International Conference on Post-Kyoto Climate Change Mitigation modelling,Seoul 17-18 June 2010

Impact of Special Gas Consumption Tax in Electroproduction on the Greek Electricity Market

Dr. Athanasios Dagoumas

Senior Energy Analyst, Hellenic Transmission System Operator S.A. Lecturer, University of Piraeus

4th International Scientific Conference on Energy and Climate Change,Athens 13-14 October 2011

Outline

• Greek Electricity Market

• Developments in the last year

• Natural Gas Pricing and its linkage with

• Pricing at International hubs and long-term contracts

• Variable costs of electroproduction units

• Influence of energy taxation on natural gas on:

• System Marginal Price of electricity

• Mix in Electroproduction

• Trade in Interconnections

• Conclusions

Greek Electricity Market evolution in last year

Since 30/09/2011 the Greek Electricity Market operation is split in

• Day Ahead Schedule (DAS) Market

• Imbalance Settlement

The DAS market is dominant in money transactions (> 90%)

The DAS System Marginal Price has been initially decreased, allowing private Load Representatives to gain market in consumption from PPC

The implementation of “Penalties” has been implemented to discourage speculation and gaming of the market

The implementation of special consumption taxation in electroproduction form natural gas units has raised questions over its suitability

Natural Import Gas Pricing

Stern and Rogers (Oxford Energy Studies) question the rationale of the continuing linkage of prices in long term natural gas contracts to those of oil products.

Latest data provide evidence on moving to hub-based prices, namely the natural gas markets are evolving independently from oil markets.

Natural Gas import pricing in Greece seems, as most European markets, to move steadily from oil-linked pricing to hub-based pricing.

Natural gas pricing for electroproduction is further depending on volume and demand curves of gas units.

Natural Import Gas Pricing

Linkage of average import prices with:• long-term contracts and • hub-based prices

Natural Gas price in €/MWh

Natural Gas Price (Euro/MWH)

-

5

10

15

20

25

30

35

40

Mar

-08

May

-08

Jul-0

8

Sep-0

8

Nov-08

Jan-0

9

Mar

-09

May

-09

Jul-0

9

Sep-0

9

Nov-09

Jan-1

0

Mar

-10

May

-10

Jul-1

0

Sep-1

0

Nov-10

Jan-1

1

Mar

-11

May

-11

Jul-1

1

Sep-1

1

Average Gas import price (€/MWh)

NBP Gas price (€/MWh)

Source: RAE, NBP

Linkage of average import prices with:• NBP hub-based prices

Special Consumption Tax

on electroproduction from Natural Gas Units

Since 01 September 2011, a special Consumption Tax (SCT) is imposed on electroproduction from natural gas units, equal to:

1.5 Euro/GJ (=5.4 Euros/MWh)

which leads to an increase in the fuel cost of gas units by about 10-18 Euros/MWh, considering efficiencies in the range 33-60% (Open Cycle – Closed Cycle Gas turbines) and the relevant VAT

Variable costs of units consists of

• fuel cost

• O&M costs (are usually constant or slightly increasing with generation)

Indicative Variable Cost of Gas units

per Technology type in €/MWh

Indicative Variable Cost per Technology Type in Euro/MWh

0

20

40

60

80

100

120

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-Oct-11

Combined Cycle GT

Open Cycle GTSource: HTSO, DESFA, literature

Special Gas Consumption Tax

influence in

System Marginal Price

Day Ahead Scheduling

System Marginal Price in €/MWh

System Marginal Price (SMP) in Euros/MWh

0

10

20

30

40

50

60

70

80

90

100

H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 H13 H14 H15 H16 H17 H18 H19 H20 H21 H22 H23 H24

October 2010 - August 2011

September - October 2011

Difference

Source: HTSO

Day Ahead Scheduling

Load Declarations’ Curves in MW

Monthly Load curves in MW

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 H13 H14 H15 H16 H17 H18 H19 H20 H21 H22 H23 H24

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Aug-11

Sep-11Source: HTSO

Day Ahead Scheduling

System Marginal Price in €/MWh

Day-Ahead Scheduling (DAS) System Marginal Price (SMP) in Euros/MWh

0

10

20

30

40

50

60

70

80

90

100

H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 H13 H14 H15 H16 H17 H18 H19 H20 H21 H22 H23 H24

Oct-10 Nov-10

Dec-10 Jan-11

Feb-11 Mar-11

Apr-11 May-11

Jun-11 Jul-11

Aug-11 Sep-11Source: HTSO

Special Gas Consumption Tax

influence in

Electroproduction mix

Fuel share in electroproduction in %

Fuel share in electroproduction mix (%)

0

10

20

30

40

50

60

70

H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 H13 H14 H15 H16 H17 H18 H19 H20 H21 H22 H23 H24

October 2010 - August 2011 LigniteOctober 2010 - August 2011 Natural GasOctober 2010 - August 2011 RES + HydroOctober 2010 - August 2011 Net ImportsSeptember 2011 LigniteSeptember 2011 Natural GasSeptember 2011 RES + HydroSeptember 2011 Net Imports

Source: HTSO

Fuel share in electroproduction in %

Fuel share in electroproduction in % for June and September 2011

0

10

20

30

40

50

60

70

H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 H13 H14 H15 H16 H17 H18 H19 H20 H21 H22 H23 H24

Jun-11 Lignite Jun-11 Natural Gas Jun-11 RES + Hydro Jun-11 Net ImportsSep-11 Lignite Sep-11 Natural Gas Sep-11 RES + Hydro Sep-11 Net Imports

Source: HTSO

Special Gas Consumption Tax

influence in

interconnections trade

Day Ahead Scheduling

behaviour of Exporters

Average Exports' Rights and quantinies Scheduled in DAS in MW

0

100

200

300

400

500

600

700

800

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11

DAS QuantitiesRights DailyRights Long-term

Source: HTSO

Day Ahead Scheduling

behaviour of Importers

Average Imports' Rights and quantinies Scheduled in DAS in MW

0

200

400

600

800

1000

1200

1400

1600

1800

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

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ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Rig

ths

DA

S

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11

DAS QuantitiesRights DailyRights Long-term

Source: HTSO

Day Ahead Scheduling

behaviour of Exporters

(DAS Exports)/(Total Rights for Exports) in %

0

10

20

30

40

50

60

70

80

90

100

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11

Source: HTSO

The implementation of the Day Ahead Market in October 2010 led to increase of the use of exports’ rights due to SMP decrease.

Day Ahead Scheduling

behaviour of Importers

(DAS Imports)/(Total Rights for Imports) in %

0

10

20

30

40

50

60

70

80

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11

Source: HTSO

The Special Gas Consumption Tax is expected to increase net imports due to SMP increase (not happened yet in September).

Overall ConclusionsThe implementation of Day Ahead Schedule and the further Code

developments (Penalties, Recovery Cost…) has led to:• Decrease initially in System Marginal Price

• Change in Exporters behaviour and Increase in Exports initially

• Increase of share on Load representatives and decrease of PPC’ share

Natural Gas Pricing for electroproduction is related:

• internally to the volume and demand curve and

• internationally to evolution of oil products markets and gas hub-based pricing

The implementation of Special Consumption Tax in Gas units led to:• Increase of System Marginal Price 10-20euros/MWh for most of the hours, about

8euros/MWh in average for each hour.

• No significant change in the electric mix yet

• Natural Gas production remains at same levels.

• No significant change in Exporters/Imports behaviour for the time being, but it is expected for the future