The Greek consumer paid less for electricity in 2022 than other European consumers, but for this the state had to provide 8.2 billion euros in subsidies over 18 months, according to figures announced yesterday by the Minister of Environment and Energy. Kostas Skrekas. This amount corresponds to about 4% of GDP and, in addition to the exorbitant increase in electricity prices caused by the protracted energy crisis, also covered the structural weaknesses of the domestic electricity market. OUR Greek wholesale market, where the real cost of electricity is formed, is one of the most expensive in Europe. This was also pointed out OECD and this can be seen every day by looking at the price map on the European electricity market.

In 2022, Greece, at €279.91/MWh, will be the fourth most expensive market in Europe after the most expensive Italy (€303.97), Malta (€295.08) and Switzerland (€281.68). Causes:

1. High share of natural gas in the structure of electricity generation, more than 40%. Even in 2022, when the price of natural gas soared to unimaginable levels, overturning the foundations of the international energy market, the share of imported fuel in the structure of electricity production was 38%. Thus, unlike other markets such as France, where the price cap of a system can be determined by nuclear energy for several days, or Germany and the Nordic countries by wind energy, in Greece the price cap is determined by expensive natural gas. The contribution of lignite is low and RES can only set the price for a few hours due to the variability of their production.

2. Limited connections with other countries. Thus, the basically cheap electricity of Central and Western Europe does not reach the domestic market.

The amount corresponds to about 4% of GDP and covers the structural shortcomings of the domestic electricity market.

3. Oligopoly in the power industry. Four private companies and checkpoints (except for renewable energy and imports) participate in the Next Day Market. Four plus one PPC players are then asked to bid on a balancing market to adjust the generation to the real-time load. In all other European markets (except Ireland and Greece), the costs associated with these deviations are borne by the manufacturing companies. In Greece, this “penalty” is passed on to the consumer through the wholesale cost. The average balancing price in the Greek market in 2022 was 12 EUR/MWh, while the corresponding price in other European markets is around 2 EUR/MWh.

four. System losses, whose average price was set at 7.8 EUR/MWh in 2022, are additional costs for the formation of the final wholesale electricity price.

five. Since November last year, an additional cost of around 10 euros per megawatt-hour has been added by legislation, which corresponds to the payment for the extraction of natural gas.

Adjustment clause

And somewhere here the cycle of structural problems of the wholesale market closes, the consequences of which were partly mitigated by the implementation of the windfall recovery mechanism, thanks to which TEM raised 2.09 billion euros in 2022, and the baton passes to retail. In a difficult supply market, which, especially during the energy crisis, requires huge working capital every day for the purchase of energy, in addition to PPC, another 10 companies were involved. The easy way out was to pass on the increased costs to consumers with the famous adjustment clause. In this way, they have turned an activity that requires the management of high volatility into a zero-risk activity. Retail prices soared, consumers began to understand for the first time since August 2021 what a previously unknown sanitation clause meant for their pockets, and the government, under pressure from the opposition, rushed to replace the clause with a new predictive pricing model. the wholesale cost of the next month for ten days.

To avoid large losses from the unexpected high fluctuation in the wholesale price next month, suppliers began to include an increased risk margin in the prices issued. Thus, according to the RAE, in August, the first month of the introduction of the new model, the average price of tariffs for the population was 15% higher compared to the price they would have had under the regulation clause. In September, this percentage reached 57%, and this percentage also changed in the five months from September 2022 to January 2023. In absolute terms, the total increase in tariffs for the population under the new model due to the readjustment clause is estimated at about 2.843 billion which the state was asked to cover through subsidies. The problem was pointed out by the market before the introduction of the new model, and it was acknowledged afterwards when the RAE informed the Home Office in a letter. This was followed in October by the Secretary of the Environment and Energy for the first time announcing the government’s intention to retroactively tax additional supplier income, a job that was delegated to the RAE by statute.