Key Trends, Risks and Mitigation in Renewable Energy and Related Construction Disputes in Greece

The Greek energy market has attracted investors’ attention in recent years and the newly announced National Energy and Climate Plan (NECP) emphasises the goal for a further substantial increase in renewable projects and storage capacity until 2030. That said, as the market gradually matures, stakeholders in the energy sector must navigate an evolving legal landscape of laws and regulations, licensing requirements, ESG compliance, complex projects, and bureaucratic inefficiencies.

In this ever changing market, given that further rise in energy-related disputes seems inevitable, the clear identification of relevant risks and challenges and of ways to prevent, mitigate or address them becomes increasingly relevant for market participants and practitioners.

Investments in renewable energy solutions (RES) projects (solar, wind, biomass energy, storage, etc) are still on the rise. Faced with drastic changes in the energy market’s structure and operation at global and regional level, the Ministry of Environment and Energy and the Regulatory Authority for Energy, Waste and Water (RAEWW) are continuously updating energy legislation and regulations. Frequent changes in the permitting process, regulatory frameworks and uncertainty surrounding the interpretation of laws and policies (eg, reductions in feed-in tariffs), may lead to significant risks related to project timelines, profitability, and overall viability affecting financial projections, leading to disputes. Efforts are being made to reduce administrative and bureaucratic hurdles in project approvals, yet challenges remain, resulting in delays in project development.

On the project implementation front, contracts governing complex utility scale RES projects tend to grow in complexity. Ambiguities in contractual terms can lead to disputes over interpretation, particularly regarding performance standards and time for completion. Unforeseen circumstances, like technical challenges, supply chain issues, extreme weather events or underground conditions, can trigger disputes over project timelines, extension of time and additional costs, liquidated damages claims, etc. Given the lengthy nature of litigation before courts, ADR offers quicker resolutions, confidentiality, and cost savings, making it increasingly common in energy projects and energy-related construction disputes. It is expected that emerging case law will influence the legal landscape.

Moreover, increased vigilance over compliance with environmental regulations and the green transition has become a critical element for RES projects. Stricter assessments and local opposition to projects (due to environmental or land-use concerns) can lead to legal challenges, delays and disputes, in relation to renegotiation of project terms, delay costs and extension of time, project timelines, reputational damage, etc.

As in many jurisdictions, conflicts over land use and ownership rights are common in Greece, especially in areas where renewable energy projects overlap with agricultural or protected land or where the permitted uses of the land are unclear, also in view of the absence of updated special land-use regulatory framework for RES projects. Local communities are increasingly resisting renewable project development, leading to legal challenges and delays. Combined with the above, disputes regarding underground conditions or works have arisen in several projects, as no detailed geotechnical studies are undertaken in advance and the contractor encounters unforeseen underground conditions resulting in requests for variations, extension of time and cost increases.

As the Greek energy market is gradually maturing, lately Greece has been grappling with increasing grid congestion, which, coupled with its overly ambitious green transition goals, has led to a pressing need for major upgrades to the grid infrastructure. In turn, this has resulted in delays in granting grid connection terms or upgrading infrastructure which has become a critical bottleneck for the development and viability of renewable energy projects. Refusal and delays with regards to grid access by the grid operators and private owners of substations and interconnection infrastructures may also lead to potential disputes. Disputes may additionally arise over liability and compensation in relation to contractual obligations under grid connection work contracts.

The Greek energy market is reliant on imported materials and technologies. Global crises such as geopolitical tensions or pandemics (eg, COVID-19, Red Sea crisis, etc) affect energy or other supply chains, delay critical deliveries and in general affect investment stability by increasing costs. Fluctuations in energy prices, economic instability or changes in tariff structures can make renewable energy projects less predictable. These disruptions often lead to project delays, disputes over performance and renegotiation of terms in EPC contracts in Greece, especially given that the timelines for project implementation are tight as they tie in with strict regulatory deadlines while disputes regarding pricing, payments, and delivery timelines may affect long-term power purchase agreements (PPAs) which are becoming increasingly common in Greece.

Although strategies for preventing and addressing the relevant risks are quite common in all jurisdictions, the Greek energy and construction market conditions and regulatory framework often pose particular challenges warranting tailor-made mitigation measures.

It is always a good practice to conduct, early on, a thorough legal and technical due diligence and risk assessment that includes assessing financial and technical aspects, as well as regulatory and particular licensing requirements (including in terms of environmental impact assessment and grid access). During project implementation, it is critical to streamline regulatory monitoring and adopt robust compliance standards to ensure all necessary permits and approvals are secured before commencing works and continuously liaise with regulatory bodies, such as the Ministry of Environment and Energy, the regulatory authority and grid administrators and market operators, to navigate the evolving landscape effectively.

It is important to engage with all relevant stakeholders, including local communities, to address concerns and build consensus, minimising legal challenges, especially in agricultural or ecologically sensitive areas, and conduct public consultations where required to mitigate opposition and misunderstandings, reduce opposition and foster goodwill. There has been a sharp increase of local awareness and reaction against RES projects in Greece, often escalating to multi-faceted disputes not only challenging the validity of licences before administrative authorities and courts but also involving civil law litigation in terms of interim measures and damages claims invoking civil law concepts such as the violation of individual personality rights which pose novel legal challenges.

Contracts should be comprehensive so that all parties understand their obligations, clearly define roles, responsibilities, timelines, and remedies for delays or non-compliance, while risk assessments conducted early in the project life cycle can identify potential issues before they escalate and facilitate risk allocation, including force majeure, unforeseen conditions, external disruptions, change in laws and the like – in practice, internationally recognised forms of contract such as FIDIC are being increasingly used in Greek energy and construction projects, especially for large-scale infrastructure projects involving international investors, properly adjusted to take into account Greek law and market particularities as they can provide a well-established framework for addressing risks and delays.

Clear dispute resolution mechanisms must be included, preferably ADR – arbitration to litigation for efficiency and in cases of disputes, prioritise non-litigation approaches, such as early neutral evaluation, to resolve conflicts quickly and amicably. These processes are often less costly and time-consuming than traditional litigation given the very heavy workload of the state courts, especially of the courts of Athens, and they allow parties to preserve business relationships.

As in all construction projects running on tight time schedules, it is crucial to maintain comprehensive documentation of all project-related communications, changes, and decisions and formalise any changes to the scope of work through documented change orders. It is equally important to establish routine project meetings to discuss progress, address concerns, and document decisions, and encourage open communication, regular reviews, site inspections, and progress reports which help identify potential issues early, preventing them from escalating into larger disputes.

A comprehensive and well substantiated financial model must be prepared, with the assistance of experts familiar with the bankability standards, in order to secure financing terms early on, including by exploiting new financing tools and state aid schemes such as RRF funding. Greek banks dominating the market still have a strong appetite for energy transactions, but often experience bottlenecks in terms of due diligence and credit approvals while lately they are more conservative regarding project screening taking into account grid curtailment issues.

Appropriate project development and performance bonds and insurance coverage tailored to Greek construction-related risks by bankable providers must be obtained. A recent trend in the Greek market is that certain insurance companies, properly licensed, are issuing at the request of developers and contractors, bonds which were previously issued only by banks, although certain owners and financiers do not consider such insurance bonds as adequate coverage, especially for utility scale projects.

The energy and construction sectors in Greece are on the rise, presenting opportunities and challenges. Stakeholders and legal practitioners must remain proactive and flexible to effectively address challenges and risks. Implementing comprehensive risk management strategies, establishing clear contracts and dispute resolution mechanisms are vital for minimising and effectively addressing disputes towards achieving successful project outcomes.

Against this background, proactive, expert legal advice by experienced practitioners who are familiar with the particularities of the Greek regulatory framework and in general with project development pitfalls common in Greece is a crucial risk prevention and mitigation strategy.