Siting and transmission wall stops Greece rush

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Developers are lining up to stake their claims on the gold mine of wind energy in Greece. But what many of them fail to realise is that the way to the riches is strewn with obstacles. Only the most patient and stubborn will profit. For starters, it helps to be Greek -- or closely connected to one

Greek wind power is in a gold rush mood. Liberalisation of the electricity market in February opened the doors to private power plant developers. Since then, foreign companies -- particularly from Germany -- have been claim jumping sites like the gold prospectors who flocked to California and Alaska in the 19th century. "It's another Klondike," says Carsten Kelter of Danish wind turbine manufacturer Bonus Energy.

In February, applications were submitted to the newly formed Regulatory Authority of Energy (RAE) for more than 10,000 MW of new wind projects alone. The country's existing power generating capacity is 11,000 MW and to date just 200 MW of wind power has been developed, despite the huge potential for wind power sales -- and profits. While RAE is expected to authorise only 2500 MW of the applications, insiders warn not to expect much development soon. A number of obstacles sit squarely on the Klondike's trail -- from the local level all the way up to the corridors of the European Union -- dwindling the chances for striking it rich.

There has been one main reason companies have tried to break into the Greek market: money. "The economics of Greece are almost unbelievable," says Bo Mørup of NEG Micon. First, a 40% grant on the total cost of a project has been available from the Greek government. Thus, as Mørup points out, $2 million of a $5 million installation is free of charge, meaning the project needs only to earn back $3 million to break even. "And if you have nice winds, you'll get your money back after two or three or four years," he says.

To make the situation brighter, developers can secure a "fairly high" fixed price on a contract for ten years, with an option for ten year renewal. Payment for wind power in Greece is about GRD 19.6/kWh (EUR 0.0575/kWh) on the mainland and on islands with grid connection to the mainland -- such as Evia. On the autonomous island grids the rate is about GRD 24.0/kWh (EUR 0.07/kWh).

These excellent economics would not mean much if it were not for the other best reason for building wind turbines in Greece: the wind. Very good winds. The best of them blow on the islands of Evia, Crete and Rhodes, and several sites there have average winds of 9-11 metres a second (m/s), while thousands of sites around the country boast average breezes of 7-8 m/s.

Complex terrain

It was this wind that sparked initial development in the mid 1980s and by 1992 the state utility, Public Power Corp (PPC), was the main builder of about 28 MW of total capacity. Due to some technology failures -- in hindsight put down to too little experience installing wind turbines in complex terrain -- the market nearly died. But a new law in 1994 obligated the PPC to buy power from independent producers, sparking new development again, particularly from Greek companies. In 1997, the PPC issued a tender for a wind farm on Crete. NEG Micon won the contract, and by early 2000 the 10.2 MW Xirolimni wind farm was on-line -- one of the biggest in Greece at the time.

Rokas Aeoliki SA has been one of the most successful developers to date (table). The company has 110 MW on-line, just more than half the country's total capacity, with another 50 MW ready to build, according to the company's George Spyrou, who manages the metals concern's renewable energy sources affiliate. With the entry of a slew of other German developers who have found success with a number of relatively small projects, Spyrou says the country's total installed capacity will likely double this year. Beyond that, however, is anybody's guess.

Transmission bottleneck

Spyrou, who has been active in the Hellenic Association of Aeolian Energy Investment Companies for several years, speaks of "fears" and "doubts" among group members about the future of wind in their country. "We face really big problems," Spyrou says. "And the problems are getting bigger and bigger, and we feel the government is not supporting this effort as well as it should and ought to do."

Of the main obstacles, lack of grid capacity is at the top of the list. Spyrou says there is no grid space available from the PPC in the three main areas of wind development -- Evia, Thrace to the extreme northeast and Peloponnisos peninsula -- where altogether there are applications for 6000 MW of wind plant licenses. "There can be no licenses here. And even if a licence were issued, we know the construction of a high voltage grid takes from four to six years," he says.

Mørup adds that all the land with good wind is either already claimed or else the local grid is already booked to capacity. In places not taken yet, up to five companies have applied for the same strips of land.

Obstacle number two is bureaucracy. "We are not proud of the speed of our authorities," Spyrou says bluntly. "Often they change the procedures or change the environmental permission [requirements]. There's not a very clear procedure among different ministries either. Sometimes this demands two or three to four years to get something accomplished."

Kelter of Bonus, which has been Rokas's exclusive turbine supplier, explains Rokas has been successful because it is a local company that has worked in the Greek industrial sector a long time and understands how the whole system works. "A lot of [foreign developers] are looking at Greece, but they don't realise the bureaucracy is very, very difficult to penetrate," Kelter says, referring to licences and grid connections. "It takes a hell of a long time. A lot of people lose their spark."

One of the companies that dropped out recently was Greentech Energy Systems of Denmark. Just a year ago, the developer had plans for 240 MW of projects, starting with a series on Rhodes three years in the planning (Windpower Monthly, May 2000). In February, the company sold out of its 50% stake in its Greek affiliate, Wind Park of Rhodes SA, to the Swiss-Swedish ABB group. "We find it extremely difficult to do any projects down there," says Greentech's Kaj Larsen, adding that the continuous changes in the law that affect wind power caused too much hassle for the company. All the permissions Greentech had obtained became "outdated" with the new liberalisation law, meaning Greentech had to reapply. ABB took over the projects with the sale and has joined with German wind developer Windsolar to tackle the Greek market (Windpower Monthly, May 2001). ABB reports that the project furthest along, 13 MW at Pithanitis on Rhodes, is being built using 900 kW NEG Micon turbines and is due to be commissioned later this year.

Piece of the cake

To make things a touch trickier, Spyrou says local authorities have formed their own "companies" after the most recent liberalisation took place. These community firms, obviously interested to reap as many benefits as possible from getting wind turbines in their area, are in a sense holding developers hostage. They are demanding to become partners "free of charge," Spyrou tells, and threaten not to approve any applications locally unless they are let in. And when they are in, he says, they re-negotiate with the investors. "It's really crazy," he says. "It's one of the biggest problems of the last months."

Further, the grant money from the past is gone -- temporarily at least. About two-thirds of the 40% grant on project costs came from the EU. A new package of EU funding has been long overdue, but no clear announcement has been made. Instead, Spyrou says, EU officials are still considering different types of grant options, such as a competition among investors for lower percentages of grants, or else grants that are connected to wind conditions of different areas -- the better the wind, the lower the support.

Since the financial future is unclear, new development has stopped beyond the current building spree. "We have a feeling that there will be a time gap for many, many months before new projects are built," says Spyrou.

Despite the gloom, Kelter is optimistic. "There's a lot of indication that there will be development of a number of wind farms in Greece in coming years. There's very good wind and political goodwill and good prices on power. I don't see why it should stop. There is work on extending the power lines and building out the high voltage grids. Considering the time it takes to develop a project, there just might be years when less happens."

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