GIG: Energy represents one of Greece’s strongest industries. What is the outlook for the sector right now?
Hatzidakis: At the UN Climate Change Summit in New York last autumn, Prime Minister Kyriakos Mitsotakis sent a very clear message that this government is strongly committed to the Paris Agreement and to a climate-neutral EU by 2050. This strong commitment translates into concrete measures which have been incorporated into Greece’s National Energy and Climate Plan (NECP), which was finalised at the end of 2019 and submitted to the European Commission. At the same time, attracting long-term investments in the energy sector is another strategic priority for the government and for me personally. In this context, our priorities are clear: we are aiming for a fast decarbonisation of our country, which makes sense not only for obvious environmental reasons but also for economic ones; PPC has the monopoly on lignite power production and the evolution of CO2 emissions prices has rendered the operation of the company’s lignite units highly loss-making.
Having said that, we plan to close all lignite power plants in operation by 2023 (only one lignite unit will remain operational as such until 2028) and increase the share of RES within Greece´s energy-mix up to 35% by 2030. Those two targets, which are cornerstones of the NECP, will create a chain effect, opening vast investment opportunities in several fields: from the National Just Transition Plan that we are developing for the socially fair transition of the lignite regions of West Macedonia and Megalopolis in the Peloponnese, to the installation of new RES stations and storage solutions for renewable energy.
Investment opportunities can also be found in the development of electromobility (another sector where Greece is speeding up in order to close the gap with other EU countries) and the promotion of energy efficiency policies. We estimate that the implementation of the policies described in the NECP can energise investments of €44 billion and create up to 60,000 jobs by 2030.
The “greening” of the energy sector goes hand in hand with the liberalisation of the electricity market, in order to create a level playing field for all players for the benefit of end users. Last but not least, the implementation of the EU target model by June 2020 will open up the “invisible border” separating the Greek electricity market from the rest of Europe.
GIG: What message do you have for foreign investors concerned about red tape and Greece’s large number of laws holding up investment plans?
Hatzidakis: Our message is loud and clear: we have the political will, tools, and methods to accelerate the implementation of necessary reforms and introduce new ones. We already have taken important initiatives to create a truly business- and investment-friendly environment. At the end of November 2019, the government passed a law for the modernisation of The Public Power Corporation (PPC), which gives the company leeway for procurement procedures and the management of its human resources, allowing it to be more competitive. Furthermore, it sets forth the roadmap for the privatisation of The Public Gas Corporation of Greece (DEPA). Another prominent example is another law voted in October of 2019, appropriately titled “Investing in Greece”, which simplifies business licensing – including environmental licensing.
Specifically for RES, we will present regulatory and legislative measures in “waves”. First, we are simplifying administrative procedures by eliminating duplication, cutting down the number of documents required, etc. The first semester of 2020 will see the second legislative package of further licensing simplification. Our ‘to do list’ also includes an improved Spatial Planning framework for Renewables.
GIG: Privatisations are getting mixed results. A majority stake in the natural gas transmission operator DESFA was sold earlier this year, but Hellenic Petroleum failed to attract any binding bids. What’s next on the slate?
Hatzidakis: We are pursuing an ambitious privatisation plan in the energy sector. We want to attract private capital in the natural gas and electricity distribution networks in order to modernise them and make them more efficient. To this end, the privatisation of DEPA has been launched in a fully unbundled way. The state’s participation in the commercial operations of DEPA and the gas distribution network will be sold off separately.In November 2019, we launched the tender process for the sale of the infrastructure branch (DEPA Infrastructure SA), and we are already observing significant interest from potential investors. The tender process for the commercial operations (DEPA Commercial SA) followed suit at the end of January 2019. During 2020, we will initialise the process for the partial privatisation (49%) of HEDNO, the PPC-owned operator of the electricity distribution network. It is a structural measure that will give a much-needed liquidity boost to PPC while paving the way for the digitalisation of the electricity network and new investments in projects like smart meters. At the same time, the Hellenic Republic Asset Development Fund (HRADF) is reviewing the best course of action for the stake held in Hellenic Petroleum. Furthermore, we should not forget that while we are not looking for a strategic investor for PPC right now, this chapter may well open again in the not-too-distant future once the actions we have already undertaken – and the ones that are on the cards – start to bear fruit, and the long term viability and growth prospects for the company have been fully restored. PPC’s five-year business plan, which was announced at the end of December 2019, is a very significant step towards this direction.
GIG: After years of delays, Greece has been picking up the pace on RES. What targets have you set out regarding the future energy mix? What kind of growth do you see in the segment in coming years?
Hatzidakis: You are right, indeed. For many years we were lagging behind, and now we have to run. We have revised upwards the target tor RES penetration in the energy mix to 35% (from 31% before) by 2030. This corresponds, roughly, to 65% of our electricity production relying on renewable energy, which is now cost-competitive and sometimes cheaper than fossil fuels. We are talking about the installation of approximately 9000 MW of RES capacity. It is estimated that the amount of investments needed to reach the target for electricity production from RES by 2030 is in the area of €9 billion.
However, in order to accelerate the pace of investments in the sector, we need to simplify administrative and licensing procedures. We are acutely aware of the fact that licensing today can take up to 10-12 years, when the European average is 2 years. We are working intensively to close this gap, as I have already explained. Another key aspect of our RES policy concerns the development of interconnections for the supply of electricity to the islands. In the same context, we are also re-evaluating the role of hybrid projects and energy storage, as well as how to efficiently promote the development of large projects over 250 MW and promote tools for repowering and redesign.
Given the position of Greece on the map, you can see that the country has an obvious advantage – both as regards the photovoltaics and the wind turbines. We want to exploit this advantage, and I am certain that this government will surprise the markets and investors in a positive way!
GIG: There is a lot of interest in tapping Greece’s hydrocarbon reserves. When can we expect solid results?
Hatzidakis: In autumn 2019 we ratified the contracts for the licensing of exploration rights for four new blocs, two in the Ionian Sea and two off the northwestern coast of Crete. So, we currently have 13 blocs where hydrocarbon research can be conducted. Among the players that have obtained licenses are international groups like ExxonMobil, Total, Repsol, as well as Greek players, namely Hellenic Petroleum and Energean. I think we have a sound basis to proceed, taking into account the best environmental standards. It is too early to speculate about results, but certainly the latest round of interest from big companies has given a renewed impetus to the sector.
GIG: Which of the pipelines being built in Greece – or scheduled for construction – do you do you believe is the most crucial for the country? Which will potentially contribute most to the Greek economy?
Hatzidakis: Of the projects currently under construction, the one with the highest impact on the Greek economy and the country’s energy security is the Trans Adriatic Pipeline. It is through TAP that Greece – via DEPA – will get 1 billion cubic metres/year of natural gas from the Caspian Sea, thereby significantly improving the diversification of its energy supply. TAP has created thousands of jobs during its construction phase, while also investing tens of millions of euros in several projects that improved lives in the local communities. TAP is almost complete, and we are very much looking forward to the commercial commissioning of the pipeline.
Another important gas pipeline which has entered the construction phase is smaller but no less significant. I’m referring to the Interconnector Greece-Bulgaria (IGB), which will allow Bulgaria also to diversify its import sources and routes while opening a new entry point for the Greek natural gas system. IGB is expected to be commissioned soon and is also very important in terms of the ongoing effort to strengthen the geostrategic position of Greece and establish its role as a regional energy hub. In this context, the FSRU station (i.e. floating unit for the reception, storage, and re-gasification of LNG) in Alexandroupoli, which will be linked to the TAP and to the IGB, should also be mentioned, as should the underground gas storage facility in Kavala.
GIG: Following your signing of the final agreement on the EastMed pipeline project in early January 2019 along with your counterparts Cyprus and Israel, the project has been touted as a potential ‘game changer’ for the economies and geopolitics in the region. However, many hurdles lie ahead – technical, geopolitical, and financial. What are your expectations? Do you expect the project be completed by 2025?
Hatzidakis: We are fully aware of the project’s many challenges, but we are optimistic that the project will emerge as a strategic game changer for the region and the EU’s energy security as it offers the EU simultaneous diversification of gas import sources and routes. The intergovernmental agreement that we signed in early January will be ratified by the Greek parliament in the coming months, and then we will continue with the implementation of the main feasibility study. EastMed is certainly a very ambitious project, but the commitment of Greece, Cyprus, and Israel to promote our cooperation is strong and stable. The signature of the agreement was not just a political move. It will be followed by business initiatives in order for the pipeline to proceed.