By John Psaropoulos
With four new energy bills being presented to parliament this month, the government is finally taking a decisive step towards deregulating the electricity market. Both for economic and environmental reasons, this is welcome and long overdue.
The European Commission passed its first electricity liberalisation directive as long ago as 1996. Today, the Public Power Corporation (DEI) is still a virtual monopoly, supplying more than 90 percent of our electricity. Greece has, quite simply, dragged its feet. The socialist government won a derogation from the commission delaying the open market until early 2001, and still managed to overrun this extended deadline to award the first private power generating licenses by two months. Development minister Akis Tsohadzopoulos then failed to approve free market rules, making the operation of approved private investments impossible. New Democracy then took a year to tinker with the rules after it won election in March last year, mostly to the satisfaction of the monopoly-bent union GENOP-DEI.
The years of delays enabled DEI to preserve its value in the search for an investor, and to sneak in the construction of 500 Megawatts (MW) of new generating capacity at Lavrion. It also won the right to modernise 1,600 MW of installed capacity.
Now, in theory at least, the new electricity bills mark the end of the union's silent war on deregulation. Although GENOP-DEI managed to scale back the amount of power private generators will purchase the licenses for in this round, from 2,000 Megawatts to 1,300 MW, this is primarily a victory for the private sector.
DEI will be barred from building new capacity for four years, while three or four private gas-fired plants are constructed and come on line. More important still is that the grid operator, DESMIE, will be made independent from DEI. This is crucial because DESMIE will essentially operate the free market. It will do this by purchasing privately generated power on a daily basis, and by auctioning new licenses to generate power every few years. If DEI, the incumbent generator in competition with new entrants, were to remain in control of DESMIE, the conflict of interest would be sure to create allegations of favouritism, undermining the free market in fact.
Liberalisation now faces a threat from lignite, however. Lignite is a particularly dirty coal that Greece possesses in abundance. (It is the stuff Alexis Zorbas famously spent his patron's money digging for in the eponymous novel by Nikos Kazandzakis). It is the fuel that drove much of Greece's economic expansion in the postwar years. And there is enough of it to burn at today's rates for another fifty years.
DEI has exploited the lignite mines given to it by the state because the fuel came at the mere cost of extraction. Private generators will have to buy their fuel, whether lignite, oil or gas, which places them at an unfair disadvantage. Yet there is no suggestion in the new laws that DEI must even the playing field by paying even a nominal fee for lignite.
Greece's signature on the Kyoto Protocol is providing some counterbalance, however, and could conceivably signal the beginning of the end of the lignite era.
Kyoto has given major industrial plants in signatory countries a ceiling on how many tonnes of carbon they may emit each year into the atmosphere, in the form of CO2 or other greenhouse gases. Beginning January 1 this year, industry must pay for the right to emit above its allowance.
DEI announced in its half-year results that it has incurred new costs of 45 million euros from excess emissions. That is almost certainly an underestimation, but it already amounts to about 12 euros per household. Sooner or later, DEI may begin to think about selling its lignite burning plants to an investor who will convert them to burn other fuels, and exporting its lignite to a non-Kyoto signatory.
As the price of carbon rises (it hovers around $23 a tonne), it introduces an ever-higher overhead to companies that over-pollute. Our hope must be that this will make the economic logic of burning carbon untenable. The addition of local opposition.
(Athens News, 10/14/2005)