Balkanalysis.com

Energy Sector

Regional Energy Indicators:
Electricity Generation (TWh) 440.7
Electricity Consumption (TWh) 411.3

Energy Consumption per Capita (kgoe/cap) 1786
Energy Import Dependence (%) 61%
CO2 Emissions per Capita (kg CO2/cap) 5231
Note: kgoe – kg oil equivalent

The Lucrative Electricity Trade in Greece: Profits and Problems

By Ioannis Michaletos*

The electricity sector in Greece has expanded recently, and remains characterized by substantial profits made by companies due to the high system marginal prices. Currently there are several companies active in electricity trade in the country that mainly deal in imports of electricity from the Balkans and Italy to Greece. The country has an actual production capacity of around 10,100MW but its needs during the burdened summer season exceed 10,800MW. Recently, the issue has risen to the attention of the public because of losses caused to the Greek power corporation.

A Trader’s Paradise

Haris Floudopoulos, an energy analyst has assessed that energy trading is a €šÃ„òvery profitable business in the country and many of the companies involved actually employ just a few managers, in some cases not more than two or three people, based in small premises in the center of Athens.€šÃ„ô Thus with a minimum investment, higher return is assured.

The difference between the Greek market in terms of system marginal price (SMP) and that of Scandinavia, for example, is significant. For 2007 in the Scandinavian countries, SMP was at 34.53 Euros/MWh whereas in Greece it reached 78.36 Euros/MWh according to information put forth by the Greek power company. In Spain, the price was 61.38 Euros/MWh, while in Germany it was 58.5/MWh, and in France 64.71/MWh.

Moreover, there has been a trend over the past four years of increase in the Greek SMP. In 2005 it was at 43.14 Euros/MWh, but had jumped in 2008 to almost 90 Euros/MWh- more than a 100 percent increase, representing a unique case in Europe.

The Greek network manager, Hellenic Transmission Systems Operator (DESMIE), has informed that according to its database, €šÃ„òthe Greek market currently operates the most expensive electricity system in the EU, although household prices are much lower than the rest of EU countries bar Portugal.€šÃ„ô The reason for this is that €šÃ„òthe SMP increase correlates with the electricity production deficit in the country, along with the rising demand.€šÃ„ô

Another issue is the rule made by the Greek regulatory authority (RAE) that sets a limit of up to 150 Euros/MWh for the marginal price a trader can gain. Since the peak periods are limited to just a few days a year, there are considerable gains to be made by exploiting cracks in the production system of the Greek power corporation.

Although it cannot be verified for the moment, there were cases over the summer of 2008 in which it appeared that trade companies managed to extract the maximum marginal price. The regulatory authority has stated that, €šÃ„òpresently there is no trend concerning the exploitation of the maximum set price, although that cannot be excluded for the coming season.€šÃ„ô

Problems for the Greek Power Company

The electricity production deficit in the country, in combination with the decreasing production capacity of the power stations that operate using lignite, has made it possible for trading companies to exploit their opportunities to make profits unimaginable in other markets.

The Greek power company which controls almost 93 percent of the domestic market has delayed plans to modernize its plants or construct new ones. Further, private enterprises have also stalled their own investment plans, due to political or financial reasons. On the other hand, a 4 billion Euro investment plan by the power company that calls for the construction of new natural gas sites and the expansion of renewable energy systems will reduce dependence on energy traders (along with their fat profits). Yet this will not be achievable before 2015.

According to public statements by Chris Poseidon, a senior manager in the semi-state Greek power corporation, €šÃ„òin Greece, electricity bills are regulated by the state, whereas the trading corporations operate liberally. Thus the Greek power company is obliged in many cases to buy electricity at much higher prices than it actually sells to its customers.€šÃ„ô

The Greek power company increased its bills for household users by 9.5 percent in July 2008, and is petitioning the government to proceed with another 5-7 percent hike from 2009 onwards. For the moment, the troubles of the company have grasped the attention of the media, since it is losing tens of million of euros per month, a windfall now ending up in the pockets of trading companies.

The whole issue has steadily become a political hot potato for the Greek administration. On November 3, 2008, some 34 MP’s from the Socialist opposition requested an official response from the minister of development, presenting data for the first quarter of 2008 showing that the Greek power company had paid 461.4 million Euros in order to cover its electricity balance.

A sure prediction for the near future is that the activities of trading companies will come further to light and become part of a public discourse on the issue. It is more than certain that they have been able to exploit liberalization of the market better than either the government or the Greek power corporation and will continue to do so for the coming years.

The Main Players

In total there are 21 active traders, holding licenses of around 4,150 MW.

Mytilineos (Greek). Trading license of 310MW

ATEL Hellas (Swiss-Greek). Trading license of 300MW, and has reserved 50MW capacity in the Greek-Italian cable, through an auction by the Italian network manager TERNA.

VERBUND-APT (Austrian-Greek). 300MW

Edison Trading (Italian). 300MW. Has reserved a 10MW capacity in the Greek-Italian cable.

ENEL Trading (Italian). 250MW

EDF Trading (French). 243MW. Has reserved a 10MW capacity in the Greek-Italian cable

NECO (Greek-Bulgarian owned). 200MW, and has reserved 30MW capacity in the Greek-Italian cable.

EGL Hellas (Swiss). 200MW, and has reserved 5MW in the Greek-Italian cable, and another 5MW in the Greek-Bulgarian one.

Hellenic Petroleum (Greek). 200MW

EFT Hellas (British-Greek). 150MW and has reserved a 5MW capacity in the Greek-Italian cable.

Other companies that have trading licenses but average low or minimal trade are: RWE (350MW), Eon (350MW), Cinergy (200MW), Entrade (200MW), Danske Commodities (100MW), Ezpada (200MW), Terna Energy (100mw), TCB Energy (80MW), ITA Energy (50mw), Ener Greece (50MW) and Athens International Airport (25MW).

€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶€šÃ„¶

*Frequent Balkanalysis.com contributor Ioannis Michaletos is a Balkan security analyst for the RIEAS Institute in Athens, Greece. He is also Southeastern European Coordinator and Editor for the World Security Network Foundation.