GREECE: An Introduction to Energy

THE RUSSIA-UKRAINE WAR AND THE ONGOING ENERGY CRISIS IN EUROPE

On 24 February 2022, Russia escalated its conflict with its neighbour in the southwest, Ukraine, by launching a large-scale military invasion in the area. Aside from the unprecedented humanitarian consequences, the Russian invasion is also sure to forever change the energy landscape in Europe. The European energy crisis witnessed in the fourth quarter of 2021 has been rekindled by the Russia-Ukraine war, particularly in the context of the European gas markets – with oil and gas prices reaching unparalleled heights. The rise in gas and power prices, coupled with an anticipated drop in available Russian gas export capacity and supply, tests Europe’s long-held reliance on Russian gas and coal (Europe imports 90% of its natural gas needs, 40% of which is controlled by Russia) and makes the goal of energy transition to green renewable energy sources (RES) ever more focal: decarbonization is still a key goal, but now it is accompanied more than ever with a geostrategic goal for further independence and self-reliance. To address this issue, the EU is reported to be drafting a plan to “abandon” Russian natural gas and conclude a new energy agreement further pushing for the support of RES.

During the EU’s energy council held on 28 February 2022 among the 27 member state energy ministers, Greece presented the following proposals: (a) to secure that all sectors of the economy equally contribute to the rising energy costs; (b) to take into account the national characteristics and particularities of the member states; (c) to consider natural gas as a transitional energy source until full transition to RES is achieved; (d) to emphasize energy savings in buildings (which will also create employment opportunities); (e) to carefully assess the inclusion of road transport and buildings in an autonomous Emissions Rights Trading System; and (f) to take into account that while the creation of a Social Climate Fund is a positive development, the fact that it will be set up in three years’ time will only partially counterbalance the consequences of the energy crisis.

It remains to be seen how the above initiatives, together with the recent actions of the Greek government for energy and climate change (eg the securing of certain financial tools with a clear implementation timeline and the ongoing streamlining of RES licensing procedures) will impact FDI in the Greek energy sector (which has been booming during the last three years).

MAJOR LEGISLATIVE DEVELOPMENTS  

RES projects 

Updated National Energy and Climate Plan 

Greece is currently in the course of preparing an updated National Energy and Climate Plan – in line with the EU’s updated targets for 2030 (included in the “Fit for 55” package). One of the main targets is to reduce emissions by 55% in relation to 1990. The new plan is also reported to include an intermediary target for 2040, before reaching climate neutrality by 2050.

New licensing framework 

The energy legal landscape saw massive change towards mid-2020 with the promulgation of Law 4685/2020, which set out a brand-new production licensing framework aimed at accelerating and streamlining the licensing process and completely digitizing the licensing process in the RES industry.

Greece’s new RES licensing framework is expected to be further streamlined in 2022, with massive legislative changes expected to be passed down through a new bill. The Greek Ministry of Energy considers that these changes will result in massive reductions in the overall development process (from five years, which is currently the norm, to 14 months). The envisaged changes include, inter alia, reductions in the time required for the competent authorities to respond to investors’ requests and the creation of a RES informational system for the monitoring of the overall licensing process.

Tender procedure for FITs – New Auction Scheme 

On 23 December 2021, the Greek Energy Minister issued a decision setting out the technologies and categories of RES and CHP power plants, which will be considered eligible for the support scheme in the form of operating aid through participation in competitive tender procedures. The Ministerial Decision was issued in the aftermath of the recent approval of the €2.27 billion Greek scheme for the production of electricity from RES and high efficiency CHP by the European Commission. The first auction is estimated to take place in April 2022, while the Auction Scheme is set to be abolished completely after the end of 2025. For the first time, the New Auction Scheme envisages the participation of RES projects combined with storage.

New subsidies scheme 

The Greek Ministry of Energy has announced that by May 2022, a new subsidy scheme for companies to install photovoltaics and batteries (storage) will be implemented, in order to cover their own energy needs. The new subsidy scheme will finance up to 40% of the supply and installation of these systems and will provide companies with a solution to permanently address the rising energy costs.

LEVEL OF ACTIVITY IN THE SECTOR 

Since 2019, Greece has seen a surge of energy-related investments particularly in its booming RES sector. Greece’s unique geomorphological characteristics together with an ever evolving and – mostly – favourable legislative framework (also coupled with the availability of international investment protection through Greece’s vast network of Bilateral Investment Agreements and its participation in the Energy Charter Treaty) have enticed investors from all over the world to set up shop in the country. Recent investor activity in the sector can be broken down into four main categories: renewables, oil & gas, energy storage and infrastructure, privatizations and financing.

Renewables 

- The acquisition of a 303 MW photovoltaic park by HELPE Renewables in the first quarter of 2022 in Northern Greece (Florina).

- The development of a 470 MW, ~500 million euro wind power plant in the north-central and southern parts of Evia (intra-EU joint venture between Greece’s Ellaktor and Portugal’s EDP).

- A 2.5 billion euro investment in electrolytic hydrogen production through photovoltaic parks of 1.5 GW total capacity in Western Macedonia.

Oil & Gas 

- The 300–400 million euro “strategic investment” underground natural gas storage facility in Southern Kavala with an estimated throughput at 360 million Nm3.

- The FSRU project in Alexandroupolis of total LNG storage capacity of up to 170,000 cubic metres and a natural gas sent out capacity that will exceed 5.5 billion cubic metres per year. The FSRU will be connected to the National Natural Gas System of Greece via a 28 km long pipeline, through which the regasified LNG will be transmitted to the markets of Greece, Bulgaria and the wider region, from Romania, Serbia and North Macedonia to Hungary, Moldova and Ukraine. The construction of a second floating LNG terminal was also announced on 1 March 2022.

Energy storage 

- The hydro pumped storage complex in Amfilochia project developed by Terna Energy, with an investment value of over 500 million euros.

Infrastructure, Privatizations and Financing  

Infrastructure 

- Crete’s connection to the mainland constitutes one of the biggest energy infrastructure projects currently being constructed in the country, having a value of over 1 billion euros. Project includes two submarine HVDC cables, approximately 328 kilometres long, with a rated power of 1,000 MW in bipolar operation (2 x 500 MW), from Attica to Crete.

Privatizations and Financing 

- The sale of a 49% stake in the share capital of HEDNO (Greek distributor for electricity) to Macquarie. Closing of the transaction occurred on 28 February 2022.

- Italgas’s acquisition of DEPA Infrastructure S.A., the holding entity owning the operators of the Greek natural gas distribution networks.

- The international public tender process launched by HRADF for the acquisition of a 65% stake in DEPA Commercial S.A., the leading natural gas supplier in Greece.

- The issuance of a common bond loan of up to €435 million by the DESFA, the biggest operator and distributor of natural gas system in Greece, responsible for the operation, management, utilization and development of the National Natural Gas System and its interconnections, with the four Greek systemic banks acting as arrangers of the bond loan, and Eurobank S.A. as bondholder agent and administrative agent.