Greece

Greece

GREEK MARKET KICKED INTO LIFE BY POWERFUL NEW LAW

A new Greek law (September 1994) should considerably boost independent power production. State utility PPC is now obliged to buy independently produced energy, to which it is strongly opposed. A late addition to the law may, however, settle the matter because it provides new options for joint venture projects with other companies.

New legislation has been passed in Greece aimed at strongly stimulating a market for independent power production. The law -- hailed as a breakthrough for decentralisation of electricity generation in the country -- was passed by parliament on September 22. It rules that the state utility, the Public Power Corporation (PPC), must buy electricity from independent power producers at 70-90% of the low voltage tariffs for end consumers and refers explicitly to renewables.

Greece, which has strong winds and a deficit of generating capacity, holds enormous potential for the wind industry. But despite strong financial support from the European Union over the past decade, wind energy development has stumbled along in a series of fits and starts. Much of the blame for the sluggish market has been placed with PPC which, while showing little enthusiasm for developing its own wind plant, effectively blocked the birth of a private sector market.

PPC has also fiercely opposed the new legislation. The utility's main union, GENOP-DEH, even called for a series of protest strikes against it. Given the strength of the state utility's opposition, the new law relieves PPC of its responsibility for granting licences for independent power plant and hands it to the Ministry of Energy. Once a licence has been granted by the ministry, PPC is now obliged to a sign a power purchase contract with the producer.

Rates of pay for the power generated will vary according to location. For independent producers operating in areas where PPC has small local grids, such as on the Greek islands, PPC will have to pay 90% of the consumer price. For plant connected to the utility's main grid, the rate is 70%, but here PPC is also obliged to pay an additional kWh levy to reflect the "inert," or unused capacity of the plant. In practice, given current PPC prices, a wind plant operating on Crete or Rhodes will get nearly GRD 21/kWh, while a plant in south Evia will receive just GRD 17.5/kWh. In island areas with strong winds of 12 m/s, the expectation is that a wind plant could pay for itself within three to four years.

The new economic structure allows owners of power plant to use all the electricity generated, use some and sell the excess to PPC, or sell all the power to PPC as a commercial venture. Under the old legislation, stemming from 1985, only local authorities were allowed to generate power for PPC commercially -- and this was bought at rates below standard tariffs. As a result only a handful of them set up wind plants, with a total capacity of no more than 1 MW. Independent producers fared little better. Just 1.5 MW is owned by small industries and hotels who operate wind turbines in the 50-100 kW size range, selling the excess power generated to PPC.

Greece's energy and industry minister, Costa Symitis, has fought for the new law for several months. He says it will do away with the complex and bureaucratic procedures which so far have governed licence applications, discouraging many would-be independent producers from installing their own wind or hydro units. The new law, he says, will facilitate both individuals and private companies to realise investments in renewable energy.

Considerable new investment in wind energy, from within Greece and abroad, is now expected. Tassos Mantellis, secretary general of the energy and industry ministry, says his office has received a string of inquiries from potential investors. If a fraction of them were to materialise, he adds, Greece could have more than 200 MW of wind power installed in the next two years.

PPC, however, could still prove obstructive. Under the new licensing procedure, PPC is to provide the ministry with detailed technical assessment of proposed projects. But the utility claims the law will deprive it of valuable income, even though it will often be buying power from independent producers for less than what it claims is the current generation cost. This is especially true for islands reliant on diesel powered generators.

A size limit on private and local authority projects of 50 MW installed capacity has been imposed by the law for wind, hydro, solar and geothermal capacity. But even so, PPC could raise technical objections to connecting privately operated capacity to its grid, particularly on the islands, where the utility is planning to install more wind farms with 40-50% backing from the European Union.

These fears of obstruction are groundless, say PPC officials. Private generators need not fear "unreasonable" PPC intervention, it says, since there are plenty of wind sites all over Greece, especially in areas like south Evia, Crete, and Rhodes, where local electricity grids are extensive and can therefore accommodate both private and PPC wind farms. A last minute addition to the new law might also serve to smooth PPC's ruffled feathers. Energy minister Symitis introduced a new clause giving the state utility the right to set up joint ventures with other state or private companies and organisations for generating electricity from renewables or co-generation schemes.

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