Europe’s electricity price split hits southeastern economies By Reuters

By Angeliki Koutantou, Forrest Crellin and Edward McAllister

ATHENS/PARIS (Reuters) – For Athens restaurant owner Christos Kapetanakis, the rent has always been high, but now he is facing what he calls a “second rent” as bills rise electricity reduced the income and forced him to raise the price.

Kapetanakis pays between 3,000 and 3,800 euros ($3,083-$3,905) a month in power, 40% since Russia invaded Ukraine in 2022 and triggered an energy crisis in Europe. before it was about 3% of the monthly turnover and now it is more than 15%, he said.

“The continued rise in prices, especially in the tourism sector…will lead Greece to become less competitive compared to other Mediterranean countries,” he said from his restaurant in the historic neighborhood of Plaka.

His plight has been echoed across the continent since the war in Ukraine disrupted Russian pipeline gas supplies to Europe and forced countries such as Greece to seek more expensive alternatives.

But southeastern Europe felt the impact more than the northwest. Experts say it will only expand when winter hits, and have an impact on economic growth.

The wholesale power of Greece and Italy in August was 12 times higher than the Nordic countries and even other southern European countries that experienced hot weather.

HIGHEST IN EU

As of 2021, Greece has spent 11 billion euros on energy subsidies to try to protect customers. In 2022, spending will amount to 5.3% of GDP – highest in the EU and twice that of second-placed Italy, according to France-based energy consultancy Enerdata.

Despite Athens’ efforts to protect citizens from rising energy costs, the situation has exacerbated Greece’s cost of living crisis after a 2009-18 debt crisis slashed wages, pensions, and investment in electricity production and transportation.

“Rising energy prices and negatively impacting GDP is a tautology,” said Nikos Magginas, a senior economist at the National Bank of Greece.

“The rise in prices will have a negative impact on household consumption and the cost structure for industries, airlines and shipping.”

Much of the difference between southeastern Europe and its neighbors comes from investment. While the northeast has electricity and gas lines that allow easy energy transfers between countries, as well as a strong mix of renewable sources, much of southeast Europe is fragmented and isolated. .

Electricity storage, which has become more important in northern European countries, does not exist in parts of the southeast. Germany has 1,668 megawatts (MW) of large storage capacity, compared to none in mainland Greece, according to data from LCP Delta, an Edinburgh-based electricity consultancy.

“Southeast Europe and the Balkans lack (electricity) interconnects. Whenever there is a shortage of electricity, and the renewable output is low, they struggle to import the necessary volumes,” said Henning Gloystein, head of energy, climate and resources in the Eurasia Group.

In contrast, renewable power generation in Spain has increased over the past decade, in part thanks to EU funding. It generated nearly 60% of its electricity from renewable energy in the first half of this year, up from 51% last year.

“If you don’t invest, energy prices will stay high,” Gloystein said.

SO MUCH TO DO

The European electricity network is in many ways a great success. In 2022, France increased imports from Germany as nuclear power output fell. When Russian gas supplies to Europe via Ukraine were stopped last week, the impact on prices was muted as the bloc found alternatives.

But for some, more needs to be done. Following Greece’s electricity price hike last summer, Prime Minister Kyriakos Mitsotakis wrote to the European Commission demanding a solution to the “unacceptable” differences in electricity costs across Europe.

Greece is not alone. Much of the Balkans is heavily dependent on fossil fuels and the region’s electricity system is weak. In June, a blackout hit Montenegro, Bosnia, Albania and Croatia when the grid was overloaded with air conditioning needs during the heat.

Kosovo, which generates more than 90% of its power from coal, is struggling to catch up with the rest of Europe in installing more renewables.

In December, it launched an auction to install 100 MW of wind capacity. But the World Bank estimates that it will need 100 times that – at least 10 gigawatts of new capacity – to meet its target of eliminating coal use by 2050. This transition is estimated to cost Kosovo and 4.5 billion euros, an alarming amount for a small economy.

Without sufficient cross-border integration or storage, there is sometimes too much power for a market, forcing producers to reduce supply.

“If the target is more concrete to reduce prices, the easiest way to do that is to increase the penetration of renewables or nuclear,” said Fabian Ronningen, an analyst at the consultancy Rystad Energy.

While Greece has no nuclear plants, Aristotelis Aivaliotis, secretary general of the Energy Ministry, is upbeat, noting that renewable output is on the rise, two new gas-fired power plants are scheduled to come online this year, and batteries storage to be built in 2028.

The plans also call for electricity connections in Italy, Albania and Turkey to be upgraded by 2031 at a cost of around 750 million euros.

“Wholesale prices will gradually fall … and this will definitely be passed on to consumers at some point,” Aivaliotis told Reuters.

Greek customers are not convinced. Taxiarchis Fekas, who lives in a suburb of Athens, struggles to pay school tuition and allowances for his three children because the electricity bill is so high.

She urged her children to reduce their laptop and tablet use to save electricity – a tough request for kids who are glued to their devices.