February 7, 2023

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… Christmas miracle in the electricity market

The extremely exorbitant wholesale electricity prices in our country, compared to the extremely low, even negative prices in other European countries in recent weeks, reveal the constant speculative games in the energy sector ● The ploy of cheap imports, the role of PPC and the energy cartel’s additional profits.

As in any market, in the electricity market, the market is based on supply (unit production) and demand. The market clearing price and the TEA (or OTC = marginal price of the system) are in equilibrium when supply is equal to demand. When demand is high as compared to supply, prices go up, and so when supply (unit output) is high, prices go down. These situations eg supply shortages can also be artificially caused, eg with units not running and creating artificial shortages as PPC does these days. In perfect markets, i.e., where there is much competition, prices equilibrate at the marginal cost of the most expensive unit. If there is no perfect competition, cartels usually operate, as in Greece, and companies set high prices in order to make big profits. In the case of Greece, yes, there is no competition (5 producing companies arrange prices), but there are peculiarities that determine the pricing policy of each company.

What are these characteristics: the dominant firm, PPC, has about 60% of the demand (this was 63% a couple of months ago) and about 40% of the production, while private producers, on the contrary, cover a very small part of the demand, while they respectively have a proportion Large supply (production units) about 40% and about 20% of imports.

Find the differences are called short tests related to marginal and indistinguishable changes between two identical images at first glance. However, the differences in the case of the map of European wholesale electricity prices, where they are formed on energy exchangers, for a period of two weeks, in the Christmas period, are not clear. They are screaming. In all countries of the European Union from Christmas Eve until today, we have seen amazing price cuts. A negative price (-1 euro per megawatt-hour) was recorded on New Year’s Eve in Germany, while on the same day in Spain and Portugal prices were 2 and 3 euros, and in no country did they exceed 64 euros. With just one exception: Greece, where the wholesale price was €283 per MWh. But even today, on the second day of the new year, with demand back to normal levels and wholesale prices back to levels above 100 euros per MWh, Greece has a law of “physical constant” in energy exchange, with the price being 258 euros, More than twice as much as all other countries (except Italy). This makes the Greek wholesale electricity market not only the most expensive in Europe by far, but also the only one in which the “law” of supply and demand in shaping prices does not operate.

What does this mean? PPC benefits from lower wholesale prices, because it buys electricity from the market for the additional quantities it needs to cover consumers, while private producers benefit from higher wholesale prices, given that most of their production is sold to PPC, while supplies to their consumers are very small. And while one would expect PPC to try to reduce wholesale prices by oversupply (production from all its units), it does the opposite by pushing away not only lignite units (Ag. Dimitrios 1, 2 & 4, Meliti and Megalopolis 4) but also natural gas units Except (Lavrio 4, 5, and Komotini), while on the other hand, normal people have all of their units operational except for one Protergia unit (due to damage).

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lower demand

The first question that arises is why prices are so low throughout Europe and so high in Greece. Due to the holidays in central Europe, many factories and businesses that consume electricity were closed and demand fell. At the same time, given the cost of turning on and off nuclear and coal/coal power plants, companies, in order not to shut down these units, pay low prices to keep them running. On the other hand, due to the summer, the production of photovoltaic and photovoltaic power has increased and the demand for domestic consumption has decreased. The combination of all these factors leads to low electricity prices in Europe.

Expensive buys

Here, although we have similar conditions, such phenomena are not observed, because PPC, knowing that it is buying expensive and losing money (see the results of 9 months and the share decrease in 1 year – 30%) continues the same wrong strategy of reducing production of its units and increased its purchases from the system and private producers, which led to an increase in wholesale market prices, and it is clear that it prefers private producers who, as shown by the results of 9 months, are making huge profits.

After all of the above, the following question arises: due to significant differences with neighboring markets (lower prices in Bulgaria – the Balkans and Italy), who will win from this whole situation? With the target model, neighboring markets are interconnected. Automatically with the closing of bids and the solution of the stock market model, the energy flows of neighboring countries (interconnected, paired system) are also determined. We have exports from the cheap market and imports from the expensive market. Energy flows in the direction from cheap to expensive markets. Who reaps the difference? Who benefits from this story and how is the guesswork carried out?

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Every month the Energy Exchange conducts a competition for the allocation of rights to allocate the import or export of electricity on connections to and from Italy and respectively to and from Bulgaria and the Balkans. For example, with Italy there is a potential (capacity) for imports and exports separately of 500 MW. So if there is a difference in Italian OTS of 179 EUR/MWh and Greece 228 EUR/MWh (on 12/30/2022), we import from Italy to Greece and the profits of 49 EUR/MWh are taken by those who got On the ability to import from Italy into Greece.

Accordingly, in Bulgaria we have an import-export capacity of about 700 MWh at Bulgarian prices of 54.5 EUR/MWh and Greece 228 EUR/MWh (for 12/30/2022), profit of 173.5 EUR/MWh is taken again. who got import ability from bulgaria. A slightly larger capacity of around 1,000 MW of interconnection is also available from Albania and North Macedonia, where cheap imports are routed from countries with excess electricity, such as Bulgaria, Romania, Hungary, and possibly Serbia.


In short, in a 24-hour period, foreign exchange leaves Greece for Italy 4 x 500 x 24 = 588,000 euros, for Bulgaria 173.5 x 500 x 24 = 2,914,800 euros and for the rest of the Balkans approximately 173 x 1,000 x 24 = 4,152,000 euros.

The question that arises from the above is whether these cheap imports are good for our country, Greek consumers and the Greek economy in general. The answer is positive, because in the first analysis they replace expensive and more expensive domestic generation units, reducing the cost of energy in the wholesale electricity market, while reducing the rising costs of purchasing LNG.

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But this is one side of the coin. The other is that while keeping the lignite units and not putting them into operation which by their operation will bring down the price of the marginal system (OTS) in the wholesale market below 140 € / MWh, it will fall further in our country and will be reduced accordingly and large profits for the owners of interconnection power , who end up earning huge amounts of money maintaining a large spread in the wholesale market in Greece and neighboring countries.

It is clear that another advantage provided to our country by the work of the European electricity markets and the current cheap prices in the European markets, as a result of the decrease in demand due to the Christmas holidays, has become another tool to benefit from the well-known energy cartel.

It should be noted that in December this speculative game lasted for about two weeks, and it is clear that the ultimate losers are the Greek consumers and the Greek economy as a whole, so that the energy union can win again without shame with the help of PPC! The final question is what is the market regulator, the RAE, doing, which is supposed to be responsible for the orderly functioning of the market, defending the interests of Greek consumers and protecting the Greek economy from profiteering tactics. From what it looks like, RAE makes a tracker or “the man who watched the trains go by” indifferent.