Prospective investments deriving from Greece’s Energy and Climate Plan between 2020 and 2030
Target date for closure of Greece’s lignite-fuelled power plants
Amount of energy to come from RES by 2030
Capacity of wind parks installed in 2019
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Greece has one of the fastest-emerging energy markets in the world.
From the fertile plains in the north to the sunny and windswept islands of the south, the country is developing as an important regional energy hub at the crossroads of Europe, Asia, and Africa.
Billions of euros in new projects – from pipelines and wind farms to power transmission – are in the planning stages or else coming online.
Situated between vast hydrocarbon reserves to the east, and Europe’s equally vast industrial market to the west, Greece is a key player in the long-term energy security strategy of the European Union.
Years in the planning, the EU’s so-called Southern Gas Corridor – a long term initiative to diversify western Europe’s natural gas supplies – is finally becoming a reality. At the same time, the prospect of new oil and gas fields in the eastern Mediterranean is opening new prospects in exploration, production, and transmission that were only dreamt of a few years ago.
Investors have taken notice. Three major gas pipelines, an array of subsea and underground electrical interconnections, and a new natural gas power plant are either in operation, in the works, or nearing completion. Those projects are complemented by a raft of overhauls in Greece’s energy sector ranging from the privatisation of its natural gas company and its energy transmission network, to the closure of its coal mines and power plants. Meanwhile, investments in renewable energy are also taking off.
Kostis Hatzidakis, Minister of Environment and Energy, says Greece is stepping up efforts to bring more renewable energy projects to fruition, attract energy investments, and play a greater regional role.
All that is part of the plan, literally. Greece recently updated its long-term energy strategy: The National Energy and Climate Plan. Submitted to the EU in December 2019, this plan outlines prospective investments totalling more than €44 billion in energy and environmental projects over the next decade, with the creation of up to 60,000 jobs.
Among the most important projects is the €4.5 billion Trans Adriatic Pipeline (TAP) being built across Greece, Albania, and onwards to Italy that will bring natural gas from Azerbaijan to Europe in 2020. Construction of the Greek portion of the project, stretching from the Turkish border in the east to the Albanian border in the west, has been completed, and testing has started ahead of planned gas deliveries to Europe in October 2020. The project has invested more than €1.4 billion in Greece alone and represents one of the largest foreign direct investments currently being implemented in Greece. To date, the TAP has created more than 3,500 jobs.
For the most part, the project has run smoothly. The pipeline is more than 90% complete in all three of its host countries and is on schedule. But it still faced a common peril confronting many building projects in Greece, where modernity often collides with antiquity. In the process of building the pipeline, more than 400 archaeological excavations and investigations were performed in northern Greece to explore unknown sites that were unearthed during construction. Still, a major milestone was reached in late 2018 when the TAP pipeline was successfully connected with the recently inaugurated Trans Anatolian Natural Gas Pipeline (TANAP) in Turkey.
“The overall progress of the TAP project in all three of its host countries (…) has exceeded the 90% mark. In Greece, we’ve also completed the stage of mechanical construction and the testing phase has begun,” says Jonathan Collingwood, TAP Director of Corporate Services and Greece Country Office.
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“TAP is a project of major significance for its host countries, for the region of southeastern Europe, and for the entire continent. TAP contributes to the diversification and security of energy supply, as well as decarbonisation. Furthermore, new gas supplies will increase gas-to-gas competition, offering a more competitive environment for industry and end-consumers,” he adds.
Also, in 2018, the European Commission greenlit the construction of the Greece-Bulgaria Interconnector (IGB), a natural gas pipeline that will help supply Bulgaria with gas from the TAP, as well as from other sources like a new natural gas facility near Athens and the one soon to be built in northern Greece. These projects will end the country’s almost complete reliance on Russian gas. In the spring of 2018, the project manager for the interconnector awarded a €133.85 million building contract to Greek construction firm J&P AVAX to build the 182 km-long pipeline. The IGB will also extend to Serbia and Romania.
“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,” says Kostis Hatzidakis, Greece’s Minister of Environment and Energy. “It is through TAP that Greece – via DEPA [the state gas utility] – will get 1 billion cubic metres/year of natural gas from the Caspian Sea, thereby significantly improving the diversification of its energy supply,” he adds.
Located alongside the two pipeline projects, Greek utility company Gastrade is building a major energy project off the coast of the northern city of Alexandroupolis. It comprises a €370 million offshore floating LNG storage and regasification unit (FSRU) and a suited transmission pipeline designed to connect the floating unit to Greece’s national transmission system. It is scheduled to begin commercial operation at the start of 2022.
“The project is progressing very well in all workstreams. It has secured all required decrees, licences, and permissions from the relevant national authorities,” says Konstantinos Spyropoulos, Managing Director of Gastrade.
“It is evident that the LNG Alexandroupolis is a project of strategic importance for Greece and southeastern Europe. It creates a new energy gateway, enhances the role of Greece, and offers diversification of sources and routes of supply to Bulgaria, North Macedonia, Romania, Serbia, and the wider region, enhancing the security of supply in the area,” adds Spyropoulos.
In the meantime, the emergence of huge oil and gas reserves in the eastern Mediterranean is also creating new opportunities. A series of bonanza gas finds in the waters off Egypt, Israel, and Cyprus since 2010 has raised exploration prospects off the coast of Greece, too. As it is, nine new offshore concessions to the west and southwest of Greece are in various stages of exploration, as well as another four onshore blocks in the western part of the country. More immediately, those gas finds are already redrawing the energy map of the wider region.
Greece, along with the governments of Cyprus, Israel and Italy, is backing an ambitious 2,000 km-long gas pipeline connecting the eastern Mediterranean with Europe. In early January 2020, the energy ministers of Greece, Israel, and Cyprus signed the final agreement on the pipeline in Athens. While Italy still needs to sign off on the agreement, targets have been set for a final investment decision to be made by 2022 and for the pipeline to be completed by 2025.
The EastMed pipeline, as it is called, still faces some hurdles – technical, political, and financial. However, the emergence of regional gas reserves is drawing Greece, Cyprus, and Israel into an ever-closer energy and security alliance.
Greece’s power grid operator, the Independent Power Transmission Operator (IPTO), is rolling forward another strategic project to connect Crete with Attica via a submarine power cable. Worth €1 billion and set to be electrified by 2023,the Ariadne Interconnection will be one of the largest infrastructure projects in Greece’s history. Once completed, there are plans to eventually connect the undersea cable to the Cypriot and Israeli electricity grids, allowing Israel to export surplus electricity and, in the process, end the energy isolation of Cyprus.
“Ariadne Interconnection, the subsidiary special purpose vehicle of IPTO that will finance and construct the project, proceeds in a timely manner with the two tenders and the respective contracts to be signed in the first quarter of 2020,” says IPTO’s CEO, Manos Manousakis.
Manos Manousakis, Chairman and CEO of the Independent Power Transmission Operator (IPTO), says the national power grid operator is playing a key role in the country’s fast-changing energy market, with a €5 billion investment plan for the next decade for a cheaper, cleaner, and more reliable electricity supply.
Separately, in 2019 IPTO signed a €178 million long-term loan with the European Investment Bank to help finance another €330 million project to connect Crete with the Greek mainland through a medium-capacity cable linking the island with the Peloponnese. Upon electrification, which is scheduled for 2020, the company’s CEO highlights it will be the longest submarine alternating current (AC) interconnection in the world.
At home, Greece’s energy sector is rapidly evolving in a bid to attract investments and liberalise the market. A series of privatisations has already taken place, while others are in process. In the last three years, Greece has sold a 24% stake in IPTO to China State Grid for €320 million and a 66% stake in the state-owned natural gas transmission operator DESFA for €535 million to an international consortium of energy companies comprising Italy’s Snam, Spain’s Enagas, and Belgium’s Fluxys.
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Despite a number of hiccups, some of the biggest privatisation deals still lie ahead. Hellenic Petroleum (ELPE), the state-controlled owner of three Greek refineries, is due to be sold off. So too is DEPA, the country’s state gas utility. The gas company is set to be divided into DEPA Commercial for its wholesale and retail activities, and DEPA Infrastructure for its distribution network to end-users. DEPA’s participation in international pipeline projects such as IGI Poseidon, IGB and EastMed will remain under state control.
In December 2019, a tender was launched for the sale of DEPA Infrastructure, and in January 2020 the tender for DEPA Commercial followed suit. It is expected that the submission of final offers for both tenders will be completed by the end of Q1 2020.
In the meantime, an overhaul of Public Power Corporation (PPC), Greece’s national power company, is in the works, with targets set on doubling core group profitability in 2020 and boosting competition in the sector. The plan, which was approved in December 2020, includes switching off the energy giant’s operating coal-fired power plants by 2023, expanding into renewables and partially privatising HEDNO, the PPC-owned operator of the electricity distribution network.
The conservative government has pledged to close all 14 of the country’s lignite-fuelled plants by 2028, with closures starting in 2020, and replace the majority of them with renewable energy sources. This will help offset the fact that the Greek energy sector is still largely dependent on an environmentally unfriendly mix of fossil fuels, most of which are imported, along with cleaner natural gas and domestically mined lignite.
Indeed, RES such as hydro-power, wind, solar, and biomass are playing a growing role in providing cleaner energy.
And this is at a time when more than half of Greece’s energy requirements depend on imported petroleum products, compared with an EU average of about one third. These petroleum products are not only used in the transport sector, but they are also used to generate electricity.
Meanwhile, another issue that needs to be addressed is the many Greek islands that still lack undersea power cable connections to the mainland and are forced to meet most of their electricity needs from inefficient and expensive diesel generators.
Petros Tzannetakis, Deputy CEO of Motor Oil, says the independent refiner’s flexibility and refinery configuration allow it to produce high value-added products for international clients and to minimise environmental impact.
The good news is that Greece’s energy mix is changing, getting cleaner. With its sunny climate and windy seas, Greece is prime real estate for renewable energy investments – something the country badly needs.Under the EU’s 10-year-old renewable energy strategy, 20% of bloc-wide energy consumption must be met from renewable sources by 2020 according to an EC Directive on Renewable Energy. A new, revised strategy raises that target to an ambitious 35% by 2030.
ELPE is among those upping investments in green power. “We expect the pursuit of climate goals, coupled with increasing competitiveness of renewables and lower cost of capital in Greece, to drive large investments in photovoltaic and wind in the next five years,” says George Alexopoulos, ELPE’s General Manager of Group Strategic Planning and New Activities and Executive Member of the Board of Directors.
“Hellenic Petroleum Renewable Energy Sources, our wholly-owned renewables subsidiary, currently has 26 megawatts (MW) in operation and circa 600 MW at various stages of development. We have set an intermediate target of 300 MW installed capacity, mainly photovoltaic and wind, through development of our existing portfolio and targeted acquisitions,” he adds.
According to the latest data, Greece is on track to meet its 2020 target. But it will have to invest heavily, in both RES and new energy infrastructure, to reach the 2030 goals and reduce its current heavy reliance on coal and oil for power production.
Fortunately, a series of regulatory and legislative changes over the last few years, with more expected, are paving the way. The Investing in Greece law, passed by parliament in October 2019, simplifies business licensing procedures, while specific measures to enable investments in RES are expected too.
“We are simplifying administrative procedures by eliminating duplication, cutting down the number of documents required,” explains Minister Hatzidakis. “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,” he adds. And investors are heading to the call.
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Over the next decade, €9 billion is expected to be invested in renewable energy projects around Greece, which corresponds to the installation of an estimated 9 gigawatts (GW), or 9,000 megawatts (MW). To put things into perspective, 1 GW of installed capacity is enough to simultaneously meet the energy demands of approximately half a million homes, or the equivalent power generated by two coal power plants.
Under its long-term energy strategy, the country is targeting 5.2 GW of installed wind capacity by 2025 and 7 GW by 2030. These totals are up from about 3.6 GW of total installed capacity in 2019, according to the Hellenic Wind Energy Association (HWEA). Photovoltaic power is set to rise from an estimated 3 GW in 2020 to 7.7 GW by 2030.
For the time being, wind projects in particular have taken the lead. According to HWEA data, Greek wind energy capacity rose about 26% in 2019, through the addition of 727.5 MW, with the bulk of wind parks located in Central Greece, the Peloponnese, and Eastern Macedonia and Thrace.
Foreign companies have been among those at the forefront of these energy projects, and some are eyeing major investments. One example: the Chinese Shenhua Group has entered into a cooperation agreement with Greece’s Copelouzos Group to develop renewable energy projects, as well as upgrading older coal-fired power units, as part of a €3 billion investment plan.
Norway’s giant state energy company, Equinor, one of the largest energy companies in the world, expressed particular interest, as Greece moves ahead with new regulations in 2020, in a pilot project that will allow floating offshore wind parks to be built in its windy seas.
In October 2019, Enel Green Power Hellas, the Greek subsidiary of Italian energy company Enel S.p.A., inaugurated a windfarm complex on the island of Evia with an overall capacity of more than 154 MW. The €300 million investment is the largest wind power facility in Greece.
But Greece’s corporates are also leading the way in the country’s energy investment drive. In October 2019, Mytilineos Group laid the foundation stone for what is set to be the largest natural gas-fired combined cycle power station in Europe. The €300 million investment in central Greece will raise the company’s production capacity to more than 2,000 MW, excluding renewables.
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