Filenews 26 July 2022
By Haris Floudopoulos
The two Greek proposals to provide incentives to industries to reduce consumption but also to establish a new mechanism in the electricity market that will decouple electricity prices from natural gas, will be presented to the Council of Energy Ministers by the competent Minister K. Skrekas.
As Mr. Skrekas stressed when he came to the council, "we will analyze the proposal of the Greek Prime Minister K. Mitsotakis for a new demand reduction mechanism that will give the appropriate incentives to energy-intensive industries to reduce gas consumption. We will also present the Greek proposal for a new pan-European operating model of the electricity market that will better calculate the real cost of electricity, decoupling the price of natural gas from electricity prices and in this way will ensure sustainable prices for small and medium-sized enterprises and households.
According to Bloomberg, the Greek plan foresees that the energy produced from RES, hydroelectric and nuclear will be separated into a tank which will be priced separately from the energy produced from natural gas and other fossil fuels that will be priced in a separate tank. The proposal means that revenue for clean energy will be reduced, reflecting lower production costs. This could ensure lower prices for over 50% of energy given that natural gas accounts for around a third of the energy mix, a figure that will continue to decline as the energy transition accelerates.
According to the Greek proposal, the first tank will supply about two-thirds of the demand at a lower cost while the second tank will cover the rest of the demand, reducing the total cost of electricity. The average cost of electricity generation will be reduced by up to 60% compared to the current market price according to the Greek government's estimate.
The Greek proposal was distributed to member states before the meeting of energy ministers, who are asked to agree on the emergency plan to reduce gas consumption as well as for future EU energy supplies.
Strong message
As Mr. Skrekas stressed while attending the meeting, the council will send a strong message of unity and solidarity in the face of Russian blackmail. "We are confident that we will come up with a regulation that will better serve the needs and specificities of the member states that will help us reduce gas consumption and thus reduce energy dependence on Russian gas," Mr. Skrekas said.
"If we manage to put all the specificities of the member states together, I think we can agree on a regulation that will serve the main objective that is to reduce gas consumption in a way that will not endanger the social cohesion and the production base of Europe and on the other hand reduce energy dependence on Russian gas," Said Mr. Skrekas, expressing the belief that the ministers are in the very close to agreement on 'a very good text'.
The entire letter of the Prime Minister of Greece is as follows:
Dear President von der Leyen,
With this letter I am putting forward to you a proposal to strengthen our energy security for the coming winter and, at the same time, to reduce gas and electricity prices. I believe that it is time to combine our most important asset, European solidarity, with one of the most important levers we have for strengthening energy security: our own consumption. I would like to propose to you a Pan-European mechanism through which industrial consumers will be compensated for the reduction in the use of gas and electricity for the coming winter.
The idea builds on the key work undertaken by the European Commission with the 'Save Gas for a Safe Winter' project. It is an intermediary between the voluntary reduction in demand, which we must all ensure, and the compulsory reduction that may occur in the event of an emergency. This proposal is more likely to lead to a significant response on the part of the industry, as it offers financial incentives, rather than relying on interruptions in the provision of an emergency.
According to the European Commission's estimates, the European Union would be in short supply of 45 billion cubic metres (bcm) if gas flows from Russia were completely stopped. If we could ensure, by September, that a large proportion of this quantity would be covered by strong commitments to reduce consumption, the additional costs arising from the risks perceived by the markets would have shrunk and Russia's 'weapon' would have been largely neutralised. The fear of shortages would be reduced and a small sense of normality could return to the market.
Energy markets have put in place tools that allow them to pay users not to consume energy when this benefits the system as a whole. The mechanism I am proposing would be broader, covering the reduction in demand for several months and not for hours or days. To work, this tool would combine elements from the design of the energy market - when, how much, for how long - and a way to fairly compensate the industry. The ideal would be to use a combination of national and European resources, showing solidarity and allowing the flow of capital to those who are best able to reduce their consumption. It is an idea that combines economic and energy efficiency with European solidarity.
The benefits of successfully implementing this idea would likely be significant. The economic benefits for our economies and trade balances, due to lower gas and electricity prices, would probably outweigh any costs this programme would require. This is an idea that will most likely cover the costs it will incur, reducing the need for budget support already provided by several member states. But this is an idea that needs to be implemented quickly - it will only work if we can secure these quantities by September, showing Russia our determination and redefining the way in which the gas market treats Europe. It is an important opportunity to make a bold move to protect our economies and our citizens before next winter.
I hope you will find my idea timely and I remain at your disposal for a more detailed exchange of views on the issue."
Source: Capital.gr
