The energy market in Greece is undergoing dynamic changes and challenges. The country is trying to adapt to the requirements of the energy transition by focusing on the development of renewable energy sources (RES) and enhancing its energy independence. At the same time, legislative developments and initiatives aim to address existing challenges and promote sustainable solutions.
Limited Capacity of the Electricity Transmission System
The Greek energy market faces significant problems due to the limited capacity of the electricity transmission system, which leads to record levels of energy curtailments and delays in granting connection terms. This situation creates substantial obstacles for new investments in RES projects, negatively impacting their viability.
To address these challenges, several initiatives have been developed, such as promoting energy storage. Standalone batteries, RES projects with storage units, and behind-the-meter storage units in existing projects are prioritized to stabilize the grid and reduce curtailments. Ministerial Decision 55948/1087/19.05.2023 provided for three successive competitive processes for a total capacity of 1,000 megawatts. These projects must commence operations by December 2025 and be connected to the high-voltage grid.
Two competitive processes have already taken place, awarding operating aid of an average price of EUR 48 per megawatt-hour to projects with a total capacity of approximately 700 megawatts. The upcoming third process will focus on four-hour duration batteries with a total capacity of 300 megawatts.
The government is expected to legislate within the next two months to expedite the licensing of these projects, giving priority to granting connection terms for storage projects.
Bilateral Power Purchase Agreements
Bilateral Power Purchase Agreements (PPAs) have emerged as a significant mechanism in the Greek energy market, promoting the green transition and offering flexible and transparent solutions for energy producers and buyers. These long-term contracts between RES producers and large consumers or electricity suppliers allow producers to secure predictable cash flows and buyers to hedge against market price fluctuations. In practice, companies often choose virtual PPAs. Physical PPAs are also used but to a lesser extent.
The Greek government has enacted measures to encourage corporate PPAs, such as grid connection priority and the option for RES producers to suspend feed-in premium PPAs or terminate feed-in tariff agreements to enter into corporate PPAs.
The corporate PPAs market in Greece is maturing, with an expected increase in agreements as government measures and banking willingness to finance RES projects continues. Future measures, such as state guarantees covering price risk and a special platform for corporate PPAs in the Hellenic Energy Exchange, are under discussion to further encourage these agreements. With an estimated 30,000-40,000 corporate entities eligible to enter into corporate PPAs, these complex agreements must address diverse stakeholder interests and allocate inherent risks effectively.
Offshore Wind Farms
The development of offshore wind farms is a significant step toward achieving national goals for reducing greenhouse gas emissions and increasing energy independence through RES. The first legislative regulation for offshore wind farms was enacted with Law 4964/2022, and recently, Law 5106/2024 was published, setting targets for installing offshore wind farms with a total capacity of at least 2 gigawatts by 2030.
The new law simplifies the licensing process, reducing the time to less than two years and facilitating the rapid implementation of projects. The state determines the development areas based on environmental, social, and economic criteria, while the allocation of areas is carried out through competitive procedures.
Despite positive intentions, challenges remain concerning the implementation schedule and the development of necessary infrastructure, such as interconnections and energy storage. Successful development of offshore wind farms requires continuous monitoring and adaptation of legislative and regulatory frameworks.
The appetite for investments in the Greek energy market is evident, both from domestic and international investors. However, to proceed with these investments and effectively address the problem of curtailments, it is essential to ensure grid capacity in the system. Only then will the seamless financing of these investments and the sustainable development of the market be secured.
By Prokopis Linardos, Partner, Your Legal Partners
This article was originally published in Issue 11.7 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
