By Anise Ganbold and Vlasis Megaritis
LONDON (ICIS)--Greek and Bulgarian power prices are set to rise above €80/MWh in the mid 2020’s, ICIS Power Horizon modelling shows.
The countries’ dependence on thermal generation until at least 2030 will be the main bullish factor with carbon prices forecast to rise further over the next few years, pushing generation costs up.
Greek power prices will remain among the highest in Europe, topping €84/MWh by 2025, leading to high imports from neighbouring Bulgaria.
The trend then reverses in the late 2020s as carbon prices are forecast to ease back below €30/tCO2, Greek renewable capacity picks up, and both Bulgaria and Romania build new nuclear capacity.
Three key uncertainties remain:
- whether Greece will commission new lignite capacity by 2023
- whether Bulgaria will start-up a long-delayed nuclear plant in the late 2020s
- whether Greece will phase out coal by 2028.
ICIS assumes in its base case that both the Greek and Bulgarian projects will commission, and an additional scenario modelling reveals the price impact without the extra capacity.
The potential Greek coal phase-out has not been modelled yet as the government is yet to reveal concrete plans and timelines.
GREECE DOMINATED BY THERMAL, IMPORTS
Thermal generation made up 60% of the country’s electricity demand in 2018. Two more lignite plants, 440MW Meliti 2 and 660MW Ptolemaida V, are being built.
Power plants which emit over 550 grams of CO2 emissions per kWh cannot receive payments from any capacity mechanism, according to new European regulations. This could make the new projects unprofitable.
Ongoing discussions between the Greek energy ministry and the European Commission are expected to shed some light. Nevertheless, ICIS assumes Meliti 2 commissions in 2022 and Ptolemaida V in 2023.
As part of the Greek bailout agreement, lenders pushed Greece to sell 40% of the lignite capacity owned by state-owned incumbent PPC to break up the current monopoly. However, two divestment attempts were unsuccessful and the government has not been clear on the next steps.
Due to forecast rising EU ETS prices, lignite generation is set to be squeezed in the mid-2020s when Greece would see lignite-to-gas switching. Lignite should become profitable again later on, when Greek gas prices rise and carbon prices fall towards the end of the decade.
Greece is traditionally a net importer of electricity with Bulgaria its main source of imports. In 2018, net Greek imports stood at 6TWh, accounting for almost 11% of Greece’s yearly electricity demand.
Maritsa East-Nea Santa, a new bi-directional interconnector with Bulgaria, is assumed to come online in early 2023 with a capacity of 1,350MW towards Greece. The extra capacity would lead to Bulgaria providing up to 28% of Greek power demand by 2030.
BULGARIA REMAINS AN EXPORTER
Bulgarian generation is dominated by lignite and nuclear, while domestic supply outweighs demand.
Generation capacity is expected to be stable to 2028, then increasing with the commissioning of 2GW Belene nuclear project.
As a result, Bulgaria is set to remain a net power exporter throughout the forecast period, though bullish carbon would place upward pressure on power prices, and see the country pull back slightly on exports in the mid-2020s.
The government recently resurrected the 2GW Belene nuclear project by launching a competitive tender, which will close by mid-2020. Belene’s reactors have already been built and are currently in storage in Bulgaria.
Given the project’s turbulent history, however, the plant may not come online at all.
NO BELENE - PRICE UP BY €9/MWH
In a scenario where Belene is not built before 2030, the average price impact is +€9.21/MWh in 2028 - 2030, with prices averaging €73.67/MWh for these three years.
The resultant loss in supply from nuclear totalling 15.7TWh/a would be replaced by a small increase in coal and lignite generation and reduced exports.
Without Belene, Bulgaria would switch to net power imports from Romania but still remain a major exporter to most neighbours.
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