According to Sunday's Euro Summit agreement, in order for the negotiations for a new loan in Greece to commence, the Greek parliament needs to legislate a number of agreed measures no later than 22 July. A new loan for Greece, which could reach €85 billion ($92.7 billion), would also be subject to the implementation of an ambitious reform program covering various sectors of the economy.
On energy markets specifically, Greece needs to “proceed with the privatization of the electricity transmission network operator (ADMIE), unless replacement measures can be found that have equivalent effect on competition,” the Euro Summit agreement stated.
Another action that will almost certainly relate to the energy sector is the development of a significantly scaled-up privatization program with improved governance. Valuable Greek assets will be transferred to “an independent fund that will monetize the assets through privatizations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan… and generate over the life of the new loan a targeted total of €50 billion, of which €25 billion will be used for the repayment of recapitalization of banks and other assets, and 50% of every remaining euro (i.e. 50% of €25 billion) will be used for decreasing the debt to GDP ratio, and the remaining 50% will be used for investments.”
The consequences
ADMIE's sale is nothing new. A year ago, pv magazine reported that Greece's Public Power Corporation (PPC), the country's vertical integrated utility that owns ADMIE and enjoys a market monopoly, approved the participation of four investors/partnerships in a bidding process for the acquisition of 66% of ADMIE. The bidders included a partnership between Belgium's Elia System Operator S.A. and the IFM Investors Pty Ltd; Canada's Public Sector Pension Investment Board; China's State Grid International Development Limited; and Terna, Italy's leading electricity grid operator.
However, ADMIE's sale, and other measures relating to the liberalization of the Greek energy market, has been constantly put on hold. Such failures, together with the deterioration of the country's economy following the election of a new leftist government in January (the new government has been strongly opposing every reform effort), might be the reason why Sunday's Euro Summit agreement appears stricter than previous ones, including binding deadlines.
Whatever the reasons behind the tight deadlines might be, the implications of Sunday's agreement to Greece's energy system look positive.
According to the EU's “Third Legislative Package,” the bloc's liberalization framework, full ownership unbundling of the electricity assets is optional.
However, integrated energy companies that also own the transmission networks need to separate the management of the grid. Preferably, although not necessarily, the EU has suggested that the grid management would not remain within the parent group but will form an entirely separate operator that does not share any shareholder with the parent energy company.
Thus, Greece's current model, where ADMIE belongs to the incumbent utility, the PPC, is absolutely legal and in line with the EU regulations. In practice though, this model doesn't work in Greece. Consequent Greek governments have openly favored the PPC distorting the energy market and not encouraging enough competition. The full ownership separation of the transmission grid from the PPC utility is expected to bring market transparency.
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Should the ADMIE privatization be followed by the break-up of the PPC into separate companies involving private investors, Greece's energy market might benefit even further.
Market liberalization and solar PV
Greece needs to establish an energy market that provides a level-playing field and does not protect its incumbent utility against other electricity generators. Privatization alone does not guarantee this. However, privatization of PPC assets, such as ADMIE and power units, can bring capital to the government's empty coffers that could then be reinvested in the green sector via well-balanced mechanisms, preferably subsidy-free or targeting a subsidy-free milestone.
The simple fact is, Greece is not financially healthy and relies on bail-out loans to survive. Previous governments' green energy efforts were totally misinformed and miscalculated, leading to an escalating deficit in the country's renewable energies fund. Following unpopular retroactive measures taken by the previous government, the deficit problem has now been minimized. Still, this is not enough for Greece's renewable energy sector to continue growing.
Regarding solar power specifically, Greece has an excellent resource, grid parity is a reality and the Greek solar PV sector can compete without its growth being necessarily driven by subsidies. A transparent, efficient energy market that doesn't keep the electricity market prices artificially low is a prerequisite, however, and will provide the signals to solar PV investments. Net metering, for instance (introduced in Greece in December), does not rely on public subsidies and so a liberalized energy market could boost it, especially the business rooftop segment.
The time is now
Will everything go according to plan? That is the difficult question. A positive sign is that Greece's Prime Minister Alexis Tsipras has at last started to come to terms with reality. Tsipras literally saved the country from the brink of collapse at the very last minute. His rhetorical u-turn needs to be followed very quickly by a policy U-turn, too.
At least in energy, this is impossible as long as the current Energy Minister Panagiotis Lafazanis keeps his post. Lafazanis is a Marxist whose vision is a fully nationalized economy in which all key institutions are subordinate to his political ideology. In the first five months in the job, Lafazanis has openly sought to minimize the Greek energy regulator's powers, has opposed the energy market liberalization and has turned Greece's energy policy to lignite. Greek energy businessmen often call his vision “Lafazanistan.”
Yesterday, the Energy Minister and more than 30 other members of the ruling party voted down the first reforms brought to the parliament as part of the EU-Greek deal. The measures finally got approved with support from the opposition. This situation leads to an ungoverned state and cannot last.
Greece's Prime Minister will soon need to reshuffle his cabinet and possibly let other parties enter his coalition government. Until the first signs of some sort of normality and “governability” returns to Greece, the renewable energy sector will be kept at bay.
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