Greek government rolls out measures to reduce its renewable energy tariff deficit

With Greece set to hit its 2014 renewable energy target, the Government has turned its attention to the support it provides the clean energy sector in its drive to slash public spending. One move, announced earlier this year, was to cut the feed-in tariff for solar power. Meanwhile, it has also introduced a surcharge on lignite-fired electricity production.
Greek government rolls out measures to reduce its renewable energy tariff deficit

At present, renewable energy capacity in Greece exceeds 2.4 gigawatts, mainly comprising wind and solar PV, followed by small hydro and biomass. In particular, PV has display dynamic development in recent years as developers from Spain among other countries have been attracted by a succulent feed-in tariff.

By the end of 2011, installed capacity stood at 580 megawatts compared to a 198 MW in late 2010. Power purchase agreements have already been signed for a further 2,000MW (with locked feed-in tariffs), representing a 300% increase from the end of 2010.

Taking these developments into account, Greece is expected to meet its 2014 target of 1,500MW, while the realisation of projects that have already signed power purchase agreements means that the country is on track to meet the 2020 target several years before the deadline.

Reduction of PV feed-in tariffs

In order to ensure the viability of the proposed mechanisms, and to reduce the deficit of the “renewable energy special (RES) account” – effectively the cash pool used to fund the renewable energy feed-in tariffs – Greece’s Minister of the Environment, Energy and Climate Change carried out a public consultation with stakeholders in the energy market and environmental organisations earlier this year in order to discuss a reduction in the solar PV feed-in tariffs.

Taking into consideration the recommendations of all stakeholders, as well as the proposal of the Regulatory Authority for Energy (RAE) to reduce the guaranteed price for PV, the Minister issued a decision stating that the ministry would proceed with the reduction of the guaranteed feed-in tariffs for PV as of 1 February 2012 without retroactive effect (as shown in the tables below). The decision was made in light of the need for uninterrupted payments to producers and the proper functioning of the energy market, as well as the significant reduction in installation costs and the improved efficiency of photovoltaic technology.

Although the measure is expected to affect the reduction of the RES special account deficit in the long term, at present, payments to the RES producers for the energy injected into the system through their power plants are made with a delay of approximately two months.

For each year from 2015 onwards, the feed-in tariff will be a function of the marginal system price defined as 1.3 x m.ο.ΟΤΣn-1 (where m.ο.ΟΤΣn-1 is the average marginal system price of the past year, n-1). The reduction will be implemented every six months rather than annually as applicable today, and will continue until 2019.

Additional measures to cover RES special account deficit

The PV feed-in tariff reductions come in addition to the following measures announced by the Minister of the Environment, Energy and Climate change following the RAE's decision to strengthen the RES funding mechanism. These measures are as follows:

  • A charge of €2 a MW hour on the lignite-fired electricity production;
  • Use of Common Ministerial Decree 187497/2011, which foresees the sale of 10 million tons of carbon credits in 2012. In addition, the total revenues from the auction of carbon credits between 2013 and 2015 will be used to reinforce the RES special account; and
  •  Activation of Article 12(16) of Law 3851/2010 for the transfer of part of the proceeds of electricity bills for the public television licence fee to the RES special account.

Although activation of the television licence fee measure has been announced by the Minister several times, no progress has yet been made in the transfer of the proceeds to the RES special account.

Finally, the measure regarding contribution of the total revenues from the auctioning of carbon credits between 2013 and 2015 to the RES special account is included in a draft law on the use of Helliniko airport and the Helios project, which is expected to enter into force soon.

The ministry also intends, within the framework of this law, to take action on structural changes for other renewable energy technologies, in regard to their maturity and ability to achieve their goals for 2020, including:

  • A gradual transition to the declaration of readiness for the electrification project, without retroactive effect, in order to lock the guaranteed price, as in the rest of the European Union;
  • Measures for the further promotion of biomass technologies, geothermal energy, small hydro and small wind turbines; and
  • Renaming the special RES duty so that it reflects the cost of transition to a cleaner energy mix for the country.

[Editor’s note: This piece was put together by Gus J Papamichalopoulos at the Athens-based law firm Kyriakides Georgopoulos & Daniolos. Gus heads the Energy and Infrastructure Department and he has been involved in the deregulation of the electricity and gas market in Greece.]

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