The Greek power rate paradox
Greece may have the highest rates in the wholesale electricity market among the 27 member-states of the European Union, but when it comes to the retail market, Greeks appear to enjoy some of the lowest rates in the bloc.
According to data from the European statistical agency Eurostat, in the second half of 2019 Greek households paid an average electricity rate of 155 euros per megawatt/hour, against an average rate of €216/MWh for the entire EU.
Also below the EU average are the rates paid by local enterprises such as commercial stores, hotels, small manufacturers and offices. Greece in that category stood in 12th place among the EU 27 with an average rate of €108/MWh, while the mean price across the EU amounted to €117/MWh.
At the same time, though, Greece ranked among the most expensive countries in the bloc for rates in the wholesale power market, climbing to the top of the charges in the first quarter of this year at €50/MWh. This was 47% more expensive than the average EU price, which stood at just €34/MWh.
This paradox of these high rates in the wholesale market and low ones in retail is explained by the structure and operation of the Greek electricity market.
In the wholesale market, although there are many active players, the price is formed on the basis of that at which all producers sell electricity, reflecting the price of the most expensive form of energy, which is lignite. In other European countries, wholesale rates are also formed via three markets besides the daily one: the time markets, the balancing markets and the markets of available power. Therefore, producers and importers recover their costs from other markets too, which pushes prices lower. These markets will also begin operating in Greece, with the target model to be used, as of September.
Contrary to the wholesale market, competition is fierce in the domestic retail electricity market as suppliers build their consumer portfolios by often offering rates at a marginal profit, or even below cost, so that consumers benefit more in comparison with customers in other – and more mature – European markets.
