Greece adopts price caps on power generation

The European Commission approved Greece’s new energy market mechanism, following similar approvals for Spain and Portugal, allowing intervention in the domestic energy market to further mitigate the impact of rising energy prices.

Starting from July 2022, the new temporary mechanism, that was decided to be valid for 1 year, introduces a wholesale price cap on producers’ earnings based on each power generation source (natural gas, lignite, RES and hydro). Thus, electricity generation will be decoupled from soaring gas price, that was setting the exchange price for all technologies recently, by being the most expensive generation source. The Energy Exchange (EnEx) will be responsible for the operation of the new mechanism through its day-ahead market.

Meanwhile, the government has also decided to suspend the wholesale-related adjustment clause from variable electricity contracts for one year starting from the 1st of August, which was reflecting the wholesale price fluctuations and was responsible for large portion of the total energy bills lately. The combination of the new mechanisms is expected to absorb part of the increase from August onwards, although the height of the price relief  for end-users is yet to be seen.

Finally, the government intends to rely on its existing subsidisation scheme as the main source of reducing the high burden on consumers. Revenue from Greece’s carbon emission permits and levy, recently imposed on energy producers’ windfall profits, will finance this scheme.

Author:

Ioannis Korras, Energy Market Analyst

Sources:

[1]Energypress : “Εγκρίθηκε και επίσημα από Βρυξέλλες ο μηχανισμός για τη χονδρική του ρεύματος και τα πλαφόν ανά τεχνολογία”, 22.06.2022

[2]Reuters:Reuters: “Greece to scrap a power bill surcharge to combat rising energy costs”, 25.06.2022

[3]Energypress: “Wholesale price clause suspension not instant relief”, 27.06.2022