Dec 2019 Interview with Mr. Gerassimos Thomas, Deputy Minister of Energy & Environment
Prisma Reports: Greece is located at a strategic crossroad on the intersection of two major energy corridors, one crossing the Mediterranean and the other running through Southeast Europe. The local energy market is witnessing a number of very interesting developments at present with the transition from lignite sources, a new focus on gas and renewable energies, as well as large-scale infrastructure projects such as the TAP-IGB-EastMed Gas Pipelines. To start this interview, how would you describe Greece’s geopolitical role on the European energy chessboard? How important is the country for the European energy market and its security?
Gerassimos Thomas: Greece is uniquely located in a very sensitive area in the European Union. It is very close to the Eastern Mediterranean, which has significant oil and gas resources – notably when it comes to the reserves in Egypt, Cyprus and Israel.
Greece is also well-situated geographically as a gas diversification and supply route, helping supply the European market through the TAP pipeline running from Azerbaijan. It has become a significant source of LNG, through the Revithoussa terminal and another upcoming LNG terminal in Alexandroupolis that will supply South-Eastern European countries like Bulgaria, Romania, all the way to the North.
The Intergovernmental Agreement signed at the beginning of the year between Greece, Cyprus and Israel for the East Med Gas Pipeline that will bring gas from the south-eastern Mediterranean through Greece to the EU will give impetus to another major project which is a Project of Common Interest and has the potential to strengthen Europe’s energy security.
We also have significant electricity infrastructure that will expand from the South to the North and eventually, plants will link up with Egypt in Africa. Over the years Greece has maximised its strategic geographical position as a transmission route for gas, but the country also plays an increasingly significant role in supplying electricity to the Balkans. As the whole Balkans and South-Eastern European peninsula is greening, the integration of Greece, Bulgaria, Italy, Romania and Western countries with the European perspective will become very important through the increasing unification of the electricity market. The software of the electricity market – the functioning of the market, will increase and electricity will become more important than the hardware, which are the pipelines and interconnections. Greece will play an important role in regional capacity mechanisms in Thessaloniki which will bring together the capacity mechanisms of Italy, Bulgaria and Greece. We are working on the energy exchanges and the linkup of the energy exchanges between Greece, Cyprus and Bulgaria, and on increasing cooperation in the electricity market with countries North of Greece like North Macedonia, Albania and so on.
Prisma Reports: How would you summarize the key developments that occurred on Greece’s energy market in 2019? What are the main highlights of the year?
Gerassimos Thomas: Together with our newly elected government, Greece developed in 2019 a new national strategy for energy, which was adopted by the government in December 2019. This new national strategy has defined new terms for the Greek domestic energy market with an increased focus on green energy. Indeed, we have accelerated the closure of lignite power plants as a source of electricity supply; we have raised our targets for renewable electricity to 35% of our energy needs and 65% of our electricity production by 2030. As part of our national stategy, we also plan to significantly accelerate the development of gas and electricity distribution networks and the digitalization of these networks and services so as to boost our energy efficiency and reduce our total electricity usage going forward. One of our aims is also to reduce our energy needs, and thereby reduce our CO2 emissions.
This comprehensive national strategy requires significant financing. Our green energy transition will require investments of €44 billion across several sectors: about €13.5 billion for our gas and electricity networks, over €10 billion for energy efficiency and close to €10 billion for renewable energy projects. We are planning to attract significant private capital, and make the whole business more friendly for foreign direct investments – in the private sector in general, but also in the energy sector.
Prisma Reports: One of the priorities at the Government and at the wider EU level is to increase electricity market liberalization, and galvanize investment interest in the energy sector, both for conventional electricity generation and renewable energy sources. 2018 has been a major milestone in this regard, since it marked the full liberalisation of Greece’s electricity market. What has been the impact of this market liberalisation for the country and sector, and also for the operator PPC? How has this helped with the company’s restructuring and competitiveness?
Gerassimos Thomas: The liberalization of the gas market has already happened. There is nothing pending in this area except for ensuring the trading of gas supplies in the energy chains. The market has been liberalized and the transmission system operator has been decoupled and privatized by the previous government. What we are doing is to proceed with the decoupling of the distribution network and its 100% privatization so that we can bring in new investors with fresh capital to Greece to significantly invest in distribution networks and increase the penetration rate of gas in small companies, private households and industries. In terms of market, we plan to trade gas contracts in the energy chains, and this is to be done by the end of next year.
In terms of electricity, the decision of the previous government in 2018 created the framework for the liberalization of the energy market but nevertheless, the actual functioning of the energy market has already been delayed twice and Greece is still struggling to complete the energy market development by 2020 called the target model.
We are making a significant effort to make sure that during this year, we will switch to a new market-based electricity market and at the same time, take measures to ensure that competition is strengthened and liquidity in the market is developed so that we can get new players in the energy generation, distribution and retail market given the investor-friendly environment.
PPC is not linked to liberalization but we found it in a bad financial situation and therefore had to implement measures to ensure the liquidity and viability of PPC in 2019. The restructuring that took place in the second half of last year has allowed PPC to embark on a significant restructuring during this year, minimizing its losses from loss making lignite power plants in the production sector, cut costs and embark on the program of new renewable investments. Acceptance of this new business strategy by the market has been very encouraging.
Energy transition and transformation is one way to remove lignite power and increase renewable electricity and energy efficiency to reduce CO2 emissions. We also have policies to boost the environmental dimension. Significant emphasis has been placed to enforce the circular economy, with measures to reduce or eliminate the use of single use plastic. We have an ambitious project involving the recycling and treatment of waste with a lot of emphasis placed on public partnerships to combine waste management, recycling and energy production in order to deal with this chronic problem in Greece. Waste management has always been a very weak spot in the Greek economy with fines by the European Union .Lastly, we have significant adaptation measures through urban planning,
Overall, Greece is embarking on its new national strategy for energy and climate protection. We are taking a holistic approach as we believe this is the only way we can achieve the ambitious targets of eliminating greenhouse gases and ensuring a zero-carbon economy by 2050. We strongly support the European target and the European Green Deal for a zero-carbon Europe by 2050 and we will approach it with a holistic strategy covering all sectors.
Prisma Reports: What progress has been made in regard to the decarbonization of the economy?
Gerassimos Thomas: We are very close to achieving our target for 2020 in terms of CO2 emissions reduction. We are on a good track, but we need to accelerate in some areas. We plan to accelerate in 2030 with reductions of 55% in greenhouse gas emissions on a 2005 basis.
Prisma Reports: Greece’s new Government has announced its intention to further accelerate the RES push and has posted more ambitious targets to produce 35% from renewable by 2030. Greece’s exceptional climate conditions – sun, wind and mountains – make it a significant potential renewable producer. What is Greece’s percentage of renewables today and how is the country working now to develop renewable infrastructure and tap into this potential?
Gerassimos Thomas: We now have 18% of our energy produced from renewable and we plan to reach 20% by the end of 2020.We are completely reviewing the licensing procedure in Greece and plan to reduce the total time needed to get all the licences to two years on average. We are developing a regulatory framework for storage and renewable combinations and we will develop a regulatory framework for offshore wind and solar solutions over the next 2 years.
Prisma Reports: What are some of the key strategies in place to boost the percentage of renewables by tapping geothermal sources and enabling / incentivizing larger investments in solar and wind, both and offshore?
Gerassimos Thomas: We have already taken legal initiatives to facilitate larger projects of more than 250 MW, allowing them to be built and have the option to apply either through auctioning or directly through getting price regimes from the European Commission in Brussels. We have a very well developed auctioning system that has allowed the prices of renewable project developments to fall well below the average 60 euros per MWh. Simplifying the licensing regime is also one of the most important strategies.
Prisma Reports: As European gas production is expected to fall by 60% by 2040, the EU is becoming increasingly dependent on imports. With the new gas discoveries made in the Eastern Mediterranean, and the new infrastructure deployed Greece is designing an entire new role for itself in the region. How do you assess the nation’s potential in terms of gas production and exports, and how is the new Government supporting new developments in the sector, in terms of legislation or liberalisation?
Gerassimos Thomas: We have continued the strategy and have shown consistency in the country in terms of the development of oil and gas resources. Four new exploration fields have been signed in the west of Greece. Two of them with significant scale on the southeast of Crete. At the same time, we maintain a very strong dialogue with Cyprus, Israel and Egypt with a strategic interest to develop resources in the eastern Mediterranean, as I said before.
Geothermal and bio energy will also be developed. By legislation, biothermal energy must make up a certain part of our energy needs. We have different sources of geothermal energy in Greece and we will provide the framework for the private sector to develop them with full respect for the protection of the environment.
Prisma Reports: With the Revithoussa Terminal Greece is stepping up its game and becoming a major gateway for LNG in the European market. How vital is that LNG terminal not only to Greece, but also to US interest? Generally speaking, what does Greece represent for Americans from an energy perspective?
Gerassimos Thomas: LNG is among the priorities of the government. Revithoussa is an important LNG terminal, whose capacity is already restrained due to the low LNG prices currently – that’s why a second important terminal is being built in Alexandroupolis. There is also a new underground gas storage facility in Kavala. This has allowed Greece to be a source of US LNG, but not only. Since the LNG market is open and competitive, different sources of energy can be bought at a competitive price from many sources, which is the advantage of LNG. The competition and sourcing of gas has also allowed Greece, the EU, Bulgaria and Romania to renegotiate lower prices from Russia.
The support of the US government in the development process of alternative sources of gas is important. The US is an important energy partner for Greece and the EU, and an important stakeholder in South-Eastern Europe. We greatly appreciate and cherish this strategic cooperation with the US in this area. In terms of resources, Exxon is one of the most important players in the oil and gas exploration.
Reports: Foreign investors are already playing a strong role in the sector, with Exxon and Total who for example are bringing new technologies for offshore exploration. Americans in particular have already invested in companies like Energean or GEK Terna. American companies are also highly interested in the renewable sector. What can foreign and American investors bring to the sector, and what do you view as the most interesting investment opportunities for them in the energy market?
Gerassimos Thomas: The oil and gas sectors, particularly LNG, are the two sectors where American investors are very much at ease with bringing competitive advantages, technological know-how and financial advantages. We believe that Greece can not only be an area of investment for the US in the domestic market, but also be an opportunity for partnerships with green companies who can play a role in expanding the EU-US investment in the entire Balkan region. Greece is a pole of political stability in the whole region and can serve as a springboard for EU-US partnerships to develop in the western Balkans. 90% of the energy production capacity in South-Eastern Europe is over 35 years old. There are significant opportunities for new energy production capacity in south-eastern Europe and in the Balkans. The energy transition that these countries have to undertake on the road to EU integration would also require the greening of their economies.
In the domestic market, there are many opportunities in renewable energy production and US companies have significant know-how in hybrid and storage solutions, which are a necessary complement to renewable energy. We want to provide incentives to companies who develop storage solutions that can potentially be linked to local production of such solutions in Greece.
The privatizations are open and when it comes to the distribution networks for gas and electricity, US infrastructure funds are very welcome.
Prisma Reports: To conclude this interview, what is your final message to the readers of this special edition?
Gerassimos Thomas: Greece is certainly back in business. Its policies are going to focus on attracting private capital to Greece and in the region. The policies will be outward looking, which provides the perfect field for international investors coming to this part of the world.