Greece has an abundant supply of renewable energy sources (RES) available for development, this is especially true for wind and solar power. The Greek RES sector currently comprises approximately 2,500 MW of installed capacity (1,650 MW of onshore wind; 625 MW of solar photovoltaic (PV) power and 205 MW of small scale hydro power). The regulation of RES in Greece has developed significantly since 1985 when the first national law on alternative forms of energy was passed. The EU Renewable Energy Directive (Directive 2009/28/EC) was transposed into national legislation by Law 3468/2006 (as amended) (the RES Law).
The RES Law provides the broad legal framework for the licensing and operation of power generation from RES in Greece. A number of secondary regulations have been adopted by various competent authorities, primarily the Minister of Environment, Energy & Climate Change and the Regulatory Authority for Energy (RAE), which regulates such licensing and the integration of renewable energy generators into the domestic electricity market.
Renewable energy has a right of priority dispatch into the electrical network in Greece under long term and standardised Power Purchase Agreements (PPAs) and pricing supplemented by a regulated feed-in tariff (FiT) the cost of which is essentially funded by the end consumer. This primary RES support mechanism is supplemented by public funding of up to 40 per cent of a renewable energy project’s capital expenditure (depending on the location of the project and its capacity and excluding solar PV projects).
Back to top
Under the EU Renewable Energy Directive, Greece has committed to a legally binding target of sourcing 18 per cent of its final energy consumption from renewable sources. The Greek government has increased this target to 20 per cent. In order to meet its obligation, the government estimates that around 40 per cent of Greece’s electricity, 10 per cent of its transport sector and 20 per cent of its cooling and heating sector, will have to come from renewable sources by 2020.
The national renewable energy action plan for 2020 (NAP) was adopted in October 2010. It forecasts that Greece will require almost five times as much installed capacity from RES (approximately 10,000 MW, excluding large scale hydro) as it has today by 2020, if Greece is to meet its targets of sourcing 20 per cent of its final energy consumption from renewable sources. The NAP estimates the generation of electricity by renewable energy type and it provides that, in order to meet this required 10,000 MW of capacity by 2020, the following additional capacity will need to be added: 7,500 MW of wind (including offshore); 2,200 MW of solar PV and 250 MW of solar thermal; 150 MW of small scale hydro and 350 MW of biomass. These figures do not take into account any major renewable energy projects that qualify for “fast-track” licensing pursuant to Law 3894/2010, which allows for an accelerated development path for renewable energy projects which are “strategically important” (that is, those projects which have a significant qualitative and quantitative effect on the national economy) and for roof-top solar PV projects.
Renewable energy projects boost development
Despite the current macro-economic conditions in Greece, the deployment and construction of large scale renewable energy projects and associated infrastructure (e.g. grids and sub-sea interconnection cables between mainland Greece and the islands) is seen by the state as a critical path for economic development which will add considerable value to the country.
While a number of regulatory initiatives have been put in place the pace of developing Greece’s ample renewable energy resources has been slow. This can largely be blamed on bureaucratic barriers, licensing hurdles and the limited grid capacity available for renewable energy projects.
Significant grid expansion works are planned by the Transmission System Operator (TSO) in the medium term which will alleviate some of the grid issues faced today in windy and remote areas of Greece, like South Evia and Thrace. Some more ambitious grid expansion works are envisaged in the long term for the interconnection of the Aegean Sea islands, including Crete, to mainland Greece with a view to completing this by 2020.
Back to top
Policy and regulatory framework and incentives
Licensing requirements: the main licences
Under Greek electricity sector legislation, the development, construction, commissioning and operation of any type of renewable energy power plant is governed by numerous and extensive regulations. For the construction and operation of a renewable energy project with an installed capacity of more than 1 MW, the following licences are required:
- The Electricity Production Licence - granted by RAE for an initial term of 25 years following the evaluation of certain zoning, technical and economic criteria (of both the project and sponsor);
- The Grid Connection Offer - although not a typical licence, this is issued by the competent grid operator and sets out the technical and economic terms and conditions for the grid connection of the project. The Grid Connection Offer becomes final and binding for four years on the award of the Environmental Terms Approval;
- The Environmental Terms Approval - this is granted by regional authorities for an initial term of 10 years following the submission and review of the project’s Environmental Impact Assessment study by the developer;
- The Installation Licence - this is normally granted by the General Secretary of the region where the project is located for an initial term of two years;
- The Building Permit - granted by the local town planning authorities for any concrete foundations of wind turbines, PV panels or any auxiliary buildings with concrete foundations, such as control rooms. Solar PV projects normally enjoy a simplified licensing requirement which means that they do not require this type of licence; and
- The Operation Licence - this is granted by the same public authority granting the Installation Licence for an initial term of 20 years following the completion of construction and successful testing and certification of the project (including its grid connection equipment).
An Electricity Production Licence is not required for solar thermal, solar PV, biogas, biomass and biofuels power plants having installed capacity up to 1 MW; geothermal power plants up to 0.5 MW or for wind projects up to 100 kW. Any renewable energy project which is exempt from the requirement for an Electricity Production Licence is also exempt from the requirement for an Installation Licence and an Operation Licence.
Commercial operation: priority dispatch, PPAs and feed-in tariffs
- Priority dispatch and PPAs: In Greece, renewable energy projects are entitled to priority dispatch (subject to grid safety and technical limitations). This means that the system operator is legally obliged to off-take renewable energy at regulated energy prices (€ /MWh) also known as the feed-in tariff, the FiT, and for such off-take to take priority over electricity generated by non-renewable sources.
Priority dispatch is given by the system operator pursuant to the grid code and the relevant standard PPA for a term of 20 years. Entry into the standardised PPA by the system operator is compulsory for all renewable energy projects that want to connect into the grid.
- FiTs: The FiTs available to renewable energy projects are split into two categories: a FiT for solar PV installations (established by Article 27A of Law 3734/2009) and a separate FiT for all other renewable energy projects (pursuant to Article 13 of the RES Law).
FiTs for solar PV installations: From February 2012 to July 2012 the applicable FiT for solar PV projects in the interconnected system (i.e. mainland Greece) with more than 100 kW installed capacity was recently reduced to €292.08 /MWh and to €328.60 /MWh for projects with less than 100 kW of installed capacity. Projects located in the non-interconnected system (i.e. the Greek islands) are eligible for a tariff of €328.60 /MWh regardless of installed capacity.
The FiT for solar PV installations also contains a biannual reduction mechanism to adjust reference prices until the end of 2014 to ensure correlation thereafter with the wholesale electricity market price. Solar PV FiTs are annually adjusted by 25 per cent of the previous year’s consumer’s price index.
- FiTs for non-solar PV RES: The applicable FiT for non-solar PV RES varies depending on the type and the installed capacity of the power generating facilities concerned and the location of the project in question.
For instance, small scale hydro power plants (i.e. ≤15 MW) and onshore wind parks in the interconnected system of Greece with more than 50 kW installed capacity are entitled to a FiT of €87.85 /MWh, while the same wind parks in the non-interconnected system of Greece (meaning the islands) are entitled to a FiT of €99.45 /MWh. This uplift compensates the wind power producer for funding the subsea cable interconnecting the island hosting the wind park to mainland Greece. The subsea cable does not need to be in place by the first day that the plant is in operation. These FiT amounts can be increased by 15 per cent to 20 per cent (depending on the type of the plant and excluding solar thermal power plants) if the developer has not received any cash grant as an investment incentive from any investment aid program.
These FiTs are revised annually by a decision of the Minister of Environment, Energy & Climate Change following an opinion from RAE. Such revision is based upon the weighted adjustment of the Public Power Corporation’s regulated tariffs.
Wind farms installed on a non-interconnected island (inhabited or not) which become interconnected to the mainland through special grid connection works (which must include an independent sub-sea power cable which has been funded in full by the developer), are entitled to the FiT for onshore wind projects of more than 50 kW on non-interconnected islands (i.e. €99.45 /MWh) [and increased by up to 25 per cent after such an interconnection is in place] . This increase may be on top of the 20 per cent uplift available to those developers who have not received any cash grant as an investment incentive from any investment aid program.
Wind power producers are also entitled to additional compensation from the grid operator at the end of each calendar year for up to 30 per cent of any output curtailments imposed for reasons of grid stability and safety. This ceiling may increase annually up to 100 per cent so that the total additional compensation is equal to the lower of 2,000 hours of operation at the applicable FiT or the (hypothetical) revenue due, had there not been any such curtailments.
Investment aid for renewable energy projects
Other forms of state support for energy from RES like capital expenditure-related cash grants, leasing subsidies and/or tax exemptions are also available for all RES power plants other than solar PV. In some cases such support may amount to up to 50 per cent of eligible project budget but in most cases this support will be capped at 40 per cent (depending on the relevant ceiling set out in the European Commission Regional Aid Map for Greece for period 2007-2013). Other caps for “partner” or “linked enterprises” and those categorised as “Major Investment Projects” (i.e. those with an investment budget in excess of €50 million) may also apply.
Back to top
Opportunities and challenges
Euro and Greek debt crisis implications
The financing of renewable energy projects and associated infrastructure is facing severe challenges given the current public debt crisis in Greece and its adverse effect on national and European commercial banks. Now more than ever, there is a significant opportunity for commercial banks from outside the Euro-zone, multilaterals and export credit agencies to play a key role in financing renewable energy projects in Greece.
Payments made by the system operator under PPAs are fully reserved in a separate account established and managed by the TSO, known as the Special Account for RES. The revenues of the Special Account for RES derive from the Greek wholesale energy market (i.e. revenues from imbalances related to renewable energy and revenues from electricity supply in the non-interconnected islands) and final electricity consumption (i.e. revenues from the special duty for renewables) and recently from the auctioning of unclaimed EU allowances. Consequently, the state budget (and any deficits or financing difficulties connected to it) does not affect the orderly payments of the FiT to renewable energy producers under their PPAs.
Offshore wind projects under way
Greece’s offshore wind resources are largely untapped and the potential for growth in the sector is significant. The RAE is set to review and assess the 36 offshore wind projects (totalling 5,267 MW) that have been applied for but the development of which has stagnated due to various regulatory and policy issues which have now been streamlined.
The base FiT for offshore wind was recently set at €108.30 /MWh. However, an increase of up to 30% is possible on a project-by-project basis, if the RAE deems that such an uplift is required because of the level of investment required.
The Greek state is promoting a 10 GW solar PV plan, known as “Project Helios” through the joint co-operative mechanisms available under the EU Renewable Energy Directive (2009/28). The required investment for Project Helios is €20 billion. Under the envisaged co-operative mechanism, Greece will provide an “all-inclusive” platform to encourage and facilitate investment in the solar PV sector by presenting potential investors with ”turnkey” projects (i.e. fully licensed solar PV power projects in specific state-owned sites, free of any administrative and bureaucratic barriers). Counterparties are expected to provide the necessary solar power PV technology and the required funding.
Back to top
Although the current macro-economic conditions in Greece and the Euro-zone present a very real financing challenge for those involved in developing renewable energy projects in Greece, there are still significant business opportunities and available resources (both onshore and offshore) which are ripe for development. Although regulation of renewable energy projects is fragmented, the Greek incentive regime remains attractive to developers and investors.
Back to top