Greece delays closure of three coal plant units to 2025

PPC’s lignite plants are to continue to operate beyond 2023, in a reversal of the government’s decarbonization policy.

The government of Prime Minister Kyriakos Mitsotakis promised in 2019 a quick decarbonization of the country’s power sector through the decommissioning of almost all lignite-fired plants by 2023. However, the energy crisis has silently led to a postponement, with an uncertain effect on climate goals.

More specifically, the original plan was for all lignite plants to retire by the end of 2023, except for Ptolemaida 5, Public Power Corp.’s (PPC) new unit that was supposed to operate with lignite for a few years before switching to natural gas by 2028 at the latest. Through the plan, Greece would end its consumption of lignite and replace it with renewables and natural gas.

Skrekas: Lignite must provide 17% to 20% of electricity in the winter

The energy crisis has placed the security of supply at the forefront of energy policy, while natural gas is no longer seen as the transition fuel because of its high cost. The coal power sector was called upon in the summer to once again increase output to help keep prices down. The plants are currently producing almost 10% of the country’s electricity.

According to Minister of Environment and Energy Kostas Skrekas, the short-term goal is for lignite plants to cover 17% to 20% of the country’s needs during the winter. To make it happen, the ministry and PPC have boosted operations at large lignite mines, but technical issues remain, as capacity utilization weakened substantially over the past years.

New extensions issued

PPC’s lignite plant units Meliti 1, Agios Dimitrios 3 and Agios Dimitrios 4 recently received an extension from 2023 to the end of 2025 in order to help secure the Greek system. The permits provide them each with about 30,000 total hours of operation from the middle of 2021 to the end of 2025. It is estimated that currently they have about 20,000 hours left apiece.

The ministry argued that the European Union demands a reduction of natural gas consumption as a result of the crisis.

Ptolemaida 5 to remain a lignite plant

Another aspect of the policy turn has to do with PPC’s brand new Ptolemaida 5 plant, which is in the process of testing before commercial operation around the end of 2022.

In past years there was a plan to switch fuel from lignite to natural gas at some point from 2026 to 2028 to enable the plant to continue working. However, the government has been silent about its plans for Ptolemaida 5 and some market players believe it is going to remain a lignite plant at least through 2028 and possibly even further.

Power plant economics at the core of calculations

The energy crisis has created a lot of uncertainty concerning the commercial viability of gas plants compared to coal plants. Right now, the high cost of natural gas has made lignite more competitive in the market, reversing a multi-year trend. Countries like Greece are currently preparing their revised national energy and climate plans (NECPs), expected in 2023, which need to set new goals for 2030 for each technology.

According to recent studies, new natural gas plants will have a hard time competing in the wholesale market from 2025. It is true for Greece as well as they would require capacity mechanisms to remain afloat. Since fuel costs directly influence the size of the remuneration mechanism, the Greek government wants to retain all options open. It is why it will be interesting to see the new national goal for natural gas and lignite in the upcoming NECP.