Greece’s new government: new energy policy?

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Despite all polls suggesting a narrow win for Greece’s Syriza (the coalition of the radical left) party, last Sunday’s snap elections gave it a surprising lead. As in January, this was, however, not a majoritarian lead, leading Syriza chose to form for a second time a coalition government with the minor, far-right Independent Greeks party. The pair might sound bizarre, but they are at least united by an anti-European and anti-liberalization narrative.

Yet this narrative has weakened. These are the parties, lest we forget, that brought a new bailout agreement with Europe in July, tying the country to further austerity and a mandatory list of reforms, including the opening of the energy market to competition.

The energy ministry

Panos Skourletis was appointed to head the Ministry for the Reconstruction of Production, Environment and Energy. Skourletis had previously replaced the former energy minister Panagiotis Lafazanis in a mini cabinet reshuffle in July, before September’s snap elections were called.

Skourletis has opposed the liberalization of Greece’s energy market, insisting Greece’s national electricity company, the public power corporation (PPC), should remain a state business. He has also promised he will find replacement measures to avoid the privatization of the electricity transmission network operator (ADMIE) that currently belongs to the PPC and which the Syriza government agreed with its European creditors in July to privatize immediately.

Skourletis’s anti-liberalization stance should not have been taken for granted. Syriza took power in January promising it would reverse the past bailout agreements’ terms. Instead, it signed a new bailout agreement with stricter terms, including the privatization of key public assets. Therefore, a change in Skourletis’s stance is absolutely possible.

Far more stressful is Skourletis’s competence in implementing the policies the Syriza government has agreed within the third bailout agreement.

The energy policy

Apart from the ADMIE sale, the energy ministry has agreed with its European creditors to present a new renewable remuneration policy framework by the end of the year. The new framework needs to satisfy the European Union principles for supporting renewable energy, which allows feed-in tariffs (FITs) only for small PV systems and remunerates the large installations via competitive schemes (e.g. feed-in-premium tenders). The latter means a new electricity market structure needs to be crafted that allows healthy competition among electricity generators and encourages renewable energy investors to step in without the “safe haven” Greek FITs of old (which were among the most generous in the world).

Greece’s electrical system and energy market is a reflection of the past. Given that the country’s electricity demand is on the rise and about 40% of its power generation comes from coal, there are plenty of opportunities for policymakers to embrace.

A piece of good news stems from the high popularity of Greece’s Prime Minister Alexis Tsipras. Despite failing to fulfill its recent anti-austerity promises, Tsipras swept the elections and enjoys his people’s trust. The European Union creditors now hope that Tsipras will be able to pass the reforms his predecessors were unable to.

The low point is that Greece’s energy policy needs much more that merely to implement the suggested reform agenda. First and foremost, the liberalization of the energy market needs to take place transparently (a very hard task in the case of Greece) and secondly, engage the private sector in a newly formed market structure rather than simply replace its public character with a private one.

Finally, modern electricity systems have grown very complex and the need to embrace decentralized renewable energy generation, energy storage and flexible electrical networks requires skillful policymakers with ideas of their own and solutions to suggest.

Until the first signs of market transparency and a new form of a competitive market structure are laid bare, Greece’s solar sector will struggle to add significant numbers of new PV installations.

Latest statistics

According to the latest statistics for 2015 published last week by Greece’s electricity market operator LAGIE, the country installed only 7 MW of new PV in January and February. From March to July there were no new PV installations.

On a more positive note, Greece electrified its first net metering installation on 16th September. This was a 85 KW rooftop solar PV system at a factory in the city of Volos. Greek solar PV market sources have expressed hope that net metering will revive the stalled domestic PV market. However, no more than a few MW of new installations are expected before the end of next year at best.