ECONOMY

Natural gas use is picking up in popularity in the Greek energy market

The lack of long-term energy planning in Greece, with clear objectives, strategies and policies to tackle issues such as securing the country’s energy supply, protecting the environment, promoting balanced regional development and attracting investments to expand existing infrastructures is the source of the market’s greatest problems, according to representatives of the natural gas sector. This is the main finding of a survey by the Foundation for Economic and Industrial Research (IOBE) about the natural gas market. The survey, however, foresees a dynamic penetration by the fuel in the local energy market, led by household demand and the manufacturing and service sectors. A strong selling point is its price, as the IOBE study discovered. In industry it is 50 percent lower on average than the price of diesel (1997-2002 period), while in the domestic sector it is 20 percent lower than heating oil and 60 percent below the cost of electric energy. The sector functions as a regulated monopoly and companies do not have direct competitors, only substitute products. Competition is, however, expected after 2005, when the natural gas market is due to be liberalized, albeit on supply level only. On the other hand, in terms of distribution, existing gas supply companies will maintain their monopoly in their permitted areas for the next 30 years. Problems The survey lays great emphasis on the sector’s problems, which create huge obstacles despite the market’s momentum. Among the problems is a lack of adherence to safety conditions in buildings (making gas use prohibitive), the need for effective training and certification of technicians, the absence of cooperation among parties involved, an inconsistent tax policy, and the high cost of replacing existing equipment. All this hampers the market’s growth, canceling out the advantage of gas’s low price compared with other fuels, says the IOBE report. Another crucial issue is the pricing strategy applied both in manufacturing and in industry. In the former, the policy of raising natural gas rates to among the highest in Europe in order to depreciate the high production cost of the high-pressure pipeline hampers investments in power-producing plants, which would not be able to compete with the Public Power Corporation’s lignite units. Proposals Another obstacle to the market’s growth is poor consumer information and education on natural gas issues. Additionally, IOBE’s study notes that emphasis must be placed on the institutional framework of the electric energy market, as electricity units will become the biggest natural gas consumers and therefore the main factors for the market’s growth. The same study proposes a series of actions it considers necessary for drawing up regulations for liberalizing the market, suggesting among other things: a re-evaluation of the criteria for investing in the high-pressure pipeline, so that the carriage cost of natural gas is reduced and its competitiveness is bolstered; distinguishing the activities of the Public Gas Corporation (DEPA); applying a stable and consistent tax regime; and returning the 75 percent exemption from taxable income for purchases of natural gas appliances.