A new Special Report published by the Institute of Energy for Southeast Europe (IENE) examines the rebalancing of Greece’s energy market and the negative impact on the economy following the Russian invasion of Ukraine. The report also considers the outlook of the market for 2023. Furthermore, the report provides a critical analysis, based on detailed data, on the market's performance over the past year, as already presented in the Institute's 2022 Energy Analysis Report, and also highlights the key issues that emerged.
In 2022, there was a significant divergence from previous years due to the exceptionally high prices of almost all energy commodities. The extremely high prices of natural gas and electricity in 2022 had a significant impact on the entire economy. The steep increase in energy costs throughout the year led to historically high levels, affecting industrial production, businesses, and household consumption. The increase in energy costs was passed on to the supply chain and ultimately reached the final consumer.
The Report emphasizes that the unprecedented energy prices caused by high electricity and natural gas prices resulted in energy subsidies amounting to €8.2 billion in the last 18 months. The escalation of prices of essential goods and services also had a near catastrophic effect on the budget. Despite this, the Greek economy showed steady growth in the first half of 2022. However, the growth rate was affected in the second half of the year due to rising inflation. In 2022, the average annual inflation rate was at a record high of 9.6%, the highest since 1994.
The most significant event in the energy sector last year was the conflict in Ukraine, which had an immediate effect on the security of natural gas supply and, also, negatively affected oil and electricity prices. Furthermore, in addition, there were other occurrences and incidents throughout the year that had a significant impact on the energy sector.
These developments for 2022 are summarized as follows:
- The increase in energy prices that had been on the rise since the summer of 2021 was significantly accelerated by the war in Ukraine. This caused an increase in electricity prices, especially in the average Market Clearing Price, and led to a decrease in electricity demand.
- Lignite returned dynamically to the country's energy balance reversing the government’s decarbonization plans.
- 2022 was a record year for the installation of RES units, as 1,700 MW of new installed capacity was added.
- However, the electrical distribution network suffered significant flaws, which caused a reduction in the supply of energy from renewable energy sources (RES) for the first time in many years.
- Greece recorded massive electricity imports, higher than ever before.
- For the first time, Greece became a net exporter of natural gas to northern countries, especially Bulgaria, and increased its sway in SE Europe.
- Despite the obvious need to strengthen the energy mix with conventional sources used by the majority of consumers, there is no coordinated policy arising from the new National Energy and Climate Plan (NECP), as it deals exclusively with RES and hydrogen.
The challenges that need to be addressed include coordinating a tighter monetary policy with targeted fiscal support measures, the possibility of a prolonged economic slowdown, and the potential for the energy crisis to worsen in the latter part of 2023.
The report concludes by pointing out that the fluctuating energy prices create more uncertainty for both businesses and households. The possibility of an increase in "imported" inflation cannot be ruled out, primarily due to the high prices of energy products, while the deflation rate for imports and exports surpass the corresponding rates for consumption and fixed capital investments.
You can read the complete IENE Special Report here.
