Greece is expected to launch its first auction of subsidised guarantees of origin (GOs) in December or early 2024, potentially offering an estimated 6 TWh of 2023 GOs in total by the end of the compliance period in March 2024 which could have a short-term bearish price impact.

The country has been exporting GOs via ex-domain cancellations – since direct exports will only become possible in the following weeks – and most of the expected auctioned volume will most probably flow towards other AIB countries.

Greek Registry and Issuing Body DAPEEP’s planned auctions could have a short-term bearish impact on prices given that large volumes will be offered in just a few sessions which will be possible until the disclosure deadline for 2023 which is on 31 March 2024.

Background

Greece will be the eighth country that auctions supported GOs in the AIB market. After a successful connection of the Greek registry with the AIB Hub in early October, imports of GOs to the country have become available. Exports will follow in the next weeks. Enabling cross-border trade with the rest of the AIB market was an important milestone for DAPEEP which plans to auction off supported GOs that have been accumulating in its registry’s account since the beginning of the year.

Greece has been an AIB member since 2019, issuing European Energy Certificate System (EECS) GOs based on an approved domain protocol by the AIB in 2019. However, the digital registry infrastructure needed for the cross-border transfer of GOs had not been in place, rendering Greece a special case that was interacting with other markets, only via ex-domain cancellations, without being able to import or export GOs via registry transfers.

This special condition was the reason why local GO prices used to be lower than the prices in the wider market. Indicatively, in March 2023 the Greek GOs were trading between 4-6 EUR/MWh, while in the AIB market, the price was above 7 EUR/MWh, marking a premium of at least +1.5 EUR/MWh.

Subsidised GOs

In Greece, GOs for production from “old” plants that are subsidised and have started commercial operation before 1 January 2021 are issued in favour of DAPEEP and they are automatically cancelled in favour of all power suppliers in the country. In 2022, a total of 9.92 TWh of GOs were cancelled this way, representing 19.2% of final electricity consumption.

The GOs for “new” plants that receive operational support (via FiT or FiP) and started operation after 1 January 2021 used to be freely traded between producers and suppliers. However, since the law was changed in August 2022, these GOs are issued in favour of DAPEEP to be sold off in the monthly auctions.

This means that GOs have been accumulating in DAPEEP’s registry account since then, with market participants awaiting the start of the auctions to see these volumes getting back into the market. While the GOs issued between August – December 2022 will have expired by the time of the first auction and they will not be eligible for transfer, GOs for early 2023 production will be transferrable until early 2024 - given that GOs are transferrable for 12 months after issuance – and eligible for cancellation until 18 months after issuance. In this time window until early 2024 DAPEEP will have to unload these GOs into the market, especially ahead of the disclosure deadline for 2023 which is 31 March 2024.

For the first nine months of 2023, almost 16 TWh of renewable electricity (excluding electricity produced by 3.2 GW of large hydropower plants) were produced in Greece. Out of these, 4.55 TWh were generated by “new” RES plants for which the GOs are issued in favour of DAPEEP and will be auctioned off. The remaining 11.5 TWh were produced by plants that are either involved in a PPA or are “old” plants.

Greek GO issuance reached 12.56 TWh in the 2021 disclosure period (April 2021 – March 2022), while cancellations stood at 4.6 TWh and ex-domain cancellations at 8.3 TWh, according to the most recent DAPEEP presentation. For the 2022 disclosure period, issuance slowed down to 9.11 TWh mainly because DAPEEP prevented the issuance of GOs for production from “new” installations since August 2022, when the new legislation on supported GOs came into effect.

These changes did not affect local cancellations which were slightly higher than 2021 levels at 4.8 TWh, but impacted ex-domain cancellations that were cut down by 43% year on year to 4.7 TWh. The exports were facilitated at a discount compared to other AIB GOs because the process of ex-domain cancellation is more expensive and more time-consuming than a simple transfer from one AIB registry to the other. Given that around 50% of total issuance in 2022 was exported (via ex-domain cancellations) and that Greek GOs were traded at a discount compared to GOs from other AIB countries, we can conclude that the willingness to pay among Greek consumers is lower than that of the AIB consumers. For this reason, when transfers from Greece to the AIB countries will be available, it is expected that most GOs issued in Greece will flow outwards.

Market impact

According to DAPEEP, the first auction is intended to take place in December or early 2024 – the registry is still waiting for the national energy regulator RAAEY to approve the auction rules. 

If the last three months of 2023 follow the average production of the preceding months (average 0.5 TWh production from new plants per month), an estimated maximum of 6 TWh of 2023 GOs should accumulate in DAPEEP’s registry account by December. It is improbable that DAPEEP will choose to offer the entire quantity in one auction session as this amount of GOs could have a significant bearish effect on the prices on the day of the auction.

However, considering that the disclosure deadline for 2023 is 31 March 2024, DAPEEP has a narrow time window to auction off these GOs. If the Greek issuing body delays its first auction further and holds only two auction sessions before March, we could see offered quantities of up to 3 TWh in each session. This size of offered volume is comparable to that of EEX, the exchange that organises the auctions with the biggest traded volumes in Europe.

DAPEEP will almost certainly try to sell the maximum possible quantity of GOs as the revenues from the auctions will fund the running deficit of the account that covers the monthly cost of the renewables subsidy scheme which is also managed by DAPEEP. In September the deficit stood at EUR 37m, according to DAPEEP data. Auctioning off 6 TWh of GOs at the market price that Veyt observed on 22 November 2023 could generate a revenue of EUR 22m.

Greece has been a net exporter of GOs (via ex-domain cancellations) for the last three years mainly due to the low willingness to pay among Greek consumers. Now that the exports of GOs in the form of transfers to other AIB registries are about to be activated, the process of exporting will become cheaper. Demand from domestic consumers is not expected to increase significantly soon, while GO supply is going to grow amid ambitious government renewables targets.

The latest National Energy and Climate Plan (NECP) draft sets targets of a 44% share of renewables in gross final energy consumption and a 78% share in electricity production by 2030. The target for renewable installed capacity is set at 27.5 GW, almost double the current amount (14.25 GW).In addition, more and more “old” plants will reach the end of their support scheme, adding even more to the GO supply in the long run. Looking at these prospects, Greece is predicted to play a more important role in the market in the long run.