GIG: You took the helm of the Regulatory Authority for Energy (RAE) in July last year, coinciding with a time of profound change in Greece’s energy sector. What are your goals and priorities?
Dagoumas: Since we assumed our responsibilities in July 2020, we have worked very hard to complete several legislative and regulatory changes, some of them prepared by the previous administration. We have managed to expedite the decision-making process, while being very active and efficient, and this has led to the removal of regulatory barriers from the market.
Our greatest challenge, so far, has been the implementation of the target model, which suffered a great delay in our country. Greece implemented the target model in November 2020 although the process was initially designed in 2011, a period during which I was working at the Hellenic Energy Exchange. As the president of RAE, we made more than 60 decisions to complete this process in a very short time. While this was the final stage of the implementation of the target model, its completion is the reflection of the work of many people over several years, whom I would like to congratulate. It is truly a collaborative achievement.
In terms of our priorities, we don’t want to be pathetic observers of the European energy markets’ evolution. Rather, we aim to be ambitious and work actively towards offsetting historical delays in the integration process of the Hellenic wholesale market with European markets.
We completed the day-ahead market coupling with Italy in December 2020, which was followed by the day-head market coupling with Bulgaria in May 2021. RAE’s decision on the go-live date of intraday market coupled operation (CRIDA) is expected in September 2021, while the market’s integration with the European continuous intra-day market through the XBID (cross border intraday) project is expected in February 2022. We plan to facilitate the integration process with European Platforms MARI (Manually Activated Reserves Initiative) and PICASSO (Platform for the International Coordination of Automated Frequency Restoration and Stable System Operation).
For this process, the role of the Hellenic Energy Exchange and the Independent Transmission System Operator is crucial. Therefore, we are cooperating to ensure we do not suffer any delays. We are strongly committed towards integrating with European markets, having the ambition to gradually become an active participant in European decision making.
We are grateful for the high quality of human capital within the regulator. Our staff is acknowledged for its professionalism and are welcome in international institutions. In fact, I was also personally involved in the European market design, cooperating with ENTSO-E as a University Professor. I strongly believe that a more efficient management of our resources can enable us to play a more active role. But a perquisite to achieve this is integrating in a fast and efficient manner to ensure that the changes that are taking place in Europe also happen in Greece.
GIG: A digital licensing process was developed by RAE in a bid to reduce the time required for the issuance of the first RES license down to 30 days. What kind of response has this received from prospective applicants?
Dagoumas: One of our priorities was to complete the IT platform for the digital licensing of renewables. This was done in a very short time span, and we managed to review 1,211 applications that had been filed in the past and to approve about 21.5 GW of renewables in approximately one month, at the end of 2020. It was an important achievement.
Since then, we have proceeded with several licensing rounds. A reflection of the immense interest in Greece’s renewable energy sector are the 1,865 applications we received for about 45 GW of renewables in December 2020, after which we received 479 applications for an additional 9 GW in February 2021. Then, in June 2021, we received 743 applications for 17.5GW.
We have already evaluated the applications for December 2020 and for February 2021 and issued 1,570 licenses corresponding to 34.5GW. In terms of production licenses, to date, we have issues 4,952 for 78.6GW. Most of these production licenses are for PV projects with them totalling 2,426 licenses for 46.1GW. On the other hand, 1,770 licenses have been issued for wind energy projects totalling 29.7 GW.
These volumes are handled through our IT system, which means there is an enormous effort being undertaken by the regulator. However, we manage to respond in a very short timeframe. It is important to note that all these investment projects stand in strong competition with each other, with only about 10%-20% of them being likely to be implemented.
GIG: The Ministry of Energy has set out to significantly reduce the licensing period for RES projects, acknowledging that these lengthy procedures are one of the biggest barriers to deepening investments in the sector. What are the biggest challenges that need to be overcome by RAE to simplify RES licensing?
Dagoumas: From a technical perspective, we plan to integrate all the RES licensing into one registry to ensure a better organisational system. However, in terms of licensing, RAE’s part of the equation has been completed. Our role in this respect is clear and has been simplified, according to the recent and applicable energy law.
The criteria we check have been standardised and simplified to enable their assessment through an IT system, which is what enabled the regulator, from a practical perspective, to evaluate all the applications I previously mentioned.
Now, this concerns the first step that is taken by all prospecting investors. These investors then move on to the next steps with their application for additional licenses that are required to complete an actual RES investment. Investors can participate in RES auctions or proceed with merchant Power Purchasing Agreements (PPAs). The role of transmission and network operators is crucial, as the provision of connection terms is important for different RES projects.
The Ministry of Environment and Energy is working hard to complete the integration of different steps in RES-project licensing, which will eventually lead the licensing process to be fully integrated within RAE’s system. This will facilitate the licensing procedure, making it more effective and transparent for investors.
By integrating additional processes within our system, we will be able to provide formal feedback to investors regarding environmental or real estate issues, for example. In fact, we are elaborating studies, in cooperation with the ministry, regarding spatial planning that help in the identification of the geographic areas that can support renewable projects, eliminating licensing risks.
GIG: Greece’s energy transition is attracting investor interest in areas as varied as energy storage and offshore wind through to floating PV or hydrogen posing important regulatory challenges, in some cases, due to the lack of an applicable regulatory framework. How are you tackling this? When do you expect the necessary frameworks to be in place?
Dagoumas: That’s true. The energy transition affects these three technologies: energy storage, offshore wind, and hydrogen. With respect to energy storage, we have already provided a first round of licenses. We are working in close cooperation with the ministry and other stakeholders to update the regulatory framework as well as the supporting framework. This will concern the different stages of an investment in energy storage, starting from licensing to their participation in the market.
Regarding offshore wind, the Minister recently announced that there will be a new framework in place in upcoming months. For hydrogen, there is also a specific committee in the ministry where the regulator also participates. I must say that we have an excellent cooperation with the ministry and with all the operators: the TSOs, DSOs, and the Hellenic Energy Exchange, cultivating a cooperative culture that facilitates the energy transition. We try to be forward looking, solution-based, and to focus on the step-by-step implementation of feasible reforms.
GIG: Wholesale electricity prices in Greece fell below the European average in January of this year for the first time. What is the strategy? What is your assessment of the functioning of the new energy markets?
Dagoumas: Greece’s day-ahead wholesale electricity price became one of the cheapest in Europe in January 2021, for the first time ever, just two and a half months after the target model’s implementation.
Based on the first months of this new model there is evidence of market coupling bearing in mind that Greece’s wholesale electricity price is close to the European average. As a reference, Greece’s electricity price is about €5/MWh cheaper than Italy’s.
However, we intervened in the balancing market and made two decisions aimed at protecting competition in the first period of the target model’s implementation, especially with respect to smaller suppliers: Firstly, non-technically feasible bids below the technical minimum will not be accepted and, secondly, negative bids are not temporarily allowed for manual Frequency Restoration Reserve (mFRR) down products. We want to support competition and enable the participation of more players in the market.
All institutions in Greece’s energy market (Ministry of Environment and Energy, RAE, Hellenic Energy Exchange [HENEX], and the System Operator) made important steps towards integrating the country’s wholesale market with European markets over the past few months, namely by adopting the Target Model in November 2020 and implementing the day-ahead market coupling with Italy and Bulgaria, respectively, in December 2020 and May 2021.
By the end of 2021, HENEX will launch a natural gas trading platform, following excellent cooperation among RAE, HENEX and DESFA. And based on our aspiration to further facilitate this process with new commitments, a new electricity market reform plan will be submitted to the European Commission by the end of July 2021.
This is part of the Greek State’s decision to support a strategic reserve scheme, as well as a potential capacity renumeration scheme in a bid to attract investments facilitated by the country’s rapid delignitisation. This plan will incorporate a roadmap for the enhancement of competition, through full participation of demand response, storage assets, traders, and RES aggregators – across all markets – in addition to facilitating market coupling in the intra-day (X-BID) and balancing platforms (MARI, PICASSO).
Further decisions are likely to follow considering that Greek legislation needs to be adapted to European legislation. Many things have changed in Europe since we started planning our target model in 2014, let alone its approval in 2018. We need to be dynamic and integrate those changes over time, especially Regulation 943/2019 and Directive 944/2019, where the latter is about to be incorporated within national legislation.
GIG: What effects do you expect the new design of the electricity market to have on wholesale and retail electricity markets?
Dagoumas: We radically changed our electricity model after working for about 20 years with a previous model. We plan to fully integrate this new model as soon as possible and enhance any major competition. We plan to provide a clear market reform plan, allowing more participants to be active in the wholesale market, which will help prices to become more competitive and cost-reflecting, while allowing retailers and managers to hedge their risk and adapt to this new environment.
GIG: What message would you like to send to potential investors that are in the process of investing or considering investing in Greece’s renewable energy sector?
Dagoumas: I strongly welcome investors from abroad and believe that effective steps have been taken to create a transparent and safe environment for investors. This includes a stable legislative framework for RES, including both the support mechanism (SA 44666) and the RES auction plan (SA48143, 2018-2020) approved by the European Commission’s Directorate-General for Competition, the monitoring of the viability of the Special RES Account, and the simplification of the RES licencing procedure via the RES digital transformation.
It is important to highlight that €2.5 billion worth of new investments are already under construction within this new environment, with a total capacity of 3,06 GW of solar and wind projects. These projects have derived from 17 RES auctions carried out between 2018-2021 and will be connected to the grid withing the next one to three years.
As the regulator, we guarantee a stable environment through our decisions. Our country is one of the most advantageous concerning RES, particularly with respect to both wind and solar energy. And this clear advantage must be reflected in our electricity prices. While we would be very pleased if we received low bids in the next RES auctions from domestic and international investors, this practically already happened for PV projects in May 2021 when the lowest bid was at €33/MWh, while the weighted average was at €37.6/MWh. Of course, any further reduction will be mainly driven by technological costs and the costs of capital, due to which what is also important is that the price levels secure project implementation on the one hand (with reasonable profit margins) and the achievement of targets on the other.
We are strongly committed to further enhancing the reputation of the regulator by improving our efficiency, removing regulatory barriers, facilitating the liberalisation of the sector, along with the licensing process.