Greece is making efforts to achieve full liberalization by 2005. With the growing number of power projects and the influx of foreign investors, the country’s future looks bright. However, demand is outstripping supply, which is a cause for concern. PEi investigates.

Gero Di Piazza

Greece depends quite heavily on its European neighbours to meet its energy demands. With reserves of some 2874 million t, lignite is the one fuel that relieves the burden of its lack of indigenous sources. Subsequently, the country’s fuel mix is mainly coal dominated. The lignite mining areas – six dedicated power stations with total generating capacity of 4850 MW – produce more than two-thirds of Greece’s supply.

Greece generates an annual output of 46.4 billion kWh of electricity, 90 per cent from thermal power plant, ten per cent hydropower and a minimal percentage from solar power.


Greece’s power generation mix by fuel source in GWh
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Energy consumption is forecast to grow at an annual rate of 2.1 per cent until 2020 far higher than the rate in other European countries. The majority of demand is expected to come from transport, commerce and residential customers.


Power plants in existence or under development
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The short supply problems comes at a crucial period with the Olympic games to be held shortly. The electricity shortage is expected to reach crisis point within the next four years. But this has not gone unnoticed, the government is trying to patch the system up by increasing interconnections of gas, oil and electricity transmission lines with neighbouring countries and the European Union, as a short term stop-gap. But long term measures have already been put into practice with the establishment of the Regulatory Authority for Energy (RAE) in 2000 as an independent agency, with a mixed advisory and decision-making role. Its role in electricity matters but is, however, limited as the Ministry of Development makes the final decisions.

State-owned

Greece’s state-owned Public Power Corporation (PPC) has 6.6 million customers, all across the interconnected system on the mainland as well as on the islands. The company also maintains a distribution network of approximately 196 500 km containing power lines of both medium and low voltage. The company believes that the increase in electricity demand, which has increased year-on-year, will result in a need for additional installed capacity in the near term to cover expected growth in demand. Between now and 2005, PPC anticipates generation capacity will increase by up to ten per cent excluding hydroelectric stations, and by up to 12 per cent including hydroelectric stations.

Before February 2001, PPC held an almost 100 per cent monopoly of the country’s electricity supply. PPC claims that since the above date there has been over 1300 applications for the construction of power plants totalling over 23 GW. But efforts to relinquish ownership have been effective over recent years. Some 20 per cent of the PPC was floated on the Athens stock exchange in November 2000.

The reason for the 2001 deadline, which was specially extended two years more than other EU countries, was due to the fact that it borders no other member state and much of its territory is comprised of islands that cannot be linked to the national grid. Since 2001 about 34 per cent of eligible customers of middle and high-tension voltage may obtain their electricity from producers other than PPC.

The electricity market in Greece will have to be fully deregulated by 2005.

The government is also nearing completion of its privatization programme, which aims to privatize or sell minority stakes in some 20 government enterprises and organizations. The state has been successful in selling minority stakes in Hellenic Petroleum and other vital but non-related industries. There are plans to float further stakes in PPC. The country is anticipating that this move will lead to further opportunities to attract foreign investment – calculated at a7.7 billion by the end of 2005.

PPC, on mainland Greece, owns and operates 33 generating power stations, consisting of ten thermal stations, 22 hydroelectric stations and one wind park. Surrounding islands are equipped with the state-owned company’s 39 autonomous thermal stations, two hydroelectric stations, 20 wind parks and five photovoltaic power stations.

Renewables

Greece has a healthy potential in the renewable sector. The state has established the Centre for Renewable Energy Sources (CRES). The ministry of Development set up the body to maximize the abundant solar, wind and geothermal sources. This in turn will aid supply problems to the country’s remote islands, which are not connected to the main grid. CRES estimates that 15 per cent of Greece’s total generation output can be produced by wind farms. This is an ambitious figure considering its current 110 MW in this sector.

Greece’s Hellenic Energy and Development Renewables is working with Spain’s Gamesa to develop wind farms in Greece, which will amount to 500 MW by 2008. Additionally, the UK’s Windforce plans to invest in three wind farms in the country adding a further 650 MW by the same year. Wind power accounts for a ten per cent contribution to the country’s fuel mix. Solar power, which accounts for one per cent but looks set for a steady increase, is used to heat water. Solar saves the grid 1.4 billion kWh/year. The renewable programmes are more of a reaction to the damage done rather than any initiative preventative measures. The use of lignite in power generation is responsible for half of Greece’s CO2 emissions as well as other air pollutants. It has led to high levels of atmospheric pollution linked to severe health problems in the capital and severe damage to buildings and monuments.

As power shortage looms and becomes even more of a reality, measures have been taken to not jeopardize the scheduled Olympic games that is due to return to Athens in 2004. PPC has stated that the commencement of operations at the lignite-fired power stations at Komotini, at the new hydroelectric station in Messochora, plus new capacity to be added by independent power producers holding generation licences from the minister of development, will provide sufficient installed capacity to satisfy the anticipated increased demand until 2004. The PPC plans to construct five new electricity sub-stations in Attica to help meet higher demand for power during the Olympics.

Projects

The country is involved in a number of projects to link its electricity grid with neighbouring countries. A

164 km sub-sea pipeline linking Greece and Italy was completed in July 2002, which will enable a 500 MW cable adjoining Ontranto in Italy with Aetos in Greece. The project is a joint venture between Enel and PPC, with a 75 to 25 per cent ownership ratio respectively. It cost an estimated $305 million.

Greece’s power network is connected with Albania, Macedonia and Bulgaria. These countries allow easier access points to export power to Kosovo and Yugoslavia as well as enhancing its position as the energy hub for the Balkans.

Another surprising country which a resurgent Greek power market continues to reinforce itself with, is Turkey. Political relations between the two countries have improved over the last few years, which has been shown through their commitments to establish a 400-600 MW gas fired power plant in Greece.

The joint project owners consist of Greece’s Copelouzos, Turkey’s Gama and the USA’s ExxonMobil. The plant will be used to export power to Turkey whilst supplying Greek power demands. Additionally, Greece and Turkey continue to work together on a proposed gas pipeline which targets a 2005 completion date. The project, on completion, is expected to add 500 million m3 a year to the Greek market.

Greece is four years into a 21-year contractual agreement with Algeria to supply liquefied natural gas shipment under which the Greek Public Gas Company (DEPA) will purchase gas from Algeria’s Sonatrach.

Demand for electricity in Greece is affected by a number of factors including changes in economic activity, the relative energy requirements of individual sectors of the economy, improvements in the efficiency of electricity use, the price to consumers of electricity relative to other forms of energy, the weather, time of day, day of the week, and time of year. Although demand does not vary as significantly throughout the year as in some other European countries, the lowest demand generally occurs in April and demand increases to peak load in July due to air conditioning use during the summer. The maximum demand for electricity in Greece typically occurs on a summer weekday. The minimum level of electricity demand typically occurs on a spring weekend. In 2001, the top-end demand reached 8600 MW in July between 8–9 am.

The energy market in Greece is dominated by highly integrated state-owned enterprises. The government relies on this because it lacks the personnel to do detailed planning and monitor the market. However, the situation has improved with the liberalization and privatization of state-owned power companies. But this has since changed.

Liberalization

Greece’s liberalization process began in 2001 in line with European Commission Directive 96/92. The country has worked hard to be part of the Economic Monetary Union (EMU) and became its twelth member on January 1, 2001. The move meant the market opened up 34 per cent. The two-phase project will see major consumers, which represents around 30 per cent of the market, opening up first. The second stage, scheduled for 2005, is when a fully liberalized market will be in place.


Greece’s regulatory framework
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The process is hotting up as home and foreign interest remains strong. Ideas for project construction have come from Copelouzos Group, Halivourgiki, Viohalko, Petrola and Public Gas Co. amongst others. Foreign power giants that seek to buy a way into the electrical market include the UK’s National Power, Italy’s Enel and Edison, France’s Electricité de France, Belgium’s Tractebel and Germany’s RWE.

Around 2300 MW of new power could be added to the system, if construction programmes prove true. This represents around 20 per cent of the country’s existing power capacity. Six licences have been approved for the construction of large thermoelectric power stations fuelled by natural gas. Four of the licenses went to Greek companies and the other two were joint ventures involving Greece’s Promethius Gas and Italy’s Enelpower.

However, research company CivilitasResearch based in Cyprus, has expressed its doubts on the liberalization process. It reports that the six licences have yet to be granted and in turn the earliest stages of project development is being hampered by a lack of international funding – which cannot be secured without an operating license and a purchase agreement.

Even after the initial stages of full liberalization, PPC will retain the majority market share and will have a competitive price advantage against up and coming independent power producers. CivilitasResearch goes on to predict, with certain matters that need to be considered Greece will not have a fully functioning liberalized power market before 2010. The factors it points out are that energy sources for private producers will be limited due to the lack of access to natural gas supplies, and LNG would be too expensive. This is without the minimal price increase that is expected to follow, which in turn lowers profit margins for private producers.

Despite this, no one doubts the power potential that Greece has. With average yearly growth demand rates of four per cent along with even higher growth in the surrounding Greek islands, investors, as seen so far, will not fall short in expressing an interest. But also to consider is the 2005 time limit that draws nearer for PPC’s fragmentation. CivilitasResearch believes that pressure put on PPC, from the European Commission, will be needed to meet the deadline. This was the case in Italy with the former state-owned power giant, Enel.

The longer term measures with the implementation of natural gas pipelines (in Turkey/Italy), construction of various power plants and renewables facilities will undoubtedly aid the country along with its islands to focus on and actively carry out the higher standards that have been set.