Will energy open up?

Next year will see the completion of the third phase of the energy market liberalization in the European Union. European consumers will from July 2007 be able to buy electricity and natural gas from any supplier in the bloc. Already industrial and commercial consumers in the eurozone enjoy the right to choose their supplier in electrical energy. At the same time in Greece we are lost amid thousands of pages of rules for the operation of the liberalized market before we have even created it. Liberalization has for five years now concerned only a closed circle of domestic investors, bankers and public bodies; all together they are trying to create a «Greek-style» liberalization framework that is not in harmony with any strategy to converge with the larger European market. It has taken Greece three law adjustments to harmonize itself with the European framework that dates back to 1996, only to end up with a model so complex and contradictory that it may actually be non-applicable. Even if it does get applied, there is no guarantee it will lead to competitive electricity rates, which is the main goal. Since February 2001, when some investors snapped up electricity production licenses practically without having any framework for such an activity, the whole process has been based on how to show we have two or three more players in the market – a model which mathematically leads to higher rates. When in 2001 the first permits were given to the private sector, natural gas was chosen as the exclusive raw material for the operation of production units. At the time natural gas prices were of course nowhere near where they are currently, which are too high for electricity production, considering also the rising trend of oil prices internationally. The expansion of the market into the private sector had also been an opportunity for Greece to make up for another delay, that of entering natural gas in the energy balance. Therefore the coal unit planned by Edison in cooperation with AGET at Aliveri never materialized and today we are seeking ways to subsidize the construction of the more expensive electricity production units. At the same time Europe is redrawing its entire energy policy on the basis of reducing its dependence on imported fuel, expanding to all raw materials available, from renewable sources to coal and nuclear energy. Germany is constructing the biggest lignite station of production in the world, which will produce 2,100 megawatts and be equipped with state-of-the-art technology. Sweden is preparing for its complete independence from oil in the next 15 years and without resorting to a new generation of nuclear stations. The country, which in 1970 was considerably hurt by the oil crisis, today draws virtually all its power from nuclear and hydroelectric units and uses fossil fuel mainly for transports. Most other countries in Europe, too, have turned toward renewable energy sources (RES). Despite its rich potential in RES that could prove a real solution to the problem of dependence on oil (the highest in Europe), Greece lags considerably in this domain. For instance, the new framework for the development of RES has been on the drawing board since the spring of 2004 and has yet to be completed. On a corporate level, too, there is some frustration. Via an defensive or offensive strategy big companies in Europe are fighting for a strong position in the new expanded market. The Greek energy companies, which could support such strategies, feel no need to be either defensive or offensive. The Public Power Corporation (PPC) has not developed any outward-looking strategy to date, has not entered into any cooperation agreement with local or foreign investors, while being completely detached from activity in RES in recent years. Only now is it in discussion to include in its energy plan a program for the creation of wind parks. Similarly short-sighted is the policy followed by Hellenic Petroleum (HELPE), which recently entered the electricity production sector. While internationally we see major oil groups, such as BP and Shell, investing huge sums in RES and seeking important market shares in the rapidly developing «green energy» sector, HELPE remains far from such investments. After all HELPE belongs to the investors pressuring the authorities to raise electricity rates so as to create a viable market for private units. Investors and competent government figures all agree that the specific model of liberalization promoted will lead to a rise in energy rates. This would cancel altogether the original aim of a competitive price of energy and is expected to worsen further the country’s competitiveness. Government promises boost for renewable energy production The government yesterday said it had approved a package of incentives to provide a major boost to the country’s energy production from renewable sources. Development Minister Dimitris Sioufas did not provide the details of the plan but said it would include tax incentives for energy producers, distributors and individual consumers, as well as a simplified licensing system. The new regulations would be in full effect at the beginning of 2007, Sioufas said. Behind EU Despite Greece’s potential to develop solar and wind-driven energy production, the country lags behind most European Union states. Sioufas said Greece’s total installed capacity for renewable energy totals a modest 615 MW, compared with Germany’s 18,500 MW capacity and the 10,000 MW of Spain. «We are increasing support for green energy production, to make investments of this kind more attractive in this country,» Sioufas said after a meeting with other ministers involved in the project and Prime Minister Costas Karamanlis. «This is a milestone for the renewable energy industry, whether it concerns solar or wind parks, hydroelectric projects or geothermal energy,» he said. Last year, Greece committed to an increase in use of biofuels to reach 5.75 percent of total gas and diesel consumption used for transport purposes derived from biofuels by the end of 2010. The target is in keeping with the European Union directive on biofuels, which are produced by decomposing organic material in an oxygen-free environment.