At the end of February 2016, Revelle Group’s Legal, Regulatory and Compliance Officer, Vassilis Triantafyllos, successfully completed a paper on ‘Proposal of 10 regulatory measures for Greece aimed at cutting greenhouse gas emissions over the next two decades’ in fulfillment of the Regulation of the Power Sector course of the Florence School of Regulation (Italy).
This paper comes at a time when power sectors all over the world are facing their hardest challenge since their creation: that of balancing our growing need for power with environmental concerns. The security of energy supply to keep up with the ever-mounting demand, the de-carbonisation of the sector, the integration of renewable energy and universal access to energy is just some of the many issues, which need to be addressed in the fight against climate change and the drastic transformation of the current energy system. This is particularly evident in Greece, where besides the ongoing financial crises which has brought the economy to its knees, the country is also faces a commitment of achieving a greenhouse gas (GHG) emissions reduction in the next 20 years.
The paper starts by illustrating the overall situation of the Greek energy production, which has traditionally been dependent on conventional and fossil-based sources (namely lignite and coal) and clearly identifies the design of an adequate and solid regulatory system as the true and only answer to face and solve the country’s energy challenges.
Ten regulatory measures are proposed. However, for the sake of simplicity and accessibility, we have grouped them and summarised them in the following five key points.
Firstly, redesigning the generation mix with a steady reduction of dependence on coal and a simultaneous increase in RES, with gas as a “bridge fuel”.
The recent economic crisis could endorse the pursuit of unsustainable and short-term solutions at the expense of clear long-term regulatory decisions to drastically move away from the existing polluting coal- based system to alternative approaches to base load generation through renewable sources. Whilst one of the tools to guarantee a sustainable transition could be the introduction of a carbon tax (a measure charging polluters for the marginal damage produced by their pollution), the design of a new and comprehensive energy strategy should not exclude the inclusion of other sources in the electricity mix, namely gas. Even if underused in Greece, the ‘gas path’ deserves being taken into consideration, given the country’s geographical proximity to big gas exporters, as well as its convenient position on existing and planned interconnector pipelines. This shows that ‘that Greece has both the capability and the interest to promote increased gas usage, especially if said increase is planned and interconnected with the existing electricity concerns’.
All of the above must be accompanied by a reconsideration of the Greek RE policy. This should be made rational and stable, especially given the current liquidity issue and the high country risk factor and should first and foremost ensure a financially sustainable penetration of RES (i.e. solar, biomass, hydro and geothermal) in the energy system.
Secondly, investing in the transmission grid, both for domestic efficiency and access to regional markets. The Greek transmission grid is owned by ADMHE (Independent Power Transmission Operator- IPTO), under the same ownership regime as the country’s sole utility company, the Public Power Corporation of Greece (PPT). In order to move away from such a static and stagnant structure, the papers identifies three key directions: i) modernization, improvement and expansion of the existing obsolete and inefficient transmission grid to ease RE integration; ii) better interconnections within national and regional markets to optimize load management; iii) expansion of the national grid to incorporate non-interconnected islands (NII), whose energy consumption is largely dependent on diesel generators; and iv) privatization of the network, which could ease investment flows within the network.
Thirdly, redesigning the markets and eliminate failures in order to increase efficiency. Efficient market designs can help promote the achievement of the objective of cutting GHG emissions over the next two decades. The paper supports both a traditional model i.e. that of a vertically integrated structure, as well as a liberalized one, which relies on ‘the natural behavioural tendencies of the agents while steered discreetly by prudent regulation’. Unfortunately however, the current state of the Greek wholesale market doesn’t foster true competition. In fact, the country’s sole utility company, the Public Power Corporation of Greece (PPT) ‘retains exclusive access to the lignite deposits (45% of total generation) and hydro (8% of total generation), leaving only gas at 33% as an effective fuel for competitors (excluding renewables)’. In light of this, it seems that only a true liberalization of the wholesale market with increased agent participation and easier access will allow agents to diversify while at the same time market forces and competition will ensure a more efficient mix and lower marginal prices.
Fourthly, increasing consumer participation in generation and demand response. Demand-side management is a key component in the successful evolution of the power system. It creates value for consumers and society in general by allowing consumers to be rewarded for changing their consumption behaviour and consequently reduce the costs of energy. However, demand-side management tools, such as smart-metering, still remain underutilised, which represents a missed-opportunity for both individual consumers as well as the industry as a whole.
Finally, investing in new technologies in storage.
In the context of the transition from a polluting, but more reliable fossil fuel-based energy system to a clean, but volatile and intermittent renewable energy system, storage solutions are at the heart of such evolution. Energy storage by definition, does not mean consuming more, but rather enabling to essentially convert electricity into another energy form (different according to the storage system employed) and release it again into the market whenever needed it. Today’s energy storage solutions are no longer limited to AA batteries, but rather include a multifaceted range of technologies, such as pumped hydro power, hydrogen storage, advanced battery storage and compressed/liquid air storage. These have all the potential of turning renewable energy’s intermittent generation more reliable and thus make the overall grid system more resistant to disruptions. The paper identifies this last aspect as being crucial and key in the Greek context, as being able to place the country positively in the global energy map. However, because storage solutions are very costly, their development would require large investments in research and innovation, which would enable the country to become a technological leader, both domestically i.e. using its own solutions, as well as internationally, i.e. exporting them.
The path towards the achievement of reducing GHG emissions and the overall transition to a clean and sustainable energy system in Greece appears long and strenuous. The main challenge consists of designing a comprehensive long term strategy with strong basis (i.e. thorough research studies and sector analysis) and clear objectives, which will in turn provide the necessary regulatory stability to inspire confidence and trust among investment agents.
Elisa Asmelash, Junior Energy Consultant@Revelle
