2024-07-27 15:12:20
The disproportionately high costs that Greeks are forced to pay for basic goods such as electricity is of great concern to all of us.
A fundamentally political issue, due to the absence of effective control to avoid excess profits to energy producers and suppliers and energy planning that does not aim to contain prices and protect consumers.
1. How is the electricity price that consumers pay determined?
Suppliers buy energy mainly from the energy exchange (wholesale market) and resell it to end consumers. When they buy expensively from the producers and when they do not implement – or have no incentive to implement – measures to protect them from wholesale cost increases (hedging policies), then of course they resell it more expensively so as not to lose their profit .
2. Who produces energy?
According to the ADMIE, the energy needs of our country this year were met at a rate of 51.6% by RES units (mainly wind and photovoltaic), 34.3% by natural gas units, 6.7% by lignite units, 7.3% from hydroelectric and 0.04% from other sources (imports, other fuels).
In particular, the production from RES comes from a number of producers, smaller and larger, such as low-power private photovoltaics, for example residential photovoltaics (21.7%), up to large projects connected to the ADMIE Energy Transmission System (29.8 %). The lignite units as well as the large hydroelectric plants are owned by PPC (14% of production). The Natural Gas units (34.3%) belong to PPC and four other producers. Therefore, 48.3% of the energy needs are covered by energy production units belonging to five – including PPC – well-known business groups which ultimately shape the average selling price of electricity in the wholesale market.
3. What is happening in the wholesale market?
In the last month (source: RAEF) at midnight the prices start at €171.35/MWh and fall to the lowest levels (€57.6/MWh) at 12.00pm due to RES. From 18.00pm the prices rise again to €116.55/MWh (PV stops producing) and peak at 21.00pm, at €332.80/MWh – €850/MWh on 7/22 – when the needs are mainly covered by the Natural Gas and Lignite units. In this price rally – first in Europe in terms of energy costs on 7/20 – PPC is also leading the way.
4. How can wholesale market prices be reduced?
With the implementation of antitrust mechanisms by independent authorities (RAEF, competition commissions) that will ensure that no surplus profits are created for producers – especially where objectively there is an oligopoly. Also with the immediate restructuring of the energy policy so that we rely more on the cheapest power generation units (eg RES with energy storage).
5. Why do retail supplier prices increase every month?
Because they buy expensively from the wholesale market and have no incentive to hold down their prices. The same groups that produce the largest percentage of energy are also the ones that sell it to the final consumers! The absence of real competition removes any incentive to take cost-cutting measures (cartel logic). Thus prices are constantly rising and energy poverty is deepening.
6. How could retail tariffs have been cheaper?
If the retail supply market operated without distortions, suppliers would bear most of the risk of increasing their costs (ie the cost of the energy they buy from producers).
As in the rest of Europe, providers ensure competitive, stable and predictable prices through long-term contracts with producers (PPAs) and at the same time enter into hedging contracts, remaining competitive and offering fixed tariffs to consumers for well over 6 months, no adjustment clauses. And of course the state should not allow them to make a profit since they are selling a social good like electricity.
PPC, for example, as a provider that controls about 50% of the market, while remaining a state-owned enterprise (34% state control) could keep prices low and force the rest to follow.
The regulated fees could be reduced with greater control over ADMIE and DEDDIE costs, and interconnection of the islands for the elimination of YKO fees. In conclusion, the problem of increased energy costs will not be solved by government fireworks, subsidies that return to the oligopoly coffers depriving valuable resources from other necessary investments (Education, Health, etc.), or by pre-election discounts to buy votes.
Strong political will is needed to implement citizen-centric solutions and a new rational energy strategy that will not serve business interests.