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EU Emissions Trading System – What have we learned after nine months of operation?
European shipping and ships calling at EU ports became subject to the EU ETS in January 2024.
Global | Publication | July 2021
Increasingly, Greece’s transition to a low carbon economy and towards a new energy model is assuming a higher priority; the country’s ambitious climate action and energy plans include reducing greenhouse gas (GHG) emissions, increasing the renewable energy share (of the nation’s gross total energy consumption) and improving energy efficiency generally. Electricity storage plays an important role in the transition to a low carbon economy and drives energy efficiency while at the same time allowing the integration of more renewable energy sources into the electricity system.
A key challenge in the journey transition to a low carbon economy is to deliver renewable energy production in a way that meets the power adequacy requirements of tomorrow's decarbonized world.
Renewable energy plants are highly dependent on the weather, making them inconsistent and renewable energy is therefore not a stable source of power. Storage units are able to ‘stockpile’ excess renewable energy production and help stabilize the problem – surplus energy can then be utilized whenever there is a power shortage.
For the stability of the energy network and the security of electricity supply, it is important that demand and supply are consistently well balanced. Here the storage of electricity plays a vital role allowing excess electricity to be stored, when there is a surplus of production over consumption: conversely, when demand is greater than production, the electricity thus stored can be used to meet that demand.
Energy storage technologies provide valuable flexibility on the grid by making the grid more efficient. With storage systems, renewable energy can be converted into basic units – the units that cover the basic loads of the system. Storage technologies also provide power system flexibility that can effectively manage situations of overproduction combined with intermittent demand1. In addition, storage systems can benefit electricity markets, as they help reduce price fluctuations, prevent spikes in market prices (both in the energy and the balancing market) and help create the appropriate opportunities for bilateral contracts to be entered into.
The regulatory regime governing electricity storage will also play an important role in promoting progress in the field of electricity storage. The new legal regime is based on Directive 2019/944/EU and the national framework that will be adopted on that basis.
The European Union has for some time stressed the importance of electricity storage: in fact, Recital (64) of Directive 2019/944/EU underlines the importance of making progress in the seasonal energy storage in order to achieve a completely decarbonised electricity sector that is fully free of emissions: “Such energy storage is an element that would serve as a tool for the operation of the electricity system to allow for short-term and seasonal adjustment, in order to cope with variability in the production of electricity from renewable sources and the associated contingencies in those horizons.”
It is anticipated that the new national framework that will govern electricity storage is expected to be in place in the near future and it has been suggested that the scope of this framework will cover issues that extend to and include the following:
It is also important that the new national framework contains a clear definition of energy storage and makes appropriate provision in terms of the classification of activities – energy storage should be treated as one of the electricity activities in addition to generation, supply, trade, aggregation, system operator activities, distribution system operator activities and electricity market operator activities. Until now, energy storage has too often been classified as a part of generation (although it may be classified as consumption at one point and as a generation at the next). This legal issue has to be addressed by the new legislation which will need to give legal certainty and predictability for market participants.
The definition needs to be technology neutral; this is essential for the development and implementation of various new technologies2. In particular, Recital (42) of Directive 2019/944/EU emphasizes that consumers should be able to consume, store and sell self-generated electricity to the market and to participate in all electricity markets by providing flexibility to the system, for instance through energy storage, such as storage using electric vehicles, through demand response or through energy efficiency schemes.
Accordingly, Directive 2019/944/EU introduces the concept of an active customer who will likely have an important role in relation to electricity storage. The new framework should envisage that active customers that own energy storage facilities have the right to be connected to the grid connection within a reasonable time after requesting to be connected provided that all necessary conditions (such as balancing responsibility and adequate metering) are fulfilled, and they should not be subject to disproportionate licensing or fee requirements.
With regards to the connection of these facilities to the system/network, a person engaged in energy storage has to be treated as a system user and will thus be subject to the general provisions on connection to the transmission or distribution system which require obtaining consent for connection. In relation to the connection of energy storage facilities and renewable energy generation facilities, it has to be specifically required that conditions for connection be non-discriminatory and that they assure easy connection of such facilities. Conditions might differentiate for different groups of facilities according to type or size, where appropriate.
It is anticipated that demand will increase over the coming years, and the battery market (as a means of storing electricity) is expected to be one of the most dynamic and strategically important in the EU. In addition to the advantages that energy storage brings to the electricity system and the reliability and security of the network, investments in energy storage can also be a driver of increasing economic productivity. Despite the proven benefits of electricity storage, the key finding remains that markets fail to assess their full value and turn it into revenue that will make these investments viable. Below are some EU funded sources of finance that can help to facilitate such investments:
The introduction and development of storage on Greece’s islands that are that are not connected to the mainland power system is quite different, as it is currently only possible via hybrid stations (i.e. virtual production stations consisting of renewable energy resources and storage units operating as single distribution entities). The Ministry of Environment and Energy is in consultation with the European Commission in order to approve a special regime that will allow hybrid stations to participate in the tenders to be held in the period 2021-2024 by RAE (the Regulatory Authority for Energy). Until now, these projects are considered to be, and treated as, conventional units. Since this does not appear to be sufficient, and in order for these investments to be sustainable and successfully implemented, further incentives will need to be introduced in line with the State Aid Guidelines.
Despite significant investment interest and the approximately 160 production licenses for projects with guaranteed capacity over 500 MW and renewable energy capacity greater than 1100 MW, only two small projects have already been implemented, in Tilos and Ikaria, with a total capacity of 3 MW. This is due to delays in the new support framework for hybrid stations. The Ministry of Environment and Energy is currently in final consultation with the European Commission in order for these stations to be included in the tenders through the period 2021-2024. With the approval of the new tender framework for the selection of hybrid projects based on the minimum production cost, it is estimated that investments in hybrid projects will resume soon. At the same time, pilot projects of high penetration in autonomous systems are evolving, such as those of Agios Efstratios and Astypalea. Such projects are of a demonstrative nature due to their small size, but significant when it comes to international visibility of the country.
The development of storage in Greece has only just begun: this year has been the big "kick-start" and there is now a common understanding of the needs and requirements and the steps to be taken to ensure an adequate identification and prioritization of all necessary actions.
The next steps demand a stable regulatory framework, the rationalization of a renewable energy project licensing process, an increase of the system’s capacity to receive viable renewable energy projects, and the utilization of all financial instruments and support schemes with effective project selection and aid procedures based on the needs of the system and of the investments.
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