Executive summary

Greece’s energy and climate policies are centred on achieving net zero emissions by 2050 while ensuring energy security, improving economic competitiveness and protecting vulnerable consumers. The National Energy and Climate Plan (NECP), adopted in 2019, is the main document setting energy and climate policy through 2030 and includes targets and supporting measures to put the country on a path to net zero emissions. The National Climate Law, adopted in May 2022, sets targets to reduce total greenhouse gas (GHG) emissions by 55% by 2030, by 80% by 2040 and to reach net zero emissions by 2050. It defines key emissions reduction measures, including the phase-out of lignite-fired generation by 2028.

Greece has seen a reduction in the share of fossil fuels in its energy supply, mainly because of decreasing use of lignite for electricity generation. However, fossil fuels are still the dominant energy source in Greece, and strong efforts are needed to reduce fossil fuel demand in line with GHG emissions targets. From 2010 to 2021, the share of fossil fuels in energy supply fell from 90% to 82% of total energy supply (compared to an IEA average of 78% in 2020). From 2005 to 2021, the share of lignite-fired generation fell from 60% to 10%, driving down the carbon intensity of electricity generation. The decline in lignite-fired generation was offset mainly by increased gas-fired generation, along with growth in generation from wind and solar photovoltaics (PV).

Greece achieved most of its 2020 energy and climate targets. However, a significant share of the reduction in energy demand and GHG emissions was caused by Greece’s prolonged economic contraction following the 2008 crisis and the Covid-19 pandemic. Greece has reduced the carbon intensity of its economy, but an increase in demand following the lifting of pandemic restrictions in 2021 is already leading to increased GHG emissions.

Looking forward, Greece’s energy policy focuses on boosting the use of renewable energy, especially for electricity generation, in tandem with increasing the share of energy demand covered by electricity, especially for transport and heating and cooling. Greece recently made several significant changes to its support scheme for renewable electricity generation to increase the rate of deployment and ensure low electricity prices. Greece is also taking steps to reduce the time needed for licensing and permitting projects for renewable energy, electricity infrastructure and energy storage. In August 2022, Greece approved its first Offshore Wind Law, which aims for 2 gigawatts (GW) of offshore wind capacity by 2030. Renewable energy in transport comes mainly from a biofuel blending mandate. Greece is a global leader in the use of solar thermal to cover building hot water demand.

Greece is planning major investments in electricity infrastructure. This includes expanding interconnection capacity to increase integration with the European electricity market and support the goal of becoming a net electricity exporter. The government has announced plans to double the capacity of interconnections with Bulgaria, Italy and North Macedonia; triple the capacity of interconnections with Albania; and establish an interconnection with Egypt. There are also major investments planned to boost domestic transmission and distribution capacity to support much higher levels of generation from wind, solar PV and hydro. The government also aims to connect the most populated islands to the mainland electricity grid by 2030.

To ensure the efficient and effective functioning of its electricity market, Greece finalised major reforms in 2020 to introduce three wholesale electricity spot markets (day-ahead, intraday and balancing) and a derivatives market. Greece has also completed several reforms to support full integration in the European common electricity market, including joining the intraday European market coupling in December 2022 and opening its market to demand response in September 2022. Greece’s gas market has also undergone major changes in recent years, with the opening of a natural gas spot market in March 2022 as a key achievement.

The government aims to increase energy efficiency in all sectors, with the NECP defining a wide range of energy efficiency measures. An energy efficiency obligation scheme provided higher energy savings than expected between 2017 and 2020, but Greece fell short of achieving its overall energy-saving target for this period. Building on the experience of other IEA member countries, Greece could improve the scheme and increase energy savings through 2030. As the Greek building stock is older than the EU and IEA average, it presents a notable opportunity to achieve energy savings. Existing measures for buildings include stricter building codes and a variety of incentives for thermal renovations, upgrading heating and cooling systems, and replacing appliances with more efficient ones. The stock of vehicles on Greek roads is also among the oldest in the European Union (EU). In the transport sector, subsidies and fiscal measures aim to increase the adoption of electric vehicles (EVs), while local authorities are obliged to prepare plans to promote a modal shift away from private vehicles to public transit, cycling and walking. Industry sector measures consist mainly of energy demand audits. Additional efforts are needed to realise the full potential of energy efficiency in all sectors, supporting energy security and climate targets.

The government sees energy research and development (R&D) as important to achieving 2030 climate targets and the long-term net zero emissions goal. The NECP provides an overview of research areas the government deems most critical to achieving energy and climate goals. These include new technologies for renewable electricity generation; electricity transmission, distribution and storage; heating and cooling; energy efficiency in buildings and industry; low-cost smart electromobility; advanced biofuels; and GHG reductions through low-emission technologies in industry. Greece has a long history of scientific excellence, concentrated in a small number of public institutions; however, significant effort is needed to boost the level of energy R&D in Greece and ensure it is aligned with the net zero emissions goal.

There is a policy focus on reducing oil demand, which comes mostly from the transport sector. Reducing oil demand from road transport is achieved mainly through a biofuel blending mandate and also through increasing support for EVs. Oil is also a key fuel in the building sector, covering around a quarter of building energy demand in 2020. There are policy efforts to reduce oil-fired building heating. From 2025, the installation of oil boilers will no longer be allowed, and from 2030, oil for heating will have to contain at least 30% by volume of renewable liquid fuels. Greece continues to rely on oil for a notable share of its electricity generation – 7% in 2021 – compared to the IEA average of 2% in 2020. Oil‑fired electricity generation is used mainly on Greek islands, with the government aiming to phase out most oil-fired generation by 2030 by interconnecting islands to the mainland electricity grid and the deployment of renewables on islands.

Key policy documents (most of which were approved before 2021) give natural gas a major role in reducing lignite-fired generation and oil demand from building heating and industry. Following the Russia Federation’s (hereafter “Russia”) invasion of Ukraine and the sustained increase in gas prices, the government is re-evaluating the role of gas in the Greek energy system. However, the future of natural gas in the Greek energy system remains unclear, with major steps being taken to reduce gas demand in line with climate and security goals while at the same time large investments are planned to expand gas infrastructure, which could lead to higher gas demand.

The government aims to use energy taxation to drive energy transition. Greece’s effective tax rates on CO2 emissions from energy use are high compared with other OECD countries. However, tax rates vary across fuels and uses, as well as tax concessions, and provide inconsistent carbon price signals that are not well aligned with Greece’s climate goals. There are numerous exemptions and reductions to energy taxation, many of which lower the cost of fossil fuels. In addition, electricity bills include a wide range of fees and charges, many of which have no relation to consumers’ electricity use. This reduces the incentive to save energy and makes electrification a less attractive option. As an EU member state, Greece has committed to eliminate fossil fuel subsidies. However, the OECD estimates that in 2020, Greece provided over EUR 1.9 billion in fossil fuel subsidies. From 2015 to 2020, fossil fuel subsidies decreased by 14% because of reductions in direct transfers supporting oil-fired electricity generation on non-interconnected islands and lower spending on heating allowances. Although decreasing, fossil fuel subsidies were still equivalent to more than one-quarter of energy tax revenue, among the highest share in the OECD. 

Covid-19 response

In response to the Covid-19 pandemic, the European Union established the Recovery and Resilience Facility, which provides EUR 724 billion through 2026 to support recovery and resilience plans developed by each EU member state. Greece was among the first EU member states to submit a plan, in April 2021. The plan (Greece 2.0) is one of the largest funding requests to the Recovery and Resilience Facility (EUR 30.5 billion, equivalent to 16.7% of Greece’s 2019 gross domestic product [GDP]). The plan funds energy efficiency subsidies for residential buildings (EUR 1.1 billion), businesses (EUR 0.45 billion) and the public sector (EUR 0.2 billion). In the electricity sector, there is funding to deploy 1.4 GW of electricity storage (EUR 0.45 billion), interconnect the islands (EUR 0.2 billion) and upgrade electricity distribution networks (EUR 0.1 billion). The plan also includes EUR 0.2 billion to instal 8 656 publicly accessible EV charging points, deploy 220 electric buses and replace older taxis with EVs. The plan further includes EUR 0.3 billion for energy research, development and demonstration (RD&D) relating to EVs and the development of Greece’s first CO2 storage facility. The plan also supports the implementation of a variety of energy sector reforms, including improvements to the main financing mechanism for renewables and co-generation and to licensing and spatial planning for renewables.

Addressing energy poverty and high energy prices

Greece’s NECP notes that energy poverty has been increasing and that reducing it is an important policy priority; the objective is to reduce it by at least 50% by 2025 and bring it below the EU average by 2030. The government estimates that in 2021, 17.5% of the total population and 36.7% of economically vulnerable consumers were unable to adequately heat their homes; these figures are higher than the 8% average for the European Union. In September 2021, Greece released an Action Plan to Combat Energy Poverty, which gives a quantitative definition of energy poverty and defines a broad strategy backed by specific measures to reduce energy poverty. The social tariff (established in 2010) is the main policy tool to address energy poverty. It provides discounted electricity rates to several categories of economically or socially vulnerable residential consumers. The government estimates that in 2019, 500 000-550 000 households benefited from the social tariff.

Starting in late 2021, global energy prices began to increase rapidly, especially in Europe. Price spikes and high volatility persisted into 2022, driven mainly by the impacts of Russia’s invasion of Ukraine. Greece has taken numerous steps to limit the impact of high energy prices, especially for vulnerable consumers. The Greek efforts include expanding existing measures targeting energy poverty and introducing broader measures to reduce energy prices for most consumers. From September 2021 to November 2022, Greece dedicated EUR 9 billion to energy subsidies and other measures to help consumers pay utility bills. Most of this support is delivered through the Energy Transition Fund, established in 2021 to fund a variety of subsidies for electricity, natural gas, heating oil and transportation fuels to combat energy poverty and reduce the impact of high energy prices. 

Reducing dependence on Russian fossil fuels

Greece has notable dependence on fossil fuel imports from Russia. In 2021, Russia accounted for 96% of hard coal imports, 41% of natural gas imports, 21% of crude oil imports and a small share of oil products imports. Hard coal imports are used mainly in the industry sector, primarily for steel production. Gas-fired generation plays a key role in the Greek electricity system, and gas is also important for building heating and industry. Greece is taking strong steps to decrease national and EU dependence on Russian energy imports.

A new floating storage unit at the liquefied natural gas (LNG) terminal started operations in August 2022; thanks to the new unit, LNG cargoes have doubled year-on-year, while imports from Russia have dropped from 40% to less than 20% of Greece’s gas supply. One of Greece’s major gas importers has signed a deal that could substitute almost 100% of Greece’s remaining gas imports from Russia. Construction of a new floating LNG terminal started in May 2022; it should be operational by the end of 2023 and would almost double Greece’s LNG import capacity. There are additional LNG terminal projects under consideration. Greece increased lignite stockpiling to serve as a security reserve in case of disruptions in the gas supply. Since the Russian invasion of Ukraine, Greece has also notably increased efforts to deploy renewables and increase energy savings as key tools to reduce reliance on Russian energy. 

Key recommendations

The government of Greece should:

  • Reassess the need for investments in fossil fuel infrastructure, taking into account the risk of stranded assets and the need to direct limited capital to investments supporting the energy transition.
  • Ensure transparent and stable legal and regulatory frameworks, which enable renewables and electricity infrastructure projects to be implemented within a reasonable time frame. Streamline the procedures for spatial planning and licences to facilitate the timely deployment of projects.
  • Adjust taxes, market regulations and financial support measures so that energy prices drive behaviour and investment towards a just energy transition, increase system flexibility and reduce the risk of stranded assets.
  • Focus building renovation programmes on deep renovations that combine thermal insulation with heat pumps to deliver maximum benefits for energy savings and reducing bills. Vulnerable households should receive priority and adequate resources.
  • Promote the replacement of old vehicles, especially freight trucks, by providing incentives, including a scrapping programme to trade-in older vehicles for more efficient ones.