IEA Welcomes Greeces Adoption of Natural Gas, but Calls for Further Efforts on Security of Supply and Energy Efficiency

(Paris) — 9 October 2002

"Greece has done well to diversify its fuel-mix and supply sources, but must ensure that it can meet growing energy demand," said Robert Priddle, Executive Director of the International Energy Agency at the launch today of the Agency's in-depth review of Greek energy policy. He welcomed the government's policy to increase energy links with Greece's neighbours and noted that "a well-designed market reform is essential in the electricity and gas sectors to attract private investment."

Energy Security
Greece is geographically isolated from most other European IEA Member countries and depends heavily on imported energy, especially oil. Lignite is the only major domestic fuel and has been extensively used for power generation. The government is working to diversify fuels and supply sources and to improve relationships with neighbouring and producer states, notably Azerbaijan, Iran, Kazakhstan and Turkey.

Electricity demand is forecast to increase by 4.5% per year over the decade 2000-2010 and supply is forecast to be tight over the next three to four years, even if planned power plants are commissioned on time. Imports of electricity can play only a marginal role since transmission capacity is limited. Further regulatory reform is urgently needed to attract investment in new generating capacity. The price distortion that prevails in the electricity market, in the form of cross-subsidies and prices set too low to reflect the true cost of supply, must be corrected in order to attract new investment.

Natural gas was introduced into Greece's energy balance in 1996 and by 2000, it accounted for 6.1% of primary energy supply. Demand is growing fast and forecast to increase four-fold by 2010. The report approves the government's efforts to diversify supply sources, to increase liquefied natural gas and storage capacity, and to build links between Greece, Italy and Turkey.

Effective oil stock management is necessary for improving energy security. It was a matter of concern that until very recently Greek stock levels were substantially below their IEA obligation since the fourth quarter of 1999. However, at present, Greece is meeting its obligation. The government has taken steps to improve the situation through the introduction of new legislation.

Regulatory Reform and Competition
The Greek energy market is still dominated by highly integrated state-owned enterprises; Public Power Corporation (PPC) in the electricity sector and Greek Public Gas Corporation (DEPA) in the gas sector. Following market liberalisation, the generation and distribution/retailing operations of PPC are being unbundled and an independent transmission system operator (HTSO) has been established. Currently, a large share of HTSO is held by the PPC, which remains the sole electricity generator.

The report welcomes the government's intention to liberalise the gas market before the 2006 deadline set by the EU Gas directive. Greek oil markets were liberalised in 1992 and the retail sector has become competitive as a result.

Greece has made progress in establishing the institutions necessary to underpin market liberalisation. The Regulatory Authority for Energy is an independent regulator with jurisdiction in the electricity, gas and oil sectors; but the Ministry of Development retains primary responsibility for regulatory matters. The IEA recommends that the functions of the Energy Administration and the Regulatory Authority for Energy should be more clearly separated: regulatory decisions need to be taken by the regulator and policy decisions by the Ministry.

Climate Change Mitigation
Greece has ratified the Kyoto Protocol. Under the EU "burden-sharing" agreement, Greece's greenhouse gas (GHG) emission target for the first commitment period is set at 25% above 1990. In 2000, Greece's energy-related carbon dioxide emissions, were 24% over the 1990 level.

Greece's efforts to curb the growth of GHG emissions have traditionally focused on supply-side measures, such as replacing coal and oil by natural gas. Yet energy intensity in Greece has been constantly increasing. Demand per unit of GDP now exceeds the OECD Europe average and energy demand per capita has reached almost 80% of the OECD Europe average. The report recommends placing greater emphasis on the efficiency of energy end-use, since substantial emission reductions could be achieved by "win-win" measures. The Greek government is working to this end by promoting third party financing of energy efficiency projects, introducing voluntary agreements with industry and improving public transport, through the introduction of natural-gas powered busses and extending the Athens subway system.

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