By Charles Ellinas
The International Energy Agency (IEA) released on November 2 a report ‘Review of Greek Energy Policies’, with special emphasis on promotion of renewable energy and energy efficiency. The last such review was in 2011. Present were Dr Fatih Birol, IEA’s executive director and Greek Energy Minister Giorgos Stathakis.
In the forward to the report, Dr Birol praised the country’s achievements.
“Greece has made significant efforts to advance energy sector reforms in a challenging environment of declining consumption and constrained finances. The government should be commended for progress made since the IEA’s last review of the country’s energy policies,” he said. “But even greater effort will be required if Greece is to achieve its longer-term energy goals. The creation of competitive and price-responsive energy markets will be critical to ensuring long-term economic prospects while putting the country solidly on a path to a low-carbon economy.”
The IEA said Greece has made noticeable progress with energy sector reforms since the last IEA in-depth review in 2011, by restructuring state-owned companies and transforming its energy system. This should provide long-term economic benefits and sustainable outcomes for the environment and Greek society.
It recognised that plans already being implemented to restructure state-owned companies and liberalise electricity and gas markets will lead to more competitive and financially viable energy markets. Greece’s latest bailout requires limiting the dominance of state-controlled utility Public Power Corporation and selling a 66 per cent stake in gas grid operator DESFA, currently in progress.
It also welcomed the government’s efforts to strengthen energy security through investments in natural gas and electricity infrastructure enhancing domestic and regional inter-connections, extending gas storage and promoting international gas pipelines to diversify supply routes.
Adoption of renewables and energy efficiency have contributed to this, allowing the country to achieve its 2020 emission reduction and energy efficiency targets. In fact, Greece had the second-highest share of solar PV in the total primary energy supply of all IEA countries in 2016. This has led to an impressive increase in the share of renewables in electricity generation, achieving 12.5 per cent in 2016.
However, Greece is still one of the biggest coal producers in Europe behind Germany, Poland and the Czech Republic and most of its islands currently rely on diesel oil for their energy supply.
As a result, the IEA recommended that enhanced exploitation of its renewable energy potential and improving island interconnection to the main grid could result in a more balanced energy mix and contribute to increasing energy security.
It has also made a number of other recommendations for further policy improvements that are intended to help guide the country towards a more secure and sustainable energy future. These include:
- Development of an integrated national energy and climate policy framework for 2030 and beyond
- Facilitation of energy system transformation in a recovering economy while advancing market reforms and setting ambitious renewable energy and energy efficiency targets
- Continuation of energy reforms
- Interconnections of the islands with the mainland transmission system to use the strong renewable energy potential
- Continuation of ambitious energy efficiency policies
- Making sure that regulators have the capacity to carry out their successful work on reform and oversight.
Dr Birol observed that “Greece has a vast unexplored potential for renewable energy and we support the country’s efforts to explore this potential by interconnecting its islands with the mainland energy system.”
The IEA states that Greece is going through a comprehensive reform programme that will result in an electricity market in which competitive prices will emerge with a level of regulatory maturity to attract investors. This will allow investors to trust that market outcomes will be the result of merit only.
The Greek authorities are commended for the significant efforts already made. It is now important to ensure that Greece implements these reforms in a timely manner. Greece should opt for methods other than subsidising electricity prices to tackle energy poverty issues.
There is also important progress in liberalising the natural gas sector. The market share of the dominant gas supplier is reduced through annual auctions of some of its supply portfolio to other market players.
The IEA also commended Greece’s Regulatory Authority for Energy (RAE), which has played an important role in providing the regulatory framework and secondary legislation for electricity and gas sector reforms. Energy sector laws have further empowered and enhanced the independence of RAE. IEA recommended that Greece must ensure that RAE receives sufficient resources to undertake its growing responsibilities, given its role in ensuring competitive energy markets.
However, once the economy recovers, current policies will not be adequate to guide the Greek energy sector towards the long-term energy transition that the government is aiming for. This will require new initiatives that support sustainable increases in efficiency, and switching from oil and coal to natural gas and renewable energy. These should be included in a longer-term integrated energy and climate national energy plan to specifically take into consideration ambitions for energy efficiency and renewable energy.
Stathakis confirmed in September that Greece is in the process of preparing such an energy strategy to 2030, based on implementation of climate change and Paris accords, as well as EU agreements. It will also account for the profound changes in the energy market within the country and the EU, the liberalisation of the electricity and gas markets and the emergence of institutions that will guarantee the smooth operation of the market.
There are important lessons to be learned from IEA’s report on Greece for Cyprus, particularly with regards to stronger and more ambitious promotion of renewable energy and energy efficiency and proactive support of RAE’s work to achieve electricity and gas sector reforms.
Dr Charles Ellinas is a nonresident senior fellow at the Global Energy Centre of the Atlantic Council