Background
Despite the ongoing fiscal crisis and a lack of liquidity in Greece, the development of renewable energy is still viewed as a means to revive the economy, evidenced by the increased number of projects that received production permits between the periods Q3 2010 and Q3 2011.
However, despite the continued support, the availability of finance is still a major constraining factor with cautious investors seeking reduced sovereign risk, while Greek and European banks face serious liquidity constraints, rising funding costs and counterparty risk issues. EU and related (e.g., EIB) funding is therefore seen as an increasingly important funding pool.
Additionally the Hellenic Transmission System Operator (HTSO), the entity that is responsible for the implementation of the FIT system currently in place, has been facing increasing financial pressures. The increasing penetration rate of solar PVs in the Greek system, combined with the low System Marginal Price (SMP) level of the Greek electricity pool during the last two years has deteriorated the financial position of HTSO.
The Government supports the financial position of HTSO through a number of measures (including the proceeds from the sale of emission rights in the Athens Exchange and an increase of the special Renewable Energy Sources (RES) duty paid by all consumers amongst others) though these measures are not seen as long term solutions.
Policy
On 16 January 2012, in an attempt to support the implementation of the renewable energy law that it ratified in June 2010 further, the Government introduced Ministerial Decision 4014/2011, which aims to simplify the procedures for awarding environmental permits to renewables projects.
Other structural reforms to be effected in response to the fiscal crisis (e.g., measures aiming at increasing productivity and competitiveness) could potentially enhance the attractiveness of investment in RES.
Solar
As of Q3 2011, there were 460MW of installed solar power, representing 21% of total installed renewables capacity, compared with 200MW at the end of Q3 2010.
High levels of solar irradiation make Greece an attractive solar market. To take advantage of this resource amid the evident debt crisis, the Government recently launched Project Helios, a €20b project that anticipates developing between 2GW and 10GW of power by 2050 to export to Northern European countries.
The scheme is to be developed in accordance with EU Directive 2009/28/EC that allows a host country to develop renewable energy projects and export the power to support other EUMember States in meeting their 2020 renewable energy targets. Greece will provide investors with long-term concessions and will facilitate investments by offering fully licensed special purpose vehicles in state-owned locations with grid connection permits to reduce administrative procedures. It is likely that a large volume of the power will be exported to Germany as it seeks to move away from nuclear power.
The Government will be able to use excess revenue from the project to reduce its public debt burden by as much as €15b, reduce unemployment and diversify its energy portfolio.
At the start of December 2011, the Government appointed National Bank of Greece SA and US based Guggenheim Partners as financial advisors for the project.
In addition Public Power Corp SA, the country’s largest electricity producer, is developing a 200MW project in northern Greece.
In the past 1-2 years the solar sector in Greece has been supported by a FIT that pays higher rates than its European neighbors (€0.35 to €0.4 per kilowatt hour (kWh) in the months to February 2012 compared with €0.21 to €0.29/kWh as witnessed in Germany.
In the past, Greece had not benefited from the solar boom witnessed by its European counterparts, as bureaucratic hurdles deterred developers. However, with generous tariffs driving more rapid growth recently, and with the wider economic environment being faced by Greece, it was announced on 1st February 2012 that subsidies for solar power producers would be cut in order to ensure the viability of the financing mechanism, with FITs for installations larger than 100KW cut from programmed levels by 12.5% to €292.08/MWh from February 2012 with rates continuing to ratchet downwards every six months to reach €203.20/MWh by August 2014 (due to the recent arrival of this information, please note that this quarter’s attractiveness indices do not score for this development).
To address, to some extent, the time taken to obtain the required licenses Invest in Greece, an agency that implements a law to expedite the development of projects deemed beneficial to the Greek economy, has announced that it will fast track three solar PV projects totaling €1b to stimulate economic growth.
Wind
Onshore wind has been the predominant technology in helping the country meet its 2020 target of 20% of renewable energy in final energy consumption. Wind currently represents around 68% of the total installed renewables capacity with approximately 1.5GW, a 15% increase in capacity compared with the 1.3GW as of Q3 2010.
In order to meet the targets of the RES 2020 plan, the Government is currently assessing the licensing of offshore wind capacity in combination with a revision of the island interconnection program.
