Greece could re-introduce support for gas-fired power plants

Greece is looking into a potential re-introduction of support for gas-fired electricity generators, a source close to transmission system operator ADMIE told ICIS on Thursday. Concrete steps will be revealed after the grid operator submits a market assessment showing the impact of a recently abolished mechanism.

Energy regulator RAE scrapped from 1 July the support for gas-fired power producers, known as the variable cost recovery mechanism.

Companies operating gas-fired power plants lost out on compensation that market operator LAGIE previously paid them when they were forced to run their plants below break-even point to balance demand and supply ( see EDEM 27 June 2014 ).

The move was initially expected to have a bullish impact depending on the bidding behaviour of gas-fired producers, which could increase their bids into the pool price, known as the system marginal price (SMP) in order to compensate for the lack of financial support ( see EDEM 25 July 2014 )

Market analysis

Traders are split on whether relaunching the cost-recover mechanism would push down SMP prices.

ADMIE is currently analysing the market impact of the abolished cost recovery mechanism, the ADMIE source said.

The TSO should submit its findings to RAE by late September or early October. The grid operator will also give its opinion about potential cost recovery measures.

“There is a discussion about a new method in order for producers to receive their costs back. There are three possible scenarios. RAE will decide what the next step will be. It is hard to say what will happen,” the source said.

A RAE spokeswoman confirmed that the regulator is expecting a detailed report from ADMIE.

“RAE will assess the issue when the TSO’s study gets submitted,”she said.

The abolishment of the mechanism is expected to have a more adverse impact on independent producers, she added. Irina Peltegova