Electricity bills / Ending the myth of imported crisis – The paradoxes and dysfunctions

The electricity market seems to be in search of other sources of surplus profits, as retail subsidies have stopped and in production the ever greater penetration of Renewable Energy Sources creates new conditions, but also fields… of exploitation as long as electricity generation from fossil fuels is maintained and considered “precious » for security reasons, although limited in time.

In the first two months of the year, the wholesale market moves at lower levels compared to the corresponding period last year, even approaching in February the prices of the first half of 2021 (73.61 euros/megawatt hour). Of course, even with the markets in decline, Greece is several days in the first positions with the most expensive wholesale in Europe. And the price of natural gas also falls on the EU reference exchange. (TTF), so the justification for the foreign crisis is slowly disappearing. On the other hand, in supply, a restraint or even a drop in invoices is expected, especially in March with the offer of a multitude of products, of which, however, there is no shortage of various commercial … tricks (e.g., consumption level, very expensive fixed charge, conditions for discounts, etc. etc.).

Balancing with the indemnified

Of course, both markets (wholesale-retail) are moving freely this year without mechanisms to recover part of the excess revenue, without subsidies, although with clauses. Obviously, the players, especially the vertically integrated ones (producers and suppliers) are not harmed, they maintain their profitability, while at the same time, at least in the “dark” system of production, there is also the possibility of additional profits through the balancing market.

We remind that the objective of this market is the optimal use of available sources in order to balance production with the load for safe operation and the expected increase in the penetration of RES, while its market share will increase as the penetration of RES increases, since it essentially covers the power deficit, especially in the afternoon hours when the photovoltaics go out. ADMIE reserves the necessary reserves from thermal units for the safe operation of the system, for which, of course, generous compensation is foreseen for the producers who provide this service and the invoicing is based on the offer (pay-as-bid). The market for supply service is usually more profitable for electricity producers given the higher concentration and duration of the contracts. Thus, not all producer units are paid with the low price, especially in the last two months, of the basic wholesale market (next day – DAM), but with the highest of the balancing market. That is, they prefer to join the Manager’s program daily and get paid at the higher balancing market prices, instead of the “regular” market which is significantly cheaper, without the possibility of extra profits.

Paradoxes and malfunctions

It is noted that the high cost of balancing is an issue that has concerned authorities, agencies and consumers since the genesis of the electricity market operating model (target model), which was adopted in our country in November 2020. The question was and remains whether the increased prices in balancing are caused by any deficit that actually occurs in the supply in relation to the demand or if it is artificially caused by systematically specific offers, usually by specific units, and an obvious pursuit of excess profit. As market players point out, the following paradox has been observed recently: while very low prices appear on the energy exchange, almost all thermal units are paid 160-170 euros/megawatt hour, even at times when the wholesale price drops to and at 10 euros, so they have no interest in shaping prices in the basic market. In addition to maximizing the profits of the power producers, the RES producers who are paid less than the basic wholesale market lose out, so the Operator (DAPEEP) has less income, as, of course, do the consumers, as part of the cost of the balancing market passes through to retail. It’s just that today it’s lower and it’s not immediately noticeable. Once again, malfunctions are highlighted in the electricity market, which otherwise promotes the further development of RES potential in the context of the green transition with the promise of falling prices.

Undervalued and long overdue retail surpluses

In the meantime, the surplus profits of electricity suppliers for the period August 2022-December 2023 are still pending, while it is already being leaked that the final total amount will be extremely low, slightly exceeding 200 million euros. We remind you that SYRIZA-P.S. had calculated the excess profits in commission only for the months of September and October 2022 at 1 billion euros. However, from the outset, through the institution of the mechanism and the determination of the excess revenues, it was obvious that there will be a “scissors” in favor of the suppliers here too -as was also the case with the excess profits in power generation-, as the calculations include from “reasonable” costs, discounts , fixed retail tariffs, guarantees up to tax benefits. We remind you that the arrangement for a mechanism to return part of the excess income and the commission has been in place since November 2022, while the Joint Ministerial Decision necessary for its activation was signed only at the end of October 2023.