The current distortions in the Greek power market must be urgently addressed, state-controlled utility PPC chief executive Arthur Zervos said.
The current structure of the power market is a “Gordian knot”, he told a conference in Athens yesterday.
“The macroeconomic situation in Greece has brought to surface a set of dysfunctions in the Greek wholesale electricity market,” he said.
The most significant distortion is the “cost plus” mechanism, which was intended to ensure the viability of new thermal power plants. Plants receive their variable costs for plus 10pc for remaining in operation at their technical minimum, violating the normal merit order for plant dispatch.
The system of guaranteed feed-in tariffs for renewable generation is also inconsistent, he said.
The mandatory pool system, introduced in 2003, should be scrapped, he said. PPC advocates allowing bilateral contracts between producers and suppliers, Zervos said.
“It is estimated that this will have a positive effect on retail prices, giving the possibility of concluding long-term contracts between clients [such as large industrial users] and suppliers,” he said.
The increasing share of generation provided by renewable sources provides opportunities and is attracting foreign investment but will also require highly flexible conventional generation to balance out the fluctuations in renewable power.
“That requires the creation and operation of ancillary services market, with mechanisms to ensure adequate compensation for the units that will offer these services,” Zervos said.
Zervos also called for household power prices to be linked to wholesale prices in order to have a fully functioning, liberalised market. The removal of licences from four power suppliers in the retail market for unpaid debts has “highlighted the need for change”, he said.
PPC is the supplier of last resort and is now supplying nearly 100pc of the retail market. But regulated tariffs at which it must supply customers do not recognise the costs incurred by the utility.