Greece’s wholesale baseload electricity average price amounted to 53.5€/MWh in Quarter 1 [1] of 2021, which was slightly above the pan-European average of 52.8€/MWh and amounted to 70.3€/MWh in Quarter 2 [2] of 2021 compared to the pan-European average of 68.2€/MWh, according to the European Commission’s Quarterly Report on European Electricity Markets. However, over Q3 and Q4 of 2021, prices continued to increase on the wholesale electricity market leading to record price peaks in Europe, surpassing 200€/MWh in Greece on the Day-Ahead Market. This unforeseen situation has attracted political attention and discussions on the cost of the energy transition.

The main driver of the increase in electricity prices is linked to the interdependence of gas and electricity prices and the price of gas which surged over the year, due to a rising global demand. Other factors, playing a secondary role, include Europe’s lower-than-average gas storage stocks; limited additional pipeline gas imports to the EU; rising Emissions Trading System (ETS) allowance prices; coal and carbon price increases; and weather patterns in Europe (cold winter, unusually hot summer)’’. [3]

According to the latest report by the European Union Agency for the Cooperation of Energy Regulators (ACER) [4] entitled “Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design”, countries most exposed to high electricity prices are those with “the highest gas dependency to cover their electricity demand and lowest interconnectivity with neighboring countries compared to national demand”.

It is therefore not surprising that a country like Greece, with a very high dependency on gas as a source of energy, experienced extreme price increases on the wholesale electricity market. As can be seen from the published reports of the Hellenic Energy Exchange [5], which details the weekly and monthly energy supply mix on the Day-Ahead Market, gas fueled production covered 44% in August 2021, 46% in September 2021 and 45% in October 2021. It is therefore inevitable, that a dramatic increase in the price of gas, led to an increase of the overall average market clearing price for electricity on Greece’s wholesale electricity market.

What sets the price of electricity on the wholesale market is the marginal production cost – i.e., the cost of producing one more MWh of electricity. Renewable Energy Sources (RES) such as solar and wind, have a lower marginal generation cost and therefore constitute a cheaper alternative. It was observed from the published reports of the Hellenic Energy Exchange, that the amount of RES in the daily energy supply mix influenced the average market clearing price: the higher the amount of RES in the daily supply mix, the lower the price of electricity (average market clearing price). Given the favorable weather and geographical conditions of Greece, a strong development of RES could be extremely beneficial, not only to achieve its decarbonization targets but also to achieve lower electricity prices and increase its exports of energy.

In January 2021, Greece’s average market clearing price was 52.52€/MWh, lower than the European average of that month. By having a more competitive price on the Day-Ahead Market and a surplus of energy, Greece exported electricity to its neighboring countries. The exports of energy in January 2021 were the highest, exceeding all previous months since January 2020 and amounted to 12% of the total volume mix in January 2021, while the exports in December 2020 amounted to 10% and to only 5% in November 2020. Following the surge of the gas prices and related rise in electricity prices, the exports of electricity of Greece decreased but continued, nonetheless. Indeed, Greece’s market coupling and interconnection to Europe via Italy and Bulgaria, allowed a continuation of exports – but the imports remained considerably larger except for January 2021, as aforementioned and October 2021, when Greece’s electricity exports reached a record high of 13.82%.

It is important to note, that even though the wholesale baseload electricity price of Greece surpassed the European average price, the household and industrial electricity prices in Greece, remained below the European average in Q1 and Q2 of 2021. In Q1 of 2021, the pan-European average household price was 22.15 c€/kWh versus the Greek average price 16.52 c€/kWh ; in Q2 of 2021, the household pan-European average price was 22.79c€/kWh versus the Greek average 16.52c€/kWh. For the industrial electricity price, the pan-European average was 13.02 c€/kWh versus the Greek average 10.66 c€/kWh; in Q2 of 2021, the industrial pan-European average was 13.39c€/kWh versus the Greek average 10.66c€/kWh.

According to the latest ACER report, both the price of electricity and gas are expected to fall by Spring 2022. The report states that notwithstanding the latest increase of gas prices, it was beneficial for Europe to increase its dependency on gas as it “allowed electricity wholesale prices to be at competitive levels for several years and CO2 emissions to decrease”. Furthermore, the report concludes that the integration of the European Energy Market will bring about more benefits in the future and stresses the importance of developing the amount of cross-zonal interconnection capacity available for cross-border electricity trade, “not only for efficiency and broader societal welfare but also for shouldering considerable price shocks going forward”.

Energy exchanges like the Hellenic Energy Exchange ensure that electricity can be traded easily, transparently and in a short period of time. It allows companies wishing to generate RES to access the market and sell green energy on the Greek energy exchange, by providing a level field for all Market Participants. This is essential for the energy transition, that more RES be traded on the market to increase competition and lower energy prices. Since the scheduling of electricity production and consumption through the Day-Ahead Market takes place several hours before actual consumption, the Intraday Market, either through regular auctions or continuous trading, plays a key role in achieving energy balance while providing opportunities for profitable trading.

The Hellenic Energy Exchange recently launched the regional intraday auctions (CRIDAs) which have given access to more trading opportunities. This is expected to increase liquidity in the intraday market for the benefit of all participants and in particular for RES producers, to correct their positions (having more accurate generation forecasts available) – thereby reducing balancing costs. In 2022, the Hellenic Energy Exchange Intraday Market will be enhanced with the European Cross-Border Intraday (XBID) initiative. This will allow for faster trading on a continuous basis, which will increase market liquidity and efficiency gains. The benefit for RES generators from participation in the Intraday market will also be greater as RES will gradually take a full balancing responsibility.

What will make the difference in the future will be the availability of energy storage systems – through storage, the intermittent generation from RES will be controllable, which will facilitate integration into the system. Given the current lack of cost-effective solutions for large scale storage systems, the role of energy exchanges is essential – they support the energy transition and integrate RES into the market through nearer real-time markets, such as the intraday market.

[1] Quarterly Report on European Electricity Markets Q1. quarterly_report_on_european_electricity_markets_q1_2021_final.pdf (europa.eu)

[2] Quarterly Report on European Electricity Markets Q2. quarterly_report_on_european_electricity_markets_q2_2021_final.pdf (europa.eu)

[3] ACER’s Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design. November 2021. ACER’s Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design.pdf (europa.eu)

[4] ACER’s Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design. November 2021. ACER’s Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design.pdf (europa.eu)

[5] Hellenic Energy Exchange. Markets Reports – EnExGroup