Greece: new renewable energy law provides feed-in premiums and virtual net-metering

It is a rare occasion in Greek politics to see the vast majority of its parliament voting in favor of a bill. This happened last week, when 210 of the 230 members of the Greek parliament (MPs) present in the vote approved the new law.

Greece’s new renewable energy policy scheme distances itself from past mistakes and attempts, for the first time, to frame the sector in manageable dimensions. Thus, the new policy framework abandons the feed-in tariff (FIT) policy in favor of a feed-in premiums scheme. In practice, this means the new renewable power plants will be participating in the energy market and will given a variable premium, on top of the standard market price for the generated green power. The amount of the premium for renewable power plants will depend on some market variables (e.g. the system’s marginal price) and a tariff set via competitive tenders. The feed-in premium will be valid for 20 years, however solar thermal plants will receive it for 25 years. The new law does not apply to Greece’s non-interconnected islands.

Solar PV installations smaller than 500 KW will still qualify for a FIT of €90 per MWh.

First 40 MW PV tender

Following recommendations from the Greek Regulatory Authority for Energy (RAE), Greece’s energy minister will be able to call a tender for new renewable energy installations. In regards to 2016, the new law states that there will be a pilot tender for solar PV systems only. The PV capacity to be tendered will be at least 40 MW, according to the new law. To qualify to bid in the pilot tender, investors will need to pay a fee of €500 to RAE.

PV projects smaller than 1 MW, that are successful during the pilot tender, will be obliged to be connected to the grid in the following 18 months. PV farms larger than 1 MW will be given 24 months. Projects larger than 10 MW are not eligible to take part.

The maximum bidding price for projects larger than 1 MW is €94 per MWh, while projects that are smaller than 1 MW can bid up to €104 per MWh.

The new RE scheme aims to limit projects’ internal rate of return (IRR) to around 9 percent. In the past, Greece’s government policy allowed IRRs up to go up to nearly 40 percent, which jeopardized the success of the sector.

Virtual net metering

The country’s new renewable energies law also approves virtual net metering for specific investors. Thus, city and regional councils, schools, universities, farmers and farming associations will be allowed to develop solar PV projects (and other renewable projects) a considerable distance away from the place of the actual power consumption.

RES Fund restructured

Last but not least, the new law alters the sources that comprise Greece’s fund for renewable energies. pv magazine had recently reported that the fund runs at a deficit, which the country has promised its international lenders that it will eliminate by the end of 2017. This is the reason that Greece retroactively cut the FITs for PV and wind power projects in 2014. There were rumors that the Greek Government was thinking to apply new retroactive cuts this year too.

Instead, the new law has developed a new solution. It obliges electricity suppliers to contribute to the country’s renewable energy fund. The rationale is that renewable energy decreases the wholesale market electricity price, which results in suppliers paying less money for electricity than in a system comprising exclusively of fossil fuels.

The new rule was welcomed by Greece’s RE associations, but was criticized by the domestic power suppliers. Greece’s Public Power Corporation (PPC), the state-owned vertical integrated utility is the primary concern. PPC boasts about 90 percent of the retail electricity market, but due to the financial crisis its customers owe it approximately €3 billion in electricity bills.

According to the new power market policies, which will come into force soon, the company will also have to relinquish control of some of its generation assets allowing competitors to take them over, and therefore loose a portion of its retail market. The fear is that PPC’s most reliable customers could leave the company in search of better deals and rewards, while the customers not paying their bills will remain with PPC, and continue to take advantage of PPC’s policy to continue providing them with electricity due to political and social reasons. The new expenses for the RE fund adds another problem for PPC to think about.