Karatzis, Mytilineos sign solar power PPA in Greece for 271 MW

The companies Mytilineos and Karatzis signed a power purchase agreement (PPA), allowing for the construction of three large photovoltaic plants in Greece.

Under the PPA, Karatzis will sell the electricity from three projects with a total capacity of 270.8 MW to its customer, signalling a positive development for the Greek PPA market as a whole, which has been experiencing certain obstacles and slower pace than initially expected.

The investments amount to EUR 190.8 million, of which EUR 159.6 million will be provided through the European Union’s Recovery and Resilience Fund (RRF) and bank loans.

Karatzis got loans approved earlier from Eurobank and Bank of Piraeus. It also secured equipment supply contracts. Construction has begun near Kileler in Thessaly and the facilities are expected to become operational in the third quarter of 2024.

This new deal means that it still makes sense for certain large producers and consumers to enter the PPA market, despite the fact that prices have risen over the last couple of years.

However, it remains to be seen whether more players will embrace PPAs, since multiple obstacles remain in Greece. There is also the issue of scale, since PPAs are complex and expensive tools, so for now they only make sense for larger companies.

Karatzis targets 600 MW of renewables

Both Mytilineos and Karatzis are well-known Greek industrial groups. Mytilineos produces metals and also has a vertical presence in the energy market, being one of the top private producers and suppliers. Karatzis produces a variety of netting products and has five plants. In recent years it expanded into green energy through the construction of photovoltaics.

The company has set a high goal for its renewables arm. It aims to install 330 MW of photovoltaics with batteries in Thessaly in Central Greece within the next few years.

The investments will contribute to Karatzis’s goal to reach 600 MW of renewable capacity. The group’s financial results for 2022 showed that energy provided 18.2% of its total sales with EUR 6.6 million, a percentage the company expects will grow over time.

The PPA market faces hurdles

So far 30 PPAs have been signed in Greece, split almost equally between physical and financial deals. A few so-called sleeved PPAs involve intermediaries, such as the deal between the Public Power Corp. (PPC) and Viohalco with Heron as the middleman.

Despite the interest that large consumers initially showed, the market seems to need more time to move forward with the required speed.

A renewable energy project with a PPA gets priority in grid connection. However, consumers hesitate for reasons including curtailments that cause uncertainty about available production and affect virtual PPAs. Expectations of a drop in power prices can also lead consumers to the wholesale market instead of locking a price for many years through PPAs.

Mytilineos: Green Pool initiative rejected after a year

Greek industries have placed their hopes on the so-called Green Pool, a framework of public support for new PPAs. It was designed to help large industrial electricity consumers like aluminium, steel, glass and cement plants jointly sign up under the supervision of a public body acting as a single buyer and seller for participating companies.

However, the European Commission rejected the government’s proposal last month, and new efforts are being made to resubmit it in a new and better form.

Mytilineos Group’s chairman and CEO Evangelos Mytilineos lamented the commission’s decision at the time. “Unfortunately, we heard the bad news that the Green Pool plan was rejected after a year of consultations. Each country is trying to achieve economies of scale, and it is tough,” he stated.

It should be noted that the PPA market has been facing challenges over the past the last couple of years in Europe as a whole. Prices rose during the energy crisis and many companies turned to other mechanisms to achieve price stability. As part of the new electricity market architecture, to be concluded by the end of this year, the EU focuses on both PPAs and contracts for difference (CfDs) as well as on improving the futures market, in order to provide a complete range of solutions to consumers and producers alike.