In his article titled “Gas in electricity production: Greece diverging from Europe” published in energypress.gr, Nikos Mantzaris presents the latest data on the use of gas in electricity production in Greece and Europe. In a comparative analysis, he explains the alarming increase in gas use in the first half of 2024, in contrast to the trends recorded in Europe, and how this drives the Greek wholesale market price (DAM) higher.
In anticipation of the new Greek National Energy and Climate Plan, the article concludes that “The reduction of electricity costs in Greece and, by extension, the competitiveness of the Greek economy, deeply depends on drastic cuts in the use of gas for electricity production; at least to levels that will converge with the strong gas phase out trends recorded in Europe“.
The article was publishes on August 2, 2024, and is now available at energypress.gr (in Greek).
Here you can read the full analysis in English:
Gas in electricity production: Greece diverging from Europe
Greece closed 2023 as one of the pioneers in the electricity sector, ranked 2nd and 8th worldwide in the share of photovoltaics and wind energy in the electricity mix with shares of 18.2% and 22.5%, respectively. This great progress in renewables contributed decisively to the simultaneous reduction of both lignite- and gas-generated electricity. Thus, the cumulative contribution of both fuels to electricity generation reached a historic low of 20.2 TWh and a share of 41%. As a result, Greece achieved the most important of all, that is to cut CO2 emissions from its thermal units by 71% compared to 2005, the year EU ETS was launched. With this performance, the country surpassed the corresponding EU average (-49.3%) by almost 22 percentage points.
Unfortunately, the comparison between Greece and Europe is not the same anymore. As a recent analysis by British think tank Ember shows, fossil fuel electricity generation in Europe in the first half of 2024 fell by 17% compared to the same period in 2023, thus giving systemic characteristics to Europe’s transition away from fossil fuels. On the contrary, in Greece, electricity generated from fossil fuels increased by almost 21% in the same period.
Which fossil fuel was responsible for Greece’s backpedaling? Certainly not lignite. In this department, Greece exceeded the EU average, reducing the contribution of the most polluting fuel in the first semester of 2024 by 30% compared to the period of 2023 (-24% in EU-27). However, this reduction had little effect on the country’s overall dependence on fossil fuels, as the once dominant fuel in the Greek electricity mix has been reduced in the last 1-1.5 years to single-digit shares and only plays a small role in covering domestic demand.
The big difference between Greece and Europe can be attributed to gas, which, according to the data of the Greek IPTO (ADMIE), shot up to +37% in the first half of 2024, when in the same period, the EU-27 reduced its gas dependence by 14%. This is a complete reversal of the downward trend of gas-generated electricity that started strongly in Greece after the Russian invasion of Ukraine in 2022 and peaked in 2023.
But where can this huge increase of almost 2.5 TWh in gas-based electricity generation in Greece during the first half of 2024, be attributed to? Certainly not to the growth of electricity demand, which was just over 1 TWh in that period. The latter was covered by the more than double increase in renewables (+2.2 TWh), which even “absorbed” the drop in lignite output by 0.6 TWh.
The increase in gas-generated electricity in Greece in 2024 can largely be attributed to its extensive use for electricity exports. This becomes clear if one considers the huge reduction in Greece’s net imports within a year, from 3.5 TWh in the first half of 2023, to just 0.34 TWh in the first half of 2024 (a 90% reduction). This major shift occurred largely because overproduction from gas plants extended beyond covering domestic needs, to covering also those of neighboring countries.
The conditions in the electricity markets of neighboring countries may have favored such export activity, but they did not leave electricity prices in the domestic day ahead market unaffected. Analysis of entso-e data shows that the share of gas-based electricity in the first half of 2024 had the largest positive coefficient of variation (CV) with the wholesale market price (DAM), while wind and photovoltaic (RES) the biggest negative CV (see diagram 1). In other words, the Greek DAM price increases when the share of gas is high and decreases when wind and solar dominate.
Diagram 1: Correlation between the shares of various energy sources and the price in Greece’s day-ahead electricity market (DAM) in the first half of 2024 based on entso-e data.
Thus, Greece which had the 3rd highest share of gas in Europe in the first half of 2024 (37.2% in the interconnected system), also had the 7th highest average DAM price with 79 €/MWh in the same period (see diagram 2). It is no coincidence that the two countries with the most expensive electricity in the six-month period, Italy and Ireland, had a higher share of gas than Greece (39.8% and 45.7%, respectively). Among the countries with smaller shares of gas, Poland was more expensive than Greece, since the price there is more affected by the large participation of lignite and hard coal. Moreover, the three Baltic countries were also more expensive than Greece while also having smaller gas shares. These countries, however, strongly depend on electricity imports and during this period there were intermittency issues in their interconnections with the Scandinavian countries which supply them with cheap renewable electricity. On the opposite side of the spectrum, the lowest average DAM prices in the first semester of 2024 were recorded in Spain and Portugal, where the shares of gas in electricity production were kept at low levels (14.3% and 9.3%, respectively).
Diagram 2: Relationship between gas share in electricity generation and DAM prices in European countries. Data from ADMIE (for Greece) and Ember for monthly DAM prices and electricity generation from various sources in other countries.
This analysis demonstrates that the reduction of electricity costs in Greece and, by extension, the competitiveness of the Greek economy, deeply depends on drastic cuts in the use of gas for electricity production; at least at levels which converge with the strong reducing trends of gas dependence recorded in Europe.
Whether there is political will for this much needed commitment remains to be seen in the long-awaited revised National Energy and Climate Plan.
