Second week in a row on the European map of wholesale electricity marketsGreece is an exception, as it is the only market that does not reflect a significant de-escalation in natural gas prices on the Dutch TTF hub, which closed in December at €119/MWh and dropped to €72 yesterday, returning to levels before the Russian invasion of Ukraine.

The price per megawatt hour in the Greek market is still the highest in Europe (€269 as of today Tuesday) and indeed with a deviation of €120/megawatt hour even from the neighboring interconnected market of Bulgaria and more than €123 from the markets. Germany and France. At the month level (December 2022), Greece, at €276.9 per MWh, is the 6th most expensive market in Europe after Belgium (€278.06), Ireland (279.57), France (279.57 ), Switzerland (289.19). and Italy (297.26).

Since the beginning of the year, it has been growing and becoming the third most expensive market in Europe with a price of 279.89 euros/MWh, behind Switzerland (282.43) and Italy, which is in first place with a price of 304.17 euros/MWh. Significant price discrepancies with the rest of European markets since last week have been at the center of political disputes, with the government linking them to domestic producers pricing gas differently compared to the rest of Europe.

In fact, in Greece, the pricing model for natural gas takes into account the average price of the previous month compared to the daily price set in the stock market, a pricing model that is applied in other European countries. This timing does not allow for an immediate pass-through to the wholesale electricity price of the natural gas price decline that has occurred in other markets, where prices have fallen even to zero. If only this factor influenced prices, then convergence with the European average would be a matter of time, which is confirmed not by the data on the average price in December, not to mention the average price in 2022, but also the data for the pre-crisis period, where Greece is in the first positions countries with the highest electricity prices in the wholesale market.

The main reason for high prices lies in the fuel mix for electricity generation, in which natural gas dominates with a share of more than 40%. Unlike other countries such as France, where the system threshold can be set to several days for nuclear energy, or Germany and the Nordic countries for wind, which happened in previous days when wind generation in Germany reached 85% and in Denmark at 130%, in Greece the marginal price is determined by expensive natural gas.

Lignite participation is low and RES can only set the price for a few hours. With these data, even if Greece had followed the European gas pricing model, electricity prices would never have reached the levels of 15 and 20 euros per MWh seen in other European markets. “Even if natural gas prices in Greece were daily, prices were not going to drop below 150 euros. In order to reach the prices that we have observed in Europe in recent days, with the share of natural gas that we have in electricity generation, natural gas should fall to 20-30 euros / megawatt-hour,” RAE President Athanasios says. “K” Dagumas.

Greece’s shallow stock market, limited manufacturing competition and limited interconnections are also key factors pushing prices higher. The pricing model based on the average price of the month protects producers from the risk of daily fluctuations and creates a window of opportunity for high profits from importers, as in the current situation where imports cover 35%-40% of demand by selling megawatts. an hour they bought in neighboring markets for 50 euros for 200 in the Greek market.

However, this is not, admittedly by market participants and competent authorities, a factor that will significantly differentiate the result in terms of pricing.