The talk of Greece’s PV sector these days revolves around two issues: First, the new PV tenders that the government is set to publish in the coming months; and second, the growing deficit in the renewable energies fund that LAGIE, Greece’s electricity market operator, uses to pay renewable power generators.
In regards to LAGIE’s fund deficit, the recent bail-out agreement between Greece and its Eurozone creditors says that the deficit needs to be eliminated. Greece’s ministry of environment and energy is currently seeking a number of ways to do so, with further retroactive cuts also being considered.
Greek solar PV associations told pv magazine that the ministry has made them aware of its effort to solve the deficit issue without taking further retroactive measures. The toolset to do so is still under consideration, however, the factors that influence LAGIEs fund are specific, limiting the choices to solve the issue, unless a brave reconfiguration of the electricity market is put forward.
The islands’ case
Reports in the Greek press say that the PV projects with the highest internal rates of return (IRRs) in the country are in Greece’s islands that are not interconnected to the mainland’s electricity system.
“The argument that photovoltaic projects in the non-interconnected islands have high IRRs is a total myth,” Constantinos Faitatzoglou, a representative of the PV Energy Producers of Greece’s non-interconnected islands told pv magazine.
Last time Greece cut the PV tariffs retroactively – in 2014 – “the ministry did not publish any model, based on which it cut the FITs. Instead, it argued that the PV cuts aimed to level all project IRRs to 13.5%, which is a rational value due to the high financial costs Greece faced over the past five years.”
“After lengthy research we found out that the Greek ministry did not make the proper assumptions for the non-interconnected islands, resulting in project IRRs less than 10% for the islands’ PV installations,” added Faitatzoglou. For example, “the ministry assumed the average solar irradiation for the islands to be 9% higher than what it actually is. In addition, they considered the average PV project to have a much larger capacity, leading in lower project unit costs. As a result, the FIT cuts in the islands were up to 18% higher than in the mainland,” argued Faitatzoglou.
Another point is that power generators from PV installations in Greece’s non-interconnected islands do not get remunerated directly from Greece’s LAGIE renewable energies (RE) fund.
“The fund that remunerates our projects comes from HEDNO (the Hellenic electricity distribution network operator),” continued Faitatzoglou. “HEDNO’s RE fund has a €372 million surplus since 2012, and shouldn’t be affected by any FIT cuts or other levies at all. This surplus is diluted in the main RE fund managed by LAGIE.”
Greece’s islands need more PV and storage
The case is particularly interesting because power generation in Greece’s non-interconnected islands relies mainly on diesel, which pollutes and is expensive. As a result, “the Greek non-interconnected islands energy cost is, on average, up to three times higher than in the mainland and therefore renewable energy is precious,” argued Faitatzoglou.
This extra cost is not paid exclusively by islanders. Instead, public subsidies to power the islands’ diesel generators are paid evenly by all of Greece’s electricity consumers via their electricity bills. This subsidy is named “Services for Public Utility.” Should the government want to reduce the islands’ power generation costs and alleviate Greece’s electricity bills from the diesel subsidies, it should promote PV generation and storage in the non-interconnected market.
According to the latest statistics published last week, Greece’s non-interconnected islands have a cumulative solar PV capacity of 159 MW. Of this, 136 MW are ground-mounted systems and 23 MW are rooftop installations.
Furthermore, Greece’s anticipated new renewable energies policy framework and PV tenders exclude the non-interconnected islands.
A recent study for the Greek island of Tilos, by Germany’s energy storage technology provider Younicos, found that the island could boost the share of renewables in its energy mix to over 80% by installing a battery storage system.
Furthermore, a battery storage system would dramatically reduce the costs for diesel power, which is currently transmitted to Tilos via an undersea interconnected cable from the neighbouring island of Kos. Kos and Tilos are not interconnected to Greece’s mainland electricity system and rely predominantly on diesel.