Greece: PV installation rates plunge in second quarter as RES fund debt rises

Greece saw a dramatic decline in PV installations in the second quarter of the year compared to the first three months of 2013, when the country added 801 MW of new solar PV capacity.

The drop had been expected due to new lower PV feed-in tariffs (FITs), which came into effect on March 11. PV developers rushed to finish building their projects in the first quarter in advance of their March deadline.

Greece installed 66 MW and 48 MW of new PV capacity in April and May, respectively, according to LAGIE, Greece’s electricity market operator. Although official June PV installation data has not been released yet, sources close to pv magazine said last month’s figures will be more or less the same.

Specifically, in April, Greece added 59 MW of ground-mounted PV projects and 7 MW of rooftop projects. In May, the country installed 44 MW of new ground-mounted PV projects and 4 MW of rooftop solar PV. Greece’s cumulative PV capacity in the end of May reached 2.451 GW.

On top of the March deadline, the Greek government introduced in May new drastic FIT cuts, which further discouraged investors. PV investors also face a retroactive increase in the special PV levy, which was initially introduced in November 2012. The Greek government decided in May to increase the levy significantly.

Escalating RES fund debt

Newly published data by LAGIE bears bad news regarding the deficit of LAGIE’s Renewable Energy Sources (RES) fund, used to pay renewable energy producers in Greece. According to data published in July, the deficit reached €436.1 million by the end of May.

The Greek government has been long seeking ways to reduce LAGIE’s deficit, hence last May’s introduction of a new RES bill, which specifically targeted the solar sector by introducing drastic FITs cuts and, among other measures, increasing the special PV levy.

Still, the RES fund deficit remains dangerously high and with no sign of a possible reduction in the near future. LAGIE predicts its RES fund deficit will increase to €616.17 million by the end of 2013, up to €1.16 billion by the end of 2014, and up to €1.43 billion in May 2015 if no further measures are taken.

New measures, what measures?

The crucial question is what measures the Greek government could legislate to reduce, if not totally eliminate, LAGIE’s deficit. There are three possible routes.

Firstly, the government could ask solar PV investors to pay more. Most limits in that direction have been exhausted. New FITs are already low and investors pay a particularly high levy to the Greek government. According to the law governing the special PV levy, an investor who owns for instance 100 MW of solar PV in Greece is seen in exactly the same way as an investor who owns 100 kW of solar PV. In addition, LAGIE’s payments to PV energy producers come with a six-month delay, which has pushed many investors, particularly the small ones, to the limits of bankruptcy.

Secondly, the government could try asking consumers to pay more. Electricity consumers in Greece already pay a special fee in their electricity bills for the support of renewable energy projects. The Greek press says the Greek Regulatory Authority for Energy (RAE) decided last week to increase this fee further, and that the Greek government backs this decision. There is no official announcement yet by RAE, but the news is expected to break this week after a meeting of Greek officials with the troika – Greece’s lenders consisting of the European Commission, the International Monetary Fund and European Central Bank.

The troika has repeatedly asked for an increase in the RES fee in the electricity bills but given the financial burdens Greek consumers have gone through the last couple of years, there are clear limits to the highs such an increase can reach. Critics say it is unfair to ask consumers to pay for the government’s lack of a solid RES strategy.

Thirdly, the government could attempt to slash LAGIE’s RES fund deficit through the reconfiguration of the Greek electricity market. The government already introduced some measures towards this direction in June and it is expected to continue reforms in the coming months. The troika is also pressing for the removal of long-term distortions and miscalculations in the planning of the energy market. However, the problem with this option – ostensibly the only sustainable option to deal with LAGIE’s fund deficit and increase fair competition in the energy market — is that it could lead to strong clashes with interests that have nested in Greece’s political system for decades. Whether the government, under pressure by the troika, decide to break with past methods and design a long-term energy policy that ensures the viability of the energy system and a central role for the renewables, remains to be seen.