How will this winter come out without subsidies in drifting and to natural gas is one of the hot issues that will have to be dealt with by the new energy minister and, more generally, the government that will emerge from the June 25 national elections. One of the issues that will directly concern them is the problem of energy sufficiency, since they will start work in the middle of summer, when demand will increase sharply due to the need for cooling.

This is also of great concern to Acting Energy Minister Pantelis Kapros, with his deep knowledge and experience of the energy situation in Greece and Europe.

It is generally accepted by the competent authorities that the factor that will judge the effectiveness of the management of these two interrelated problems is, to a large extent, the weather. The general weather will determine the general course of gas and electricity prices in Europe and is officially fixed by the Commission and the International Energy Organization (IEA) as the main uncertainty for the next period. After all, the mild winter of last year proved to be the strongest ally in the fight against the energy crisis. Out of 53 billion sq.m. natural gas saved by Europe as a whole from August 2022 to March 2023 as part of demand reduction measures – 18 billion cubic meters. gas, according to the estimates of the competent European authorities, are associated with favorable weather conditions.

Will the weather be conducive again this year? “There are no guarantees that nature will again present such a gift,” Gazprom gleefully warned recently, and Europe knows it too. OUR commission in its spring forecast, although it estimates that natural gas prices in 2023/2024 will stabilize just above 50 EUR/MWh, it indicates the uncertainty of weather conditions. The combination of a very hot summer, which will “burn” a significant part of natural gas reserves, and a cold winter is a bad scenario that could cause a new surge in prices after several months of continuous de-escalation, according to the EU.

It will be difficult for Greece even if prices go to the level of 50 euros/MWh, and this is because it is called upon to abandon a valuable subsidy tool, through which it absorbed 50% of the increase in natural gas in 2022 and up to 90% of the increase in the cost of electricity, providing Greek households with the lowest electricity prices in Europe. The Commission estimates that the high dependence on natural gas in the electricity generation mix makes the Greek economy particularly sensitive to price fluctuations. The Greek wholesale electricity market was one of the most expensive markets in Europe in 2022 after Italy and Malta, and the most expensive in the fourth quarter of the year due to declining natural gas prices.

The EU, in its report on the Greek economy, recommends the abolition of horizontal subsidies from autumn until the end of 2023 and for vulnerable consumers, so that available resources can be used to reduce the budget deficit.

In the event of a price spike, subsidies can be restored, but only for vulnerable consumers. Although prices have fallen significantly from high levels of €279/MWh in 2022 and a record €414/MWh on 14 December, they are moving well above pre-crisis levels (€40-50/MWh) and especially at €108.21/MWh in May and €140. 55 EUR/MWh after five months.

The continued decline in natural gas prices to €25.49 in June futures and €44 in the 2023 Dutch winter TTF also bodes well for electricity prices, as it could lift them to pre-crisis levels. However, a possible surge due to weather conditions will put significant pressure on household budgets, which will have to pay high bills without subsidies, and politically on the new government, which, according to some estimates, will have to start a round of negotiations with the Commission early in order to secure some support.

Sufficiency is not a major concern as the system will be boosted this year with an additional 1,500 MW from PPC’s new Ptolemaida V lignite plant (660 MW) and the new Mytilineos natural gas plant in Boeotia (826 MW), as well as 1000 MW. MW of RES capacity from last year. The water reserves in the reservoirs of PPC hydroelectric units are also at a satisfactory level.

Two fears

TO ADMI, however, are concerned for two reasons: the first is related to the possible increase in electricity prices in neighboring countries due to the problems that drought can cause in the production of nuclear and hydroelectric power plants, which can direct domestic production to export. The second reason is the depletion of water and brown coal in the event of a very hot summer, which can create supply problems in winter. Cold winter coupled with possible new market tensions LNG which may be caused by increased demand from China or the replacement of nuclear and hydropower in Europe by natural gas plants due to drought, will make it difficult to manage both supply and prices, not only in Greece, but also in Europe. wide.