Balkan gateway: Greek gas exports save the day as renewables shine at home
Statements at GasStrategies.com: From Dimitris Papakanellou, Partner, Consulting and Ioannis Mitsios, Manager, Consulting, KPMG in Greece
Statements at GasStrategies.com: From Dimitris Papakanellou, Partner, Consulting and...
Greece’s energy mix has seen a drastic change in the past decade with gas and renewables now neck and neck in power generation. What are your own observations on this development? What have been the key drivers behind it?
It is true that during the last decade, significant changes have been observed in the Greek generation mix. According to ADMIE data, the share of natural gas in Greece's power generation increased from 24% in 2013 to 35% in 2022 (even reached 40% in 2021). This indicates a rise in the utilization of natural gas as a fuel source in power generation over the ten-year period. Similarly, the proportion of renewable energy sources experienced a substantial increase from 15% in 2013 to 39% in 2022 (the figures refer to variable renewables – vRES i.e. solar and wind and excludes hydro generation which is at the levels of 8-10% throughout the years).
These observations highlight the significant changes in Greece's energy mix, with a notable shift towards both natural gas and renewable energy sources, substituting, mainly, lignite production.
The increase in natural gas usage can be attributed to factors such as:
- Efforts to diversify energy sources.
- The overall increased efficiency of gas power plants which along with the lower emissions compared to lignite plants have gradually increased their participation in the mix (both criteria along with the low NG commodity prices in the past decade have helped the CCTGs variable cost to be very competitive).
- The availability of natural gas infrastructure (pipelines, LNG terminals).
- The intention for accelerated lignite phase out (as expressed in the national strategy) – despite temporary implementation delays due to the need to reduce dependency on Russian Gas.
The substantial growth in renewable energy generation reflects Greece's commitment to reducing greenhouse gas emissions, enhancing energy security and independence, as well as capitalizing on its renewable energy potential. This growth has been supported by:
- Falling costs of renewable technologies.
- Supportive government policies and incentives.
- The country's significantly untapped wind and solar potential.
The New Democracy party, which is seeking an absolute majority in the 25 June election, has pledged that in six years 80% of power generation in Greece will come from renewables. Is this target too ambitious? What might support or hinder it?
Greece, being an EU Member State, is committed to specific environmental targets for significantly reducing CO2 emissions. Several plans such as the Fit-for-55 and the REPowerEU are representative actions to reduce dependence on fossil fuels and fast forward the green transition.
Power generation is a key sector for the country’s overall effort to reduce its emissions. Even in the 2019 Greek National Energy and Climate Plan (NECP), the target for power generation from RES was at the levels of 60% for 2030 (RES-e). According to the preliminary results of the upcoming draft revised Greek NECP, the projected RES generation in the mix is expected to be at the levels of 80% in 2030, as a result of the European need to become independent from Russian fossil fuels by 2027 and further expand the renewable energy target from 40% to 45% (RES-overall at EU27 level).
To enable such increase, the government will need to:
- Improve institutional framework
Simplify permitting/licensing processes and minimize policy uncertainties is key to reducing uncertainty and attracting investment.
- Enhance Grid Integration
As the share of variable renewables like solar and wind increases, ensuring a stable and reliable grid becomes crucial. Developing grid infrastructure will be essential to handle the intermittent nature of renewable energy sources.
- Increase System Flexibility
As renewables become the dominant source of power generation, ensuring flexibility in the energy system is of major importance. This involves the ability to balance supply and demand through development and integration of energy storage, increased participation of demand-side flexibility through demand response programs as well as expansion of interconnections with other countries.
When it comes to gas, a third of the volumes Greece imported in 2022 still came from Russia. If these volumes were disrupted or stopped completely, they’d leave a big gap in Greece’s gas supply. Would the Revithoussa and Alexandroupolis LNG terminals be enough to help replace these volumes? Would a third terminal be needed, and would having to seek volumes in the spot market (if long-term agreements are not made by Greek buyers) be a problem?
For the year 2022, the total demand for natural gas (incl. exports) was 86 TWh (8.8 bcm), with one third of it stemming from Russia. In case of loss of Russia’s supply, the missing 30 TWh, could be replaced from system’s existing infrastructure, namely the LNG terminal of Revithousa with the FSRU of Alexandroupoli which is expected to be operational by the end of 2023/early 2024. Revithousa alone supplied ~4 bcm in 2022 from a total technical capability of 7bcm and Alexandroupoli is estimated at 5.5bcm.
Natural gas quantities expect to rise in the future, peaking at year 2029 at ~13 bcm according to DESFA’s 10-year demand forecast. This is attributed to increased exports because of the infrastructure’s expansion. The 2 prementioned LNG terminals can fulfill the future NG demand however two additional FSRU have already been announced:
- Elpedison’s FSRU which is at the final investment decision and is expected to become operational by the end of 2025.
- MORES’ FSRU near Corinth (Peloponnese) with unknown expected operating date.
The latter 2 FSRUs although are not technically needed for the independence of Russian gas, will further enhance the country’s infrastructure, increase competition and further expand the exporting potential.
Greek power generation has been pretty rangebound since 2013, averaging at 44 TWh/year according to ADMIE. Are you aware of any forecasts for power generation in Greece in the coming 5-10 years? If they’re upward, what will drive them? (For example, the electrification of mobility and transport?)
According to the preliminary results of the upcoming draft revised Greek NECP, the projected net generation is expected at the levels of 60TWh in 2028 and 70TWh in 2033. Generation capacity is expected to increase by approx. 70% in 2035 compared to 2022, mainly driven by the integration of RES.
The key drivers for the increase in electricity consumption are the electrification of the transport sector (transition toward electric vehicles) – with the estimated % of EV new car sales climbing to 32% in 2030, the electrification of the residential sector’s heating (heat pumps are expected to gradually substitute fossil fuels for heating – expected to represent 20% and 67% in residential and tertiary buildings respectively by 2030), as well as the uptake of green hydrogen (especially post 2030) which will also lead to a strong increase in electricity demand.
Finally, what is – in your opinion – a likely energy/power mix for Greece by 2030-40? Will Greece finally shake off lignite this decade?
RES are expected to dominate the future power mix in Greece with an expected share of 80-95% in 2030 and 2040 respectively (subject of course to the conditions outlined above – especially sufficient interconnections to ensure system flexibility & security). According to the 2019 Greek NECP (but also the revised NECP which is expected), Greece has committed of putting a complete end to the use of lignite for power generation in Greece by 2028. Finally, gas generation is expected to play a key role not only as a transitional fuel but also for providing flexibility services to the system.
KPMG in Greece