Greece, with its pivotal position in southeast Europe, is emerging as a strategic energy hub in the region. Historically heavily reliant on lignite for its electricity, natural gas from the Caspian and wind power are transforming Greece’s power sector.

 

Chris Webb

Wind farms and other renewable sources are slowly dragging Greece’s lignite-dominated power sector into the 21st century

Having joined the European Union (EU) back in 1981, and by default signed up to the concept of market liberalization, some would say that Greece has dragged its heels over some areas of its energy policy. There are some other anachronisms, which sit uncomfortably with most EU countries’ commitment to greenhouse gas reductions, particularly in the field of electricity generation, where a large proportion of its power is sourced from lignite, the very word sure to stir environmentalists into a state of apoplexy.

However, there does exist a climate of growth and opportunity in this sun-soaked peninsula with its many popular island destinations. Greece is fast becoming an energy hub for the southeast Europe, with natural gas interconnectors with Turkey, Italy and elsewhere.

Its links with Turkey clearly offer the potential to draw gas supplies from the Caspian area for distribution throughout the region. Some 75 per cent of the country’s gas comes from Russia’s Gazprom, which has a long-term supply contract stretching to 2040. Further supplies come from Algeria in the form of liquefied natural gas on a take-or-pay arrangement to 2020.

Electrical interconnectors to Italy, Macedonia, Albania and Bulgaria are also strengthening Greece’s contribution to the European electricity market. Indeed, it was secure electricity supplies from Bulgaria that enabled Greece to host the Athens Olympics in 2004, as its own supplies were fragile.

Greece now claims to have a comprehensive energy policy to establish sustainable, competitive and secure sources of energy. Invest in Greece, the government’s body responsible for attracting investment, has established a clear regulatory and market framework for the energy sector. It has transformed the electricity and energy market in Greece into one of the most exciting sectors of growth and opportunity in Europe.

While previously all electricity production, transmission and distribution was under the monopoly of Public Power Corporation (PPC), companies from around the world are now playing a significant role in developing the sector. These include France’s EDF, Enel and Edison of Italy and Spain’s Endesa, along with a host of wind power and solar power companies.

 

Stragetically located energy hub

 

Greece’s political stability has helped establish its important geopolitical role as an energy fulcrum, and this has become one of the many primary objectives of the government. The Greek-Turkish Interconnection (IGT) was inaugurated in November 2007, when natural gas started flowing from Turkey into the Hellenic system.

This, and the completion of the Greece-Italy Interconnection (IGI) expected in 2012, converge with a common aim: to complete an important corridor of gas supply, connecting the huge Caspian and Middle East gas resources to the European market.

The IGI represents a huge investment, with more than 600 km of high-pressure pipeline stretching across the country and ready to transport over 11.6 billion cubic metres (bcm) per annum of natural gas from the Caspian to the EU gas network. If the Trans-Caspian gas pipeline project, so disputed by Russia and Iran, goes ahead it would place Greece in a particularly envious position.

Overseeing the development and growth of Greece’s rapidly emerging gas supply system and infrastructure is DESFA, the Hellenic Gas Transmission System Operator which, for a little under three years has operated as an autonomous subsidiary of DEPA, part of Greece’s Public Gas Corporation. Established in April 2007, after the completion of the legal unbundling of the transmission and trading activities of the Public Gas Corporation, DESFA came about as a direct consequence of the law for the liberalization of the natural gas market.

In the most recent global dash for gas, it is a crucial move for Greece. Yet although the developments in natural gas look set to further transform Greece’s electricity sector, the country lies at the heart of an exceptionally difficult region for electric power development, with its rugged topography and numerous islands.

Greece’s geography has resulted in the seemingly inevitable legacy of a fragmented and disparate electricity system, with less than half of the country’s power plants connected to the mainland grid. In fact, only 15 of Greece’s islands are linked.

The majority of power plants are in the north of the country, where PPC’s lignite fields are located, while the bulk of demand is in and around the region of Attica in the south, where 40 per cent of the population and most of the country’s industry are based. The mainland transmission system consists of 66 kV, 150 kV and 400 kV networks which, together with isolated island transmission systems, exceed more than 12 000 km in their entire length.

 

The role of the state utility

 

PPC remains by far Greece’s biggest producer of electricity, being responsible for some 94 per cent of installed capacity. Founded by the Greek government in 1950, its main purpose was to plan and apply a national energy policy which, through the exploitation of the country’s domestic resources, chiefly lignite, could distribute cheap electric power to all citizens.

PPC started with the integration of all the small local grids to form the national interconnected grid. It was responsible for consolidating the system with the purchase of all the small private and local electric power production units. In 2001, PPC instigated a share issue and is no longer wholly-owned by the government. However, the state retains a 51.1 per cent stake.

Following the liberalization of the electricity market the responsibility for the transmission of electricity was in 2001 transferred from PPC to Hellenic Transmission System Operator, while the electricity market – production, transmission and distribution – is regulated by the Regulatory Authority for Energy (RAE), which is an independent authority.

The RAE, which enjoys financial and administrative independence, was established within the framework of the harmonization of the Hellenic Law to the provisions of Directive 96/92/EC for the liberalization of the European electricity market.

The mainland’s interconnected power grid draws its supply from a system of 34 major thermal and hydroelectric power plants and three wind farms, while some 60 autonomous power plants serve the islands of Crete, Rhodes and others. These include 33 thermal plants, two hydroelectric plants, 18 wind farms and five photovoltaic (PV) solar parks.

Connection to the mainland transmission system by submarine cable is largely restricted to those islands enjoying a close proximity to it, which include the Ionian and certain Aegean islands. The remaining islands are served by autonomous, largely oil fired power plants. In some of the islands, demand is also covered by wind powered facilities.

 

Energy demand growth and renewables

 

Oil consumption has increased in recent years, but has been outpaced by strong growth in demand for natural gas, driven by the development of new gas fired power plants. Natural gas consumption has increased steadily over the past 20 years, jumping by over 78 per cent between 1996 and 2006 to 0.5 bcm.

While the rate of growth of consumption has declined from these highs, particularly as a result of diminished economic activity during the global downturn of the last 18 months, gas consumption is expected to continue to grow as new gas fuelled power plants are installed.

Annual demand growth is expected to average 2.8 per cent between 2010 and 2030, according to the US Department of Energy’s Energy Information Administration.

Greece has an installed electricity capacity of approximately 14 GW Source: PPC

Aside from the major players already mentioned, there is keen interest not only from other independent power producers, but also from smaller private operators in developing power generation from renewable energy sources, namely wind and solar power. These vary from large-scale local authority or privately-owned wind farms and PV installations, to small-scale PV units installed on building roofs.

In its drive to encourage the deployment of renewables, and so meet its European commitments to reduce carbon emissions, the integration of these producers within the national grid is being implemented by PPC and supervised by RAE.

The PPC is also committed to buying renewable sourced energy at five times its selling rate until 2034, offering a powerful incentive to shift Greece’s energy sources to low-carbon alternatives. Small producers of less than 10 kW power, are exempt from taxation and receive credits to their monthly electrical utility bill. An average size detached home, if fully installed with PV, can earn as much as €5000 ($7000) a year, on top of enjoying free electricity.

In 2007, Endesa, Spain’s largest electricity utility, and the Greek metallurgical and engineering company Mytilineos Holdings announced a strategic alliance for the Greek market which will expand into southeast Europe. The two vowed to construct the largest independent power portfolio in Greece, with a mixture of thermal plant and renewables.

Endesa Hellas, whose ownership is split between Endesa and Mytilineos on a 50.01 per cent to 49.99 per cent respectively, says it aims to have 900 MW of capacity in Greece by the end of this year, which it is committed to achieve through tight reserve margins and competitive wholesale prices.

If that target is achieved, it would represent a seven per cent market share. Even more ambitiously, it wants to reach 2500-3000 MW in the Greek electricity generation market by 2015, a 15 per cent market share, and develop a robust retail commercial platform in the country.

A 334 MW combined heat and power plant is being commissioned in Viotia and a second combined-cycle gas turbine (CCGT) merchant plant of 400 MW is also in the pipeline. In addition, the company has ambitions for a clean coal fired power plant of 600 MW, and a renewable assets portfolio of up to 1000 MW of capacity.

Other moves by foreign companies include the signing of an agreement between Italy’s number two utility, Edison, Depa of Greece and Bulgarian Energy Holdings to build a natural gas pipeline linking Greece to Bulgaria. The memorandum of understanding marks a step towards reducing Eastern Europe’s heavy reliance on Russian gas.

CCGT plants are springing up in Greece to take advantage of this newly available gas, like the 390 MW plant built in Thessaloniki using plant supplied by VA-Tech Hydro of Austria for Thessaloniki Power.

The plant was built to alleviate the electricity supply shortage that emerged in Greece in 2004, aggravated by the fact that Greece was then hosting the Olympic Games. At the same time, the gas fired power plant represented a further step towards the reduction of carbon emissions in Greece.

Gas will continue to play an increasingly important role, but lignite remains king. Greek lignite is of low quality, characterized by low calorific value and high moisture content, but PPC’s mining operations, mainly in the three regions of Ptolemais-Amynteo, Megalopolis and Florina, are here to stay for some time to come. The company has invested huge sums in these operations.

Greece’s lignite-mining industry is second only to Germany’s in Europe. But the future of coal and specifically of Greek lignite will be crucially determined by environmentally compatible, especially low-carbon generation of electricity.

Investment in modernization and renewal of the power plant fleet are the key to securing electricity supply and progress in preventing climate change. Lignite represents Greece’s only significant fossil fuel resource, with total recoverable reserves estimated at 3900 million tonnes.

With annual production of lignite typically around 65 million tonnes, of which roughly three-quarters comes from the coal fields of northern Greece, and almost all of production consumed in electricity generation, the future of this resource is a matter of concern for the country.

 

Realizing its green potential

 

Hydropower plants are important to Greece. In 2006, generation from hydro and other renewables, including geothermal, solar, wind and biomass accounted for five per cent of Greece’s total energy balance. The figure was more than nine per cent in 2008.

Under the EU mandate, Greece needs to produce 20 per cent of its power from renewables this year, which it will achieve if hydropower is included in the equation. If it is not, it is set to fall short of its target. Yet Greece has made significant steps to go green. On the island of Crete, for example, 15 per cent of its electricity comes from wind and solar energy.

Thessaloniki Power’s 390 MW CCGT plant is part of Greece’s efforts to cut its carbon foorprint Source: Metso

The Centre for Renewable Energy Sources (CRES) is the Greek national entity for the promotion of renewable energy sources, rational use of energy and energy conservation. CRES estimates that 15 per cent of the country’s electricity needs can be produced by wind farms, with installed wind capacity ‘possibly’ reaching 2000 MW by the end of this year. The pace of development saw tripling of installed capacity between 2000 and 2006.

The Hellenic Wind Energy Association (HWEA), a not-for-profit, non-governmental organization formed in 1990, with the sole aim to actively promote wind energy development in Greece, would like to see that pace maintained. With already an installed capacity of more than seven per cent, Greece takes wind seriously. It was PPC that built the first wind installation as early as 1983 on the island of Kythnos, making it one of the first wind parks in the world. HWEA says Greece has enough wind potential to satisfy far more than the domestic market.

With specialized and experienced personnel, a satisfactory feed-in tariff system and investors queuing up, it is aiming higher than ever before to boost wind power generation.

Greece is a country whose power industry is pitched into a race against time. It has ample domestic lignite, yet coal of any colour is increasingly unacceptable in Europe, unless carbon capture and storage technology can be commercially deployed. Hedging its bets, Greece is doing what most of Europe is doing: dashing for gas and the harvesting the wind.

 

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