The renewable energy sector (RES) in Greece continues its growth course, despite the impact of an unprecedented COVID-19 health crisis on the economy. 2020 has been a landmark year for Greece’s energy transition, while the first quarter of 2021 indicates that this year will not be any different. The prospective amendments in Greece’s RES regulatory regime promoted by the Greek government aim at increasing the RES participation into the energy mix, which is key to achieve an integrated energy system and propel the country’s energy transition.
Pursuant to Greece’s National Energy and Climate Plan1, the mission is to increase the RES share from 20%2 to approximately 61% between 2020 and 2030, which translates into the materialization of approximately 10GW of RES investments in the next decade. In the context of the overall strategy to achieve this mission, the following regulatory reforms are to be put into place (see section 2 below):
- the modernisation of the second phase of the RES licensing framework (see section 2.1);
- the introduction of a framework regulating the energy storage capacity (see section 2.3); and
- the development of a national regulatory regime on the onshore and offshore RES projects (see section 2.4).
These regulatory reforms have already attracted significant RES investments in the Greek market (see section 3) which are expected to boost the country’s energy neutrality. In the same vein, the country is rewarding innovative strategic RES investments by offering certain incentives to investors (see section 2.2).
2. RES regulatory changes
Greece is set on a course to revise the RES licensing framework with a view to simplifying and streamlining the process and to accelerate the process overall.3 In 2020, the Greek Ministry of Environment and Energy (the Ministry), acknowledging that delays in the licensing process may have an effect on RES investments, announced its strategy to implement a series of amendments in the framework to minimize administrative hurdles. The endgame is to enable the finalization of the licensing process for RES projects within two years.
The RES licencing process comprises the following main steps: (i) granting of the producer certificate; (ii) approval of (or exemption from) environmental terms; (iii) granting of connection offer by the competent network operator; (iv) granting of an installation permit; (v) signing of a grid connection contract; and (vi) granting of a power purchase agreement further to the tender process to receive a sliding premium pursuant to the provisions of Law 4414/2016.
The first step towards the modernization of the licensing framework, so-called phase A of the reforms, was taken in 2020, with the introduction of amendments affecting steps (i) and (ii) above. For more on phase A, you may want to take a look at our previous client alert on developments in the Greek RES sector.
A new development in terms of phase A is the entry into force on 1 December 2020 of the new Licensing Code which, among others, regulates the RES producer certificates. The new Licensing Code features provisions to prevent territorial overlaps among RES projects and resolve relevant disputes between applicants. This has been a persistent issue for the Greek regulator; it cannot thus be excluded that further reforms may still be in the pipeline. The updates also targeted the need for clarity in the assessment of capital adequacy of RES projects. The current framework provides that special projects4 will be assessed by the Regulatory Authority for Energy (RAE) on the basis of the coverage of 10% of their budget by their own funds, while further granularity was provided on the documentation required to prove the capital adequacy or financing of the project.
The planning of phase B of the reforms started immediately after the entry into force of phase A, in spring 2020, and is now expected to materialize over the course of the next few months. The Ministry is expected to present a draft law shortly, introducing certain amendments and taking advantage of and further streamlining the digitalization of the application process and eliminating administrative steps and/or submissions by applicants. Once the draft law becomes available for public consultation, more clarity will be provided on the priorities of the Ministry and the way forward to implement the overall strategy for the modernization of the licensing process.
2.2 Strategic investments
Article 161 of Law 4759/2020 amended the provisions of Law 4608/2019 regarding the requirements for RES projects to qualify as “strategic investments.” The amended framework prioritises RES investments that feature technological innovation over those without one.
According to Article 10 para. 1 of Law 4608/2019, the investments to be construed as strategic investments are the ones that, due to their strategic importance for the national economy, are expected to bring about quantitative and qualitative results for employment growth and for the productive reconstruction of the country's natural and cultural environment. Demonstrating extroversion, innovation, competitiveness, all-encompassing design, promoting the preservation of natural resources and high added value, are also quoted as requirements of a strategic investment by the law. Such strategic investments are eligible to benefit from certain incentives, including tax incentives, fast-track licensing processes, spatial development incentives, or expenditure grants.
In this vein, and following the amendment of Law 4608/2019, investments in RES projects shall qualify as strategic investments when they constitute: (i) investments of at least EUR50 million in projects which use technological innovations to produce electricity from an RES and have a common connection point to the grid; or (ii) investments of at least EUR100 million in projects with a common connection point to the grid.
The key eligibility criterion is innovation. RES projects using technological innovations are mainly: (i) projects that include electricity storage systems; (ii) projects that produce green hydrogen; (iii) projects that connect electricity networks to the national grid through submarine cables; (iv) offshore wind parks (bottom-fixed wind turbines and floating offshore wind turbines); (v) hybrid RES production units on the non-interconnected islands; and (vi) projects with fully controlled production that use biomass, biogas or geothermal energy, as well as photovoltaic thermal plants.
2.3 Storage capacity
Developing RES storage systems is vital for ensuring the stability of electricity supply in Greece due to the inherent fluctuations in the RES energy production. Therefore, developing RES storage systems constitutes a prerequisite for the further growth of the Greek RES.
In the absence of specific legal framework in Greece, the Ministry has committed to enact such a law in 2021. In particular, pursuant to a recent Ministerial decision5, the Greek government is expected to enact a law for the development and participation of electricity storage units in the wholesale electricity markets, with the first draft law proposal expected by 15 May 2021. The draft law proposal is expected to regulate (i) the licensing and participation in the electricity markets of the interconnected system for electricity storage units with an independent connection point to the grid (storage before the meter) or as part of a portfolio of other RES units for joint participation in the market; (ii) storage units situated within a production or consumption plant (storage behind the meter); (iii) the licensing and operation of storage units on the non-interconnected islands. However, more clarity will be provided on the priorities of the Ministry once the draft law becomes available for public consultation.
In the meantime, RAE is licensing the production of storage facilities pursuant to the legal framework for thermal units, thus considering storage facilities as virtual power plants. At this stage, storage facilities that RAE has considered rely on batteries, hybrid technologies, and pump storage technologies. However, storage projects that rely on hydrogen are rapidly coming to the forefront; a EUR2.5 billion investment project – coined “White-Dragon” – is already in the pipeline in Greece bringing together institutional and private investors and which entails, among others, the storage of energy in the form of hydrogen. Currently, the legal framework for energy storage (and production) of hydrogen comprises EU Directives that regulate general issues related to the risks, equipment and environmental impact of projects involving hazardous substances, which include hydrogen. In the EU, funding for such hydrogen-based projects will be provided in the context of the EU hydrogen strategy;6 a Greek strategic plan is expected in 2021.7
2.4 Onshore and offshore RES
The law for spatial planning (Law 4447/2016) has recently been amended by Law 4759/2020, to facilitate the development of both onshore and offshore RES projects. In particular, it is envisaged that a special national framework is developed exclusively for spatial planning regarding RES project siting, which may amend the local urban plans at any time, where necessary. Allowing for the special RES framework to override local urban plans at any time is expected to replace existing cumbersome processes that had to be followed to initiate the construction of an RES site.
On offshore spatial planning, Law 4759/2020 also envisages the development of a new legislative framework exclusively for offshore RES projects which shall be disassociated from the spatial planning rules in place for onshore coastal areas. This new legislative framework is expected to also transpose into the Greek legislation the EU Maritime Spatial Planning Directive (2014/89/EU) and is expected to be enacted in 2021.
3. Market status
Against this backdrop, national and foreign companies have already invested heavily in the Greek RES market over the course of the last few years. Targeted regulatory interventions that streamline processes while promoting respect for the environment may be key to maintain this momentum. In particular,
- Key global market players are active in the RES market in Greece. US companies, including S&P 500 companies, are currently pursuing investments in the Greek Market. One of the largest Chinese energy-production companies is also investing in the Greek RES market by entering into a cooperation agreement with one of the largest Greek infrastructure investors to develop, among others, RES projects in a EUR3 billion investment plan. One German and one French multinational energy group are planning to invest approximately EUR1 billion each in Greece’s RES in the coming years.
- Key national market players, including institutional investors such as the Public Power Corporation are all investing in the Greek RES market.
On the financing side, multiple financing opportunities may arise from the European Bank for Reconstruction and Development (EBRD) that is already supporting RES projects in Greece, from the InvestEU and REACT-EU programmes, as well as from the Recovery and Resilience Facility (RRF) that was recently established by the EU Member States8 and which is highly focused on RES projects. In particular,
- The EBRD invested EUR75 million in the largest renewable energy project in Greece and the largest solar energy project in south-eastern Europe to date. Since 2015, EBRD has invested approximately EUR2 billion in investments in Greece that support sustainable infrastructure.
- The European Investment Bank, backed by the InvestEU programme with a budget of EUR38 billion, supports RES private investments.
- Funding for RES investments up to 100% of the cost of the investment can be provided by the REACT-EU plan amounting to EUR47.5 billion.
- The Greek RRF is expected to provide EUR6 billion of EU grants towards RES investments with additional funding being provided in the form of EU loans.
The Greek RES sector’s unprecedented growth is expected to continue in order to boost the participation of RES in Greece’s energy mix by 2030.
The Greek government and RAE have been very active on the regulatory front to simplify procedures based on lessons learnt to date. This is reflected in the steps taken to modernise the second phase of the RES licensing framework. Moreover, steps have been taken to regulate new areas that are relevant to RES, such as offshore RES and storage capacity, but also to reward innovative strategic RES investments by offering certain incentives to investors. Hence, by the end of 2021, the Greek RES framework is expected to significantly evolve.
Meanwhile, on the financing front, funding by the EBRD and the RFF is expected to facilitate the implementation of many RES projects in Greece in the coming years.