Greece: New package of financial and structural measures boosts the role of RES on the way to the country’s “green” transition

On 1 November 2020, what is probably a new era for the Greek energy market was marked by the launch of the so-called “Target Model” implementation plan. The term “Target Model” essentially describes EU’s initiative to create a single EU energy market, as such initiative is enshrined in the Third Energy Package. As a first step towards a streamlined wholesale electricity market, Greece’s day-ahead, intra-day and balancing markets “went live” on 1 of November.

The second step in Greece’s compliance with the EU’s energy market integration is the coupling of the intra-day market with the Italian and the Bulgarian markets, which is planned to have been completed by the end of 2020 – early 2021¹. The third step on the way to an internal sustainable energy market is to stimulate the role of the renewable energy sources (“RES”) in the energy transition; higher RES integration into the energy mix is a key policy objective for Greece, which has set ambitious decarbonization targets according to its latest National Energy and Climate Plan².

In this context, the Greek Ministry of Environment and Energy announced on 13 November 2020 a new set of transitional measures designed to meet two objectives:

• to resolve the issue of the financial shortages caused in the RES Special Account (“ELAPE”)³ by the COVID-19 repercussions as well as the shortcomings in the Account’s economic viability; and
• to stimulate the proper functioning of the RES market in more competitive terms and to lay the foundations of the gradual liberalization of the RES market.

Having considered the concerns raised by the RES producers due to ELAPE’s deficit, the Ministry initiated an extensive consultation with all the stakeholders. The outcome was a set of measures that could be classified in two pillars: (i) financial measures; and (ii) structural measures aiming at the medium- to long-term stabilization of the RES market.

Financial measures

The measures, briefly, provide for:

1. The increase of the percentage of the proceeds generated from the auctions for the sale of emission allowances from 65% to 78%, which is expected to direct to the ELAPE EUR65 million already in 2020 and shall continue to contribute to ELAPE’s cash flow by the same amount in the the following years.
   
   
2. The financial support to the ELAPE by an amount equal to approximately EUR25 million to be paid within 2020 as well as by a corresponding amount payable in 2021; this amount is expected to be generated from the Special Fee paid on the Issuance of the Certificate of RES Electricity Producer⁴, which is currently paid by the applicants/producers to the Energy Regulator (“RAE”) to the benefit of ELAPE.
   
   
3. A one-time special contribution for the year 2020 to be paid in relation to RES projects that are on a Feed-in Tariff status and have been put into operation before 31 December 2015. The extraordinary contribution aims to counteract the side effects of the COVID-19 pandemic and will be equal to 6% of the eligible RES projects’ annual turnover for the year 2020. Such aid is expected to increase ELAPE’s revenues by approximately EUR110 million.
   
   
4. A one-time extraordinary fee imposed on suppliers, which is equivalent to EUR2 / Megawatt hour for the year 2021; said fee is established as a contribution of electricity suppliers in the ELAPE’s financial stability. It is estimated that ELAPE will be funded by EUR110 million within next year. The fee imposed on both RES producers and suppliers is a one-time fee of equal value and shall be paid only for one year.
   
   
5. A special “green” tax imposed on the consumption of diesel fuel equal to EUR0.03 /liter, aiming to further support “green” projects and actions that contribute to the reduction of emissions (indicatively, support for the development of RES projects, development of electric vehicles, etc.). This measure, which is a form of Special Carbon Tax, has already been applied by other EU Member States and is estimated to permanently support green actions by EUR100 million per year. A Ministerial Decision will further define the amount that will be allocated to market participants and green projects on an annual basis and the particular terms of said allocation.
   
   
6. The adoption of a mechanism counterbalancing the reductions of the charges for the provision of public service obligations (“PSOs”) and of the Special Fee for the Reduction of Gas Emissions (“ETMEAP”), which will be achieved through the progressive interconnection of the non-interconnected islands with the national transmission system, without a financial burden imposed to customers to be required. Indicatively, the commencement of the operation of the interconnection of Crete-Peloponnese is expected to increase ELAPE’s revenues by EUR50 million per year, starting from 2021. In the same line, it is estimated that the interconnection of Crete-Attica shall generate revenues of EUR200 million on an annual basis that will be directed to ELAPE’s account.
   
   
7. The financial support of ELAPE by an amount equal to EUR200 million generated from the EU Recovery Fund, provided that the relevant request of the Hellenic Republic will be approved. This amount shall contribute to ELAPE’s liquidity until the point of time that the proposed structural reforms will be completed and implemented.

Structural measures

The following structural measures have been proposed:

1. The extension of the bidding procedures for RES projects up until 2024 at the latest, by means of six joint tenders for wind and PV projects, with a quota per technology and auctioned capacity equal to 350 MW on each of them (2.1GW in total). The new scheme shall also incorporate improvements in its architecture compared to the current scheme that is due at the end of year. This takes into consideration, on the one hand that the implementation of the Target Model will lead to increased competition and price reduction to the consumer’s benefit and, on the other, that the need for a clear framework for the RES producers is more than imperative. The last joint tender under the current regime will be launched in December for the auctioning of 350 MW of power in early 2021.
   
   
2. From 1 January 2021 onwards, all new applications for “small” PV project of less than 500 kW (including applications that will not be completed by 1 January 2021) will be required to be submitted in a tender process to “lock up” the price. To this end, the new scheme providing for tendering procedures for the period 2021-2024 shall include, apart from the six tender processes for the large projects, the potential conduct of specific tenders with pre-determined capacity for a specific category of projects. The tenders for the small PV projects will be held in a special, simplified and user-friendly platform that will ensure easy access and use.
   
   
3. From 1 January 2021 onwards, the power limit of 18 MW, which is required for the eligibility for an operating aid granted outside a tender process, will be exclusively applicable to the projects undertaken by the Energy Communities⁵, in which the local administration authorities (“OTA”) or more than 60 members (out of which 50 members at least are natural persons) do participate. The Energy Communities, which do not fall under these categories and which submit applications for PV projects of less than 1 MW, shall participate in a tender process to “lock up” the price and to conclude an Agreement for Operating Aid with the Administrator of Renewable Energy Sources and Guarantees of Origin (“DAPEEP”), from 1 January 2021 onwards.
   
   
4. Pending applications submitted by individuals for PV projects of a power below 500 kW that have been completed by the end of the year and are on the way to be connected by Hellenic Electricity Distribution Network Operator (“HEDNO”), shall receive notice of the deadline for the signing of the contract with DAPEEP until 31 December 2021 so as to “lock up” the price outside a tender process. After 1 January 2022, the projects that do not fall under the scope of a signed agreement with DAPEEP shall be priced via a tender process. With respect to the applications submitted by the Energy Communities that do not fall under the two special categories mentioned in the previous paragraph (i.e. the participation of OTA or of more than 60 members), the said deadline for the signing of the contract with DAPEEP is set to lapse on 30 June 2021.
   
   
5. With respect to the applications aiming to include RES projects in the status of the Strategic Investments⁶, the proposals with a minimum budget of EUR100 million related to electricity storage systems, installation of offshore wind farms, production of “green” hydrogen or so will be the ones that will be prioritized. Conventional RES technologies’ projects (PV and wind) will be considered eligible under certain conditions.
   
   
6. Last, the evaluation and revision of the Special Spatial Framework for RES⁷ is underway. The study for the “Evaluation and Revision of the Special Spatial Framework for Renewable Energy Sources” is expected to have been completed 18 months after the signing of the relevant contract for the assignment of the study, i.e. 30 October 2020. The framework will consider, on the one hand, the new technologies and the new forms of RES, and on the other hand, certain areas with peculiarities. The revision of the spatial framework for RES is imperative, given that the data and the assumptions on which the existing framework dated 2008 is based, have changed due to the introduction of new technologies and the adverse effects of climate change. While being obsolete, the current framework has impeded the sustainable development of RES and the subsequent environmental protection in the country’s territory; especially in areas of Greece with special features, such as small islands and other areas with sensitive landscapes, the protection is inadequate.
   
   The objective is to strategically locate each of the RES projects, taking into account the type of activity and the particularities of the certain area. New rules and criteria for the RES spatial structuring are expected to be introduced in this respect, while new or underutilized forms of RES will be further propelled.

The modernization of the environmental legislation, Law 4685/2020

The measures were to follow the recent adoption of Law 4685/2020, which simplifies and standardizes the licensing framework of RES projects in Greece. On 5 May 2020, the Greek Parliament passed a heavily debated law regarding the modernization of environmental legislation, aiming to accelerate the applicable licensing process and to stimulate investments in RES projects in Greece⁸. The law’s entry into force marked the conclusion of the first phase of the initiative to improve and streamline the RES licensing process. The new law introduced reforms to address the significant delays investors faced in the process of receiving authorizations for RES projects and to enable the country’s energy transition in line with current environmental policies. The objective is to align the envisaged timelines with the requirements of Directive (EU) 2018/2001⁹ of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources. This Directive requires Member States to ensure that the overall process does not exceed two years (or three years if justified by special circumstances) for power plants, including all relevant procedures of competent authorities. The new law is a first step to the transposition of this Directive.

The primary tools the new law uses to accelerate the licensing process to encourage investments in RES projects are: (i) structural reforms in the environmental licensing framework; and (ii) amendments to the first stage of the RES projects licensing framework, including, most notably, the replacement of the generation license for RES projects by a RES producer certificate. The new environmental law also amended the framework applicable to Natura 2000 sites, to include the establishment of RES installations in the permissible activities within such sites.

Conclusion

In an era of unprecedented challenges when the healthcare crisis affects all sectors of the global economy, the “green” recovery is expected to have a leading role in the financial recovery. In this line, the proposed measures are expected to create the conditions for the progressive and effective integration of RES in Greece’s energy mix and a fertile ground for the establishment of a competitive energy market to the benefit of consumers and the country’s economy at large. The inauguration of the Target Model on 1 November 2020, the simplification of the RES licensing process, and the proposed fiscal stimuli and structural reforms in Greece’s RES market is only the first of a series of upcoming measures to achieve the country’s energy transition. Such transition shall create multiple opportunities for both developers and financiers in what is still a relatively unexploited national RES market in the EU.

If you have any questions or wish to discuss in more detail any of the above, please feel free to reach out to Orestis Omran.

¹See also the relevant decision issued by the Energy Regulator (“RAE”), Dec. No. 1090/2018 (B’ 5910) on the approval of the Balancing Market Regulation, in accordance with articles 17 and 18 of L. 4425/2016 (A’ 185), as in force
²Pursuant to the National Energy and Climate Plan, the national target for the RES participation share in the energy consumption is set at 35%. See the National Energy and Climate Plan of the Hellenic Republic, Ministry of Environment and Energy, as published in December 2019.
³Article 143 of Law 4001/2011 (A’ 179)
⁴Article 17 of Law 4685/2020 (A’ 92)
⁵Energy Communities are defined in two separate laws of the EU Commission’s Clean Energy Package, i.e. the revised Renewable Energy Directive (EU) 2018/2011 setting the framework for “renewable energy communities” and the Internal Electricity Market Directive (EU) 2019/944 introducing “citizen energy communities”. The Directives define the Energy Communities as a possible type of organising collective citizen actions in the energy system., See also Aura Caramizaru, Andreas Uihlein, Energy communities: an overview of energy and social innovation, JRC Science for Policy Report, 2020
⁶Law 4608/2019 (A’ 66), as in force
⁷The Special Spatial Framework for RES determines the basic directions and the general rules for the strategic installation of RES project in the Greek territory, so that (i) on the one hand the specific areas, in which the installation of RES projects is completely or partially excluded, are known in advance as well as the areas potentially suitable for RES installation accordingly, and (ii) on the other hand the more specific, per RES category, spatial planning conditions of installation, especially in relation to the physiognomy, the capacity and the environment of the installation areas are clearly set., See also Law 2742/1999 (A’ 207) on “Spatial planning and Sustainable development and other provisions” and Decision No. 49828/2008 (A’ 2464) on the “Approval of a special framework for spatial planning and sustainable development for renewable energy sources and its strategic environmental impact study”.
⁸Law 4685/2020 (A’ 92/07.05.2020) on the “Modernization of the environmental legislation, incorporation into Greek legislation of Directives 2018/844 and 2019/692 of the European Parliament and of the Council and other provisions.”
⁹Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources, Art. 16 par. 4; Explanatory memorandum to the draft law on the Modernization of Environmental Legislation, p. 8.