Why Greece has the highest electricity price in the wholesale market

Why Greece presents the highest electricity price in the wholesale market? In Germany the price has fallen to 13.58 euros per MWh, in Romania is 94.50 euros. Why is it 248.24 euros per MWh in Greece?

The peculiarity of the Greek wholesale electricity market in terms of the integration of the cost of natural gas in electricity generation (which reflects the prices of the previous month) “explains”, according to industry players, the large price gap recorded in recent days in relation to the main markets in Europe:

Greece currently shows the highest wholesale price (248.24 euros/MWh) and is the only country – along with Italy – where prices are not only above 200 euros/MWh, but also in three digit numbers.

On the contrary, double-digit electricity prices are recorded in the rest of the countries – ranging from 13.58 euros/MWh in Germany (levels that had been “forgotten” for months at the mercy of the energy crisis…) to 94.50 euros/MWh in Bulgaria and Romania. In this context, it is not surprising that imports still cover the largest part of the “pie” of electricity generation, with a percentage of 36.40%.

This is followed by natural gas (31.60%) and renewable energy sources (16.48%), while lignite falls to a single-digit percentage (8.54%).

The low prices in Europe reflect both the significantly reduced demand for electricity due to the festive season combined with the mild – for the season – weather conditions and the decline in natural gas prices on the spot market to the levels of 80-85 euros/MWh . In Greece, again, as mentioned above, the differentiation of the picture is largely explained by the month ahead pricing model.

According to this, the producers buy the next month’s gas at the previous month’s prices due to the absence of a spot market. Therefore the final price of electricity produced today incorporates the cost of the fuel in the month of November when it was purchased and not the current spot price which has fallen back to the levels where it was at the beginning of the year, before Russia’s invasion of Ukraine.

In this context, sources from the Energy Ministry note that the wholesale price of electricity results from the average of the month and from this it follows that for December Greece (with a price of 278.36 euros/MWh for December) is cheaper than countries with nuclear energy , such as e.g. France (average price 288.78 euros/MWh) or from countries with organized markets, such as Great Britain (299.35 euros/MWh) and Italy (301 euros/MWh).

Auctions begin to reduce demand

On January 18-19, 2023, the Electricity Demand Reduction Service will also “premiere”. The reason for the mechanism established by the government in order to fulfill the obligation arising from the EU regulation. to reduce electricity demand by 5% during peak hours (18.00-21.00) in the period December 2022-March 2023.

This will ensure the reduction of consumption by high and medium voltage companies with discount auctions from which industrial consumers will be selected they will claim the smallest damages to limit their demand. It is noted that the upper limit of the offered price for the auctions is 400 euros/megawatt hour.

The mechanism will be valid until March 31, 2023, when the obligation of the EU member states expires to limit electricity demand during peak hours established by regulation, in the context of measures to deal with the energy crisis.

The compensations will be paid by the Energy Transition Fund and will be covered by its resources. The total amount that will be given as a compensation for the reduction of demand and will be paid to the participants is estimated at 47 euros maximum throughout the duration of the application of the measure.

If the auctions start with a delay of more than one month compared to the original schedule (which provided for the activation of the Service at the beginning of December when the pan-European “cutter” of 5% came into force), it is estimated that this does not create a substantial compliance problem for Greece.

And this is because the reduction in 24-hour electricity consumption, recorded in the country in the last six months under the burden of high energy prices, is estimated to cover the obligation to reduce electricity demand during peak hours, even without auctions for the current month.

Demand Response Cumulative Representation Bodies (FoSE), as well as large consumers representing portfolios with one or more consumption positions, will have the right to participate in the tenders.

The condition is that the total annual consumption of each portfolio for 2021 is at least 13 gigawatt hours.

Two categories of auctions are foreseen, quarterly and monthly. It should be noted, finally, that non-compliance charges are also foreseen in the event that the providers, who have been awarded a quantity of demand reduction for one peak hour per month, do not achieve this reduction during peak hours at least up to the agreed level or shift the demand.

source: daily naftemporiki

PS Apart from the market methods, one could also claim that we, Greeks, are “large” and want the electricity providers to thrive and register growth in the economy. Some mean Greeks, like my cat, would even claim that the government subsidizes our electricity bills in order to keep our mouths shut and do not rise up.