant increase:
- The further penetration of natural gas within Greece will increase opportunities for CHP in the industrial, tertiary and domestic sectors.
- New district heating installations will be developed over the next decade. Until recently, only three northern cities and the one in Megalopolis (Peloponnesus) were heated by district heating systems – all connected to PPC power plants. A private CHP system with a district heating system providing heat and hot water to customers in Serres began operation in January 2007.
- Micro- and small-scale CHP systems for the tertiary and domestic sectors (also covering cooling loads) will be introduced as a result of Directive 2004/8/EC.
Table 4 lists all known CHP projects under implementation or just starting operation.
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Greece is becoming a strong energy hub in south-east Europe with interconnections with its northern, eastern and western neighbours. In addition, Greece is working to liberate its energy markets, which are currently dominated by a small number of players that have maintained their powerful position despite the development of a legal framework for liberalization. A significant first step towards market liberalization is the operation of Greece’s first privatized power plant (HP’s 390 MW combined-cycle gas turbine plant at Thessaloniki) and a 334 MW CHP system at Aluminium de Grèce.
CHP, as well as renewables, can play an important part in these developments by offering ‘clean-clever-competitive’ electricity, as well as heating and cooling to local energy markets.
Costas G. Theofylaktos is President of the Hellenic Association for the Cogeneration of Heat and Power (HACHP), Athens, Greece.
Fax: +30 210 8821917, e-mail: firstname.lastname@example.org
New legislation for Greece
The new Law 3468 for Renewable Energy Sources and High-Efficiency Cogeneration of Heat and Power was approved by the Greek Parliament and has been effective since 27 June 2006. It aims to encourage the use of renewable energy and energy efficiency in the country by establishing a legislative and regulatory framework to support investments in those energy sectors. It has set national targets of 20.1% by 2010 and 29% by 2020 for the contribution of renewable energy to total electricity production. A system of feed-in tariffs has also been set up to accelerate the deployment of renewables and cogeneration. Notably, interconnected high-efficiency CHP systems are eligible for €73/MWh while non-interconnected systems on the islands are eligible for €84.6/MWh.
– by COSPP, based on the presentation ‘Market perspectives in Greece’ by Stathis Tselepis, Centre for Renewable Energy Sources, given at the ‘2nd PV Med’ conference in Athens, Greece, 19-20 April 2007
CHP in the liberalized market after 2001
Since the opening of the liberalized market in Greece in February 2001, RAE annual reports describe the CHP sector as growing slowly but steadily. Table 2 lists CHP units installed after 1999 with natural gas as fuel, in the industrial and tertiary sectors; total capacity as of May 2005 is 26.15 MWe. Table 3 lists CHP units installed after 1999 with biogas as fuel; the total installed capacity as of May 2005 is 25.91 MWe – most of which belongs to municipalities and to Public Water Works Co. (EYDAP).
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Barriers to the development of CHP after 2001
The administrative barriers and other obstacles remain and their solution is expected in the new law implementing Directive 2004/8/EC (on the promotion of cogeneration based on a useful heat demand in the internal energy market and amending Directive 92/42/EEC) into the Greek legal system.
The permit procedure is still centralized and the period between securing all relevant permits and beginning the CHP installation is considered quite long.
A major issue of the price offered by the utility companies to the cogenerators was solved with the favourable tariffs given to cogenerated electricity by Law 3468 of June 2006 (i.e. €73 for 1 MWh from CHP) – see box ‘New legislation for Greece’.
Today, HACHP still identifies the most important barriers as follows: