Why is the Greek spot market one of the most expensive in Europe?, SEE Energy News
For the second week in a row, Greece is the only country on the European map of wholesale electricity markets that does not follow a downward price trend, after prices at the Dutch TTF hub returned to pre-war levels in Ukraine.
The price for one megawatt-hour on the Greek day-ahead market remained the highest in Europe, at 269 euros per MWh on Tuesday, January 3, and a difference of as much as 120 euros compared to the neighboring Bulgarian market – even though the two markets are cabled. Compared to the German and French markets, this premium amounts to more than 123 euros.
On a monthly basis, in December 2022, the Greek market was the sixth most expensive in Europe, with an average price of 276.9 euros per MWh, behind Belgium, Ireland, France, Switzerland and Italy. At the average annual price in 2022, Greece is the third most expensive market in Europe, with an average of €279.9 per MWh, behind Switzerland and Italy.
The significant deviation of spot prices compared to the rest of Europe has been at the center of political controversy in the country since the end of December, which the government attributes to the price calculation formula used by domestic gas producers.
Namely, in Greece, the model for determining the prices of natural gas takes into account the average rate of the previous month, unlike the model applied in other European countries – which takes into account the daily spot price on the stock exchange.
This method does not allow for the immediate effect of lower natural gas prices on the wholesale price of electricity – as has happened in other markets.
However, if only that factor made a difference in the price, then it would be a matter of time when it would approach the European average, which is not evidenced even by the data for the average price in December, let alone the average price in 2022, but also by the data for the pre-crisis period, where Greece was also among the countries with the highest electricity prices on the wholesale market.
The main reason for high prices lies in the energy mix for electricity production, in which natural gas has a dominant position with a share of over 40%. The share of lignite is low, while renewable sources can influence the price only for a few hours.
Greece’s shallow equity market, limited generation competition and limited interconnections are also key factors driving up prices.
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