High RES share in power production jacks up costs

The rising penetration rate of renewable energy sources (RES), which has come at the expense of the relatively low-cost lignite-fired power stations, is largely responsible for a steep rise in the cost of electricity production, according to official data from the Independent Power Transmission Operator (ADMIE) concerning the January-July period this year.

The production of lignite-fired stations remained below 50 percent during this period, with lows of 39 percent in March and April. At the same time, RES accounted for shares of 13-19 percent, while natural gas stations ranged between 19 and 28 percent.

The existence of incentives that allow up to 30 percent of production to be met by the more expensive non-lignite stations forces lignite stations out of operation even during hours of low demand. This causes significant market distortions, driving up costs and charges in the electricity bills of consumers and businesses.

Lignite-produced energy costs 40 euros per megawatt, while that from natural gas comes to 100 euros/MW and from photovoltaic systems an average of 300 euros/MW. Critics argue this expensive mix undermines the competitiveness of the economy.

The Public Power Corporation (PPC) bears the brunt of this distortion, as it invests in lignite stations that operate at a fraction of capacity due to a drop in demand and the high penetration rate of RES.

Lignite stations in July were operating at an average capacity of 60 percent in July. Characteristically, PPC’s most modern plant, Meliti, was operating at 47 percent of capacity in July.

The drop in demand for electricity is the basic reason for the reduced capacity at which conventional stations operate. According to ADMIE data, total demand was 13.6 percent in July, a drop moderated by a 4.8 percent rise in industrial consumption.

Demand has been lower during all months so far this year, except in April, when there was a small rise of 1.9 percent.