2018 pivotal year for Greek energy, new PV auctions planned

Greece’s energy regulator, RAE presented its proposals for new renewable energy auctions at a seminar held last week in the capital, Athens.

RAE’s idea for 2018 is to auction, individually, 300 MW of solar PV, 300 MW of wind; and 400 MW of combined solar PV and wind capacity, via a joint auction.

RAE suggests the same scenario for 2019, while for 2020, it estimates that 300 MW of solar PV and an additional 300 MW of wind, auctioned separately, will suffice.

Furthermore, to enable meaningful competition, RAE will only allow an auction to take place when the minimum capacity registers to bid, which the regulator sets at 180% of the amount of power to be auctioned. For example, if Greece is to auction 100 MW of solar PV, the auction will take place as long as a minimum of 180 MW of bids has been registered.

If an auction does not award enough contracts to fulfill the amount of power to be auctioned, then the remaining capacity will be transferred to next year’s auction, said RAE.

Greece’s new renewable energy auctions will build on the country’s renewable energy law, legislated in 2016. The country also ran a pilot auction in December 2016, awarding 40 MW of solar PV capacity.

In January, the European Commission found that Greece’s renewable energy law is in line with EU State aid rules. The Commission said that while in 2018 “Greece will organize separate auctions for wind and solar installations in order to determine their market potential, as of 2019, joint auctions for both wind and solar installations will be held to increase competition and reduce the cost for consumers of renewable energy in Greece.”

The year 2018

Similar to the pilot solar auction in 2016, this year’s auction will be split into two categories: The first will include plants up to 1 MW each; while the second will concern plants between 1 MW and 10 MW each.

For these two categories, totaling 300 MW, RAE said that should the Greek government approve it, an auction will be announced by April, and fully implemented within four months. RAE suggests a bidding price cap of €95 per MWh and €85 per MWh for each category, respectively.

The regulator has also suggested a third auction category for PV plants larger than 10 MW, which is expected to take place separately, later in the year. Eligible projects will comprise PV plants larger than 10 MW; wind plants larger than 50 MW; and either PV or wind projects of an unspecified capacity, which form clusters.

By clusters, RAE means neighbouring PV or wind plants that link to the grid via the same substation. For example, four neighbouring PV projects, each with a capacity of 5 MW and totalling 20 MW of capacity, will be able to bid in the second auction as one project.

The total amount of capacity to be tendered in the third auction in 2018 is 400 MW. Subject to government approval, it will be announced this August and implemented by the end of the year, said RAE.

The third auction will also apply a price cap. In the case of PV plants larger than 10 MW being auctioned alone, the price cap will be the weighted average cost of the previous auction of the same category. So, the weighted average of the auction for PV plants larger than 10 MW in 2018, will be the price cap for projects bidding in the same category in 2019.

Critical elements

Apart from the rule that an auction should be adequately subscribed for it to take place, there are other critical elements to be aware of.

The most important, perhaps, is that for a project to participate in an auction, it needs to have secured a generation license and grid connection agreement (Greeks call them ‘mature’ projects).

RAE is mulling over allowing projects without the previous licenses to compete in future auctions – perhaps in a separate auction – but it is not yet certain when this can happen and will only concern specific geographical areas, mostly where the grid is set to expand.

Finally, tender participants need to submit guarantees from financial institutions that should their business fail, the institutions will cover the burden. One guarantee is submitted to RAE, while a second goes to the grid operator.

Investment climate

Stelios Psomas, policy of the Hellenic Association of Photovoltaic Companies (Helapco) tells pv magazine that there are not many available ‘mature’ projects today, and therefore should RAE’s proposal for a minimum 80% of capacity, on top of the tender capacity, go forward, the mechanism might end up without enough capacity being allocated.

Psomas also believes one financial guarantee per project is adequate, instead of the two currently being asked for. He further questioned Greece’s planning system, which he finds irrelevant to the new tender scheme. In other words, Psomas said, for a PV project to be considered ‘mature’, it needs to gather licenses that Helapco deems unnecessary.

Finally, Psomas expressed disappointment that the scheme put forward by RAE does not include energy storage.

A leading European PV investor, that preferred to remain unnamed, tells pv magazine that any tender that commits to more than 500 MW is of interest. However, he added, Greece does not look attractive yet.

The country hasn’t fixed its financial woes for good, relies on loans from its European counterparts, and it is far from certain it can stand on its own feet when the current financial support program by the EU expires this year.

“We don’t see Greece’s government building an adequate financial and business environment that encourages enough to invest. This is still a high risk country,” he concluded.

Whatever the details of the final tender scheme might be, it is certain it will have to be approved by the European Commission, and Greece’s lenders.

So much is the Commission’s lack of trust towards Greeks, that the forthcoming privatization of around 1 GW of the country’s coal plants in the following months will be managed and decided on by the Commission, via the so-called ‘Monitoring Trustee’.

The trustee will be paid by Greece, but will be accountable and report only to the Commission.

Greece’s electricity market will be utterly transformed in 2018 and it is crucial the Commission gets it right.