A new set of
retroactive measures, a so-called "new deal" that applies to all
renewable energy systems (RES), was announced on Friday by the Greek Ministry
of Environment, Energy and Climate Change (YPEKA). Of all RES plants, solar PV
installations face the biggest plunge.
The new measures ask solar photovoltaic energy producers to contribute 35% of
their 2013 income to the Greek electricity market operator LAGIE. The intention
is to plug a €700 million gap in LAGIE's fund used, which is used to pay
renewable energy producers in Greece. The country has promised its
international lenders - the European Union, the European Central Bank and the
International Monetary Fund – that it will completely eliminate LAGIE's fund
deficit by the end of 2014.
While the same measures also apply to other renewable power producers, they are
currently only required though to contribute 10% of their 2013 income to the
LAGIE fund, with one exception: rooftop solar PV installations are exempted
completely from this measure.
Retroactive FIT cuts
The second measure introduced by YPEKA regards the drastic reduction of FITs
for operational RES plants. Again, solar PV installations face the sharpest
reductions, which on average reach 30% of the initial tariffs. Retroactive FIT
cuts also apply to rooftop installations.
A smoother FIT reduction, around 20% on average, applies to smaller PV projects
up to 20 kW each that are not installed on buildings, and to those projects
owned by farmers should they not exceed 100 kW each.
Other renewable energy systems such as wind and hydro projects have been
instructed to take a much smaller FIT reduction of around 5-6% on average.
Reductions for solar PV FITs have taken into account a number of factors, such
as the technology used, the time of project development, the cost of the
installation, and even the location (specifically differentiating between
projects in mainland Greece and in the smaller electricity grids of the many
Greek islands). A critical factor also taken into account is whether a RES
project has received any additional form of aid (e.g direct subsidy, tax
exemption). FITs for projects receiving such aids face even sharper cuts.
The ministry believes the new tariffs will close the LAGIE RES fund deficit and
allow it to remain at zero levels until about 2020/2025. The new tariffs are
also significantly higher than what most investors had feared last summer, when
the "new deal" news first broke.
Extension of power purchase agreements (PPA)
To make up for the lower FITs, YPEKA allows renewable power producers to extend
their PPA with LAGIE by five years.
Specifically, after the end of the current PPAs, all RES plants that this
January had been operating for less than 12 years are given two options: to
sell the generated power to the energy market and according to the market
rules; or to sell the energy they produce to the grid at a set price of
€80/MWh.
The second
option obliges the grid to prioritize the purchase of power produced by RES,
for the given €80/MWh price and subject to an annual amount of energy that is
capped according to the installed capacity and the efficiency of the plant.
Solar PV market: open for business
Last but not least, YPEKA's new bill does bring some good news, too. Upon the
approval of the new bill by the Greek Parliament, Greece's Regulatory Energy
Agency (RAE) will again begin receiving new applications for the installation
of solar PV systems.
RAE had stopped receiving applications for producer licenses and connection
requests in August 2012. The suspension of new applications for PV systems and
of the approval process for pending applications was recently extended until
the end of 2014, but YPEKA aims to end this, albeit under a new system.
Thus, YPEKA has now set an upper limit for RES capacity to be installed per
year under the FIT system. For solar PV specifically, the limit is set at 200 MW
per year until 2020. The new measures furthermore allow for the new capacity to
be selected by tenders.
YPEKA holds the right to modify the limits for the new RES capacity to be
installed according to the energy system's needs, the cost of each technology,
and other factors.
Towards rational investment returns
Apart from eliminating the RES fund deficit, YPEKA Deputy Minister Asimakis
Papageorgiou said the new retroactive measures also aim to reduce the cost of
electricity and to stir the projects' internal rates of return (IRR) so that
all RES power producers have similar investment returns.
Such an argument is not new. In a recent letter to the Greek energy regulator
RAE, the deputy minister had written that in Europe, PV projects' investment
returns are around 8% to 9%. In Greece, he added, there were cases where the
return on the solar PV investments started at 36% and rose much higher.
Rationalization of the investment returns in the Greek solar PV market was
necessary, he argued.
Meanwhile, in a recent European Union document regarding Europe's climate and
energy trends in 2030, the European Commission says: "Support provided to
RES [in Greece] led to overcompensation, and could not be maintained over time.
Ongoing reforms need to be pursued to ensure that RES support is provided in a
budget-neutral manner as of 2014. At the same time, it must be provided in a
cost-effective manner to avoid placing excessive burden on consumers."
Critics argue the recent "new deal" measures are rather aiming to
correct last year’s Greek policies' patchwork. Overcompensation, they add, and
high returns beyond the European levels would have been avoided with a more
careful and considerable public policy planning.
Consequently, the Hellenic Association of Photovoltaic Energy Producers' (SPEF)
response to the new measures does not come as a surprise. The proposed bill, SPEF
says, appears to be in principle against the country's legal framework and
opposes the freedom of contract and trade. The current mess in the solar PV
sector, SPEF argues, is the result of recent governmental policies. But since a
resolution of the current problems is absolutely necessary, SPEF endorses the
measures, seeking major changes.
One of those changes is the new bill to force banks to accept losses by cutting
the interest rates to loans given to RES investors. SPEF also asks for the PPAs
to extend to 8.5 years and for a higher price, while it rejects the initiation
of the application procedure saying the situation is not yet smooth enough to
allow new installations.
On the contrary, the Hellenic Association of Photovoltaic Companies (HELAPCO)
fully endorses the re-opening of the PV market since the "applications
suspension has led to a loss of more than 75% of jobs in the industry."
Nevertheless,
this week finds solar PV investors in Greece
counting their losses, which for some (older) projects might climb up to over
50% FIT reduction. The good news is that even after the new retroactive cuts
the investment rate for solar PV installations in Greece remains often higher
than the European average. Therefore, the fate of many projects will be decided
by the investors' balance sheets.
Public
consultation on the new bill is set to cease on Thursday 13 March when the
government will try to pass it through parliament. By the end of January
2014, Greece's cumulative PV capacity stood at around 2.6 GW, of which about 1 GW
was installed in 2013.
(www.pv-magazine.com,
11 March, 2014)