I would like to focus on two crucial issues: - The liberalization of the electricity market and - The energy mix of the country.

Transcription

1 Speech by the Chairman & CEO of PPC S.A. Mr. Emmanouil M. Panagiotakis At the ECONOMIST Roundtable: A Compass for Europe A Fair Wind for Greece Friday, June 15, 2018, Grand Resort Lagonissi Ladies and gentlemen, The exit of Greece from the Economic Adjustment Programs finds the regulatory framework, the Greek electricity market, and PPC itself in a transitional phase. One could say that the Economic Adjustment Programs during the last three years have triggered developments quite often in a painful way in the direction of compliance of the Greek electricity sector with the European principles and policies. However, there is still a long way to go for these changes to be completed especially when taking into account the current situation in the country so that to have a positive impact on growth, the economy, and society. I would like to focus on two crucial issues: - The liberalization of the electricity market and - The energy mix of the country.

2 2 In the wholesale market, the Target Model is close to being implemented at last, replacing the current outdated and distorted electricity market model. This said, the question is how the model will be structured. Obviously, it should not reproduce existing distortions. Indeed, it should take into account the new market landscape. Following the lignite divestment, PPC will no longer be the dominant player in the market. Its wholesale market share will shrink to approximately 40%. At the same time, there will be other, large electricitygenerating companies as well. What is mostly needed from the new market model is to provide the maximum possible room for bilateral contracts. With respect to the retail electricity market, results up to now from the implementation of NOME are far from satisfactory. And I am not referring to the negative impact on PPC. I am referring to the opening of the market itself. PPC s market share in terms of GWh has shrunk to 82%, but in terms of the number of customers it remains above 95%. The electricity retail market needs to be reassessed in a radical way, far from the shadow of fiscal adjustment, and without prejudice against PPC, that it allegedly hinders the opening of the market. The key question is how all customer categories

3 3 can be part of the electricity market. Today, as we have repeatedly pointed out, only 50% of the customers are inside the market. The remainder which is actually the loss-making segment is outside the market and attached to PPC. Moreover, assigning PPC the role of implementing policies that are the responsibility of the State is not compatible with market terms, and must end. Moving on to the energy mix of the country, I believe that Greece after will have all the prerequisites to enjoy security of supply at controlled costs and a much better environmental footprint, fully aligned with the European policies for climate change. Precondition for this is the full use of Renewables, especially solar power, in combination with storage systems and the implementation of drastic policies for energy saving and efficiency improvements. The climate conditions and the current low level of energy efficiency form the basis for meeting the targets. What is at stake, however, is the period between now and then, roughly the next 15 years, specifically in the areas of security of supply and cost containment. Signs up to now are quite worrying. The rise in international oil prices and consequently of natural gas, in combination with the sharp

4 4 price increases of CO 2 emission rights result in a significant increase in generation costs and exercise strong pressures on electricity prices. Regretfully, the concerns we had expressed regarding the exemption of Greece from the allocation of free CO 2 emission rights an issue for which PPC fought hard come true in a painful way. A very positive development is the view of DG Comp expressed in its April 17, 2018 Decision on the importance of lignite-fired generation in Greece. However, this view, along with a similar view expressed in the Growth Plan for Greece submitted by the Greek Government, needs to materialize through specific measures so that it has a real impact. Energy costs are of vital importance for the Greek Economy, especially for industrial customers. Studies show that the increase in competitiveness up to 2014 a result of lower payroll costs due to the well-known painful policies was offset by rising electricity costs during the same period. The contribution of the Greek manufacturing industry in GDP is currently at 9% compared with 15% in Europe. There is a target to reach 12% of the economy in the next 3 to 5 years, but

5 5 reaching this target is highly uncertain when faced with rising energy costs. There is also another highly important issue. Electrification namely the increase of electricity in the energy mix is a common target across Europe, but this target will fade for Greece if energy costs rise. In general, what is at stake for the transitional next 15 years is the baseload electricity generation mix. The replacement of lignite-fired generation with natural gas which is the real dilemma will increase electricity costs due to the costly infrastructure as well as the capital needed for the construction of new plants. In addition, one has to take into account factors such as security of supply, and the exposure of the country to the swings in international prices and the trade balance. Consequently, based on the already mentioned views of DG Comp and of the Greek Government, it is imperative to support lignite-fired power generation for the optimal exploitation of the existing units and the invested capital. Ladies and gentlemen,

6 6 As our country enters a new era, even though PPC needs to address certain pending issues, it is prepared to successfully deal with the challenges ahead. Our basic tool and guide will be the Strategic and Business Plan, which has now been concluded. Transformation actions and the direction of its business initiatives will be specified and clarified in full. PPC, a group of companies with international presence, is expanding in other markets and adding to the products and services it offers. It enters dynamically in the natural gas market and in the provision of energy services, and undertakes actions and business initiatives aiming at becoming a leader in the Balkans. As regards its generation fleet, PPC makes a radical shift toward Renewables. Based on our Strategic Plan, we aim at a 15-fold increase of our capacity in Renewables over the coming decade. Renewables will be the new driving force for PPC s growth, the same way they were in previous decades the thermal and hydro power plants as well as the transmission and distribution networks, which made possible the supply of cheap and reliable electricity to the most remote places of the country.

7 7 Our vision is one of an efficient, competitive, and highly extroverted company. A company investing in innovation, with strategic synergies inside and outside Greece, and dynamic penetration of new markets. In addition, with a national energy plan that will not leave any room for grey areas and which will take into account the special characteristics of our country, and with a modern, realistic regulatory framework, the road to achieving our goals seems shorter. Thank you.