Positions of HAIPP: The truth about the Electricity Market



Press Release

Subject: Positions of HAIPP: The truth about the Electricity Market

Given the ongoing discussion on the electricity market, the HAIPP wishes to express its position on certain issues it considers crucial for the formation of a comprehensive picture. The HAIPP wishes a free and competitive electricity market. Without protections, exclusive rights and “closed professions or activities”, with a healthy competition and equal terms for all, aimed at the products’ cost and quality optimization. The private sector has a proven experience in the effective and efficient implementation and management of production facilities. For that reason, it does not feel threatened by the establishment of a truly free and competitive electricity market in Greece.

The distortions maintained in the market raise obstacles for its reorganization, with a negative effect on consumers. However, which are the true distortions? For 13 years, despite the declarations and the efforts for the market’s liberalization, there are reactions and resistance, which have not allowed the cure of the main asymmetry and distortion in the market, namely the exclusive and privileged access of only one player to domestic, low-cost energy resources. The market’s reorganization is possible only via the establishment of players with comparable production portfolios that will include lignite and hydroelectric production facilities.

In relation to the issues that have been brought up during the last period, we have to provide certain clarifications and data:

  1. The production of lignite power plants remains steady during the last years, at the maximum level of their electricity producing capacity. Any possibility of raising the production level of lignite power plants would only lead to a restricted additional quantity. According to data provided by the Public Power Corporation (PPC) itself, their annual maximum capability is not more than 28 TWh, when in 2011 and 2012 they produced 27,6 TWh. The private power producing plants using natural gas substituted the PPC’s expensive plants using oil, as well as its low-efficiency plants using natural gas, improving thus considerably the system’s effectiveness. It is characteristic that the production of the PPC’s power plants –both using oil and natural gas – in 2007 amounted to 3,2TWh and 11,1TWh respectively, while that of the private plants amounted to 2,1TWh. In 2012 the production was 0,1TWh for the PPC’s plants using oil, 3,8TWh for the PPC’s plants using natural gas, as well as 10,4TWh for the private plants.
  2. The system has absolute need of the power plants using natural gas. All analyses, including those by the PPC, conclude that no matter under which circumstances the market operates, the electricity system demands – and its harmonious operation imposes – the annual production of at least 12 TWh by power plants using natural gas. The question, thus, is who is more efficient and can produce this quantity at the lowest cost.
  3. The power plants of HAIPP’s member-companies stand for the healthiest and most efficient part of the domestic electricity market system. They secure for the system the necessary electricity by power plants using natural gas at the lowest possible cost, and in fact, at a price below their full cost. In any case, since 2006 the private producers substituted the PPC’s power plants using oil as well as more expensive PPC power plants using natural gas, directly responding to the rising energy needs, with credible, modern power plants of the latest technology. In fact, they help the PPC, which due to its own natural gas plants’ restricted efficiency, cannot at this moment guarantee that it is able to cover the energy demand at a comparable cost.
  4. Private producers do not receive any subsidy. Due to the current model and the market’s mechanisms, the revenues of private power plants are at levels below the full cost needed for the production with natural gas of the electricity that the system needs.
  5. The HAIPP substantially contributes to the decrease of the electricity’s cost. The investments of our member-companies in production facilities, worth €1,5 billion, have been made based on the establishment of a competitive market, that would guarantee the offer to the consumer of credible and competitive electricity.
  6. It is not the transitional mechanisms that raise obstacles for the alleviation of the industry’s burden. The industry with base-load demand has to start being priced based on a mixture of lignite and hydroelectric plants. At this moment, the production cost at the domestic electricity system’s lignite plants stands far away from the cost seen in international practice, which is the main reason for the non-formation of competitive electricity tariffs for the Greek industry.
  7. How were the PPC electricity tariffs calculated in the past; Who decided the decrease in the tariffs of commercial consumers and the parallel, harsh rise in the tariffs of industrial consumers? Whose sole objective was to protect itself from losing clients, regardless of the impact on the country’s productive network?
  8. In a market with only one supplier that has no competition in the supply of electricity, regulated capacity assurance ticket (CATs) are necessary. These have to aim at rewarding flexible, high efficiency power plants, and not obsolete, inefficient plants. It would be useful to take lessons from other European countries with markets similar to Greece’s, such as Ireland.
  9. The HAIPP’s member-companies proceed to investments and look for the optimization of the electricity’s production cost, offering added value to a wide chain in the Greek economy. They offer hundreds of permanent jobs, while also contributing to the maintenance of many more jobs and the turnover of tens of millions of euro in partner companies, due to their strong outsourcing, for cost optimization reasons. Moreover, their huge contribution to the State’s revenues, via the Special Consumption Tax, the V.A.T., and other taxes, which annually amounts to almost €500 millions, should not be neglected.