Sustainable Growth Greece Interview

The Interconnection of Greek islands: Another Perspective on the EU’s Security of Energy Supply and Economic Growth

How Greece's tremendous natural resources could contribute to foster clean energy on a European level

Greece disposes of considerable natural resources to foster clean energy in the country itself but also on a European level. Yet, this potential remains unrealised to a large extent. The interconnection of the so-called Greek Non-Interconnected Islands (NII) opens up new opportunities in this direction. In this interview, Dr. Theodore Panagos explains the possible economic, social and even geopolitical repercussions.

Dr. Panagos, for a start could you please elaborate on this project aiming at better interconnecting the Greek islands in brief?

There are almost 130 inhabited islands throughout the Aegean Sea. These islands mainly constitute small isolated or micro isolated systems. Until now, the electricity demand of these islands is covered by oil and renewable energy power plants (80% – 20%), which are installed on some of them. On the other hand, there is a very good wind capacity in this area all year long. The concept is to interconnect the NII firstly among themselves and then to the continental electricity system.

Have the operators already planned such projects?

The main idea came up in the early 2000s. The Hellenic Transmission System Operator (HTSO) has already planned the interconnection of Cyclades to the continental system through a bidirectional interconnection. In addition, the interconnection of Crete to the continental electricity system is also under planning and there is a big interest on behalf of private companies to participate in this project. But this is only a part of the entire project. It needs to be noted that, to make this project operative, an installation of wind parks on some islands is necessary, to make sure that the electricity produced by these parks will be transported to the continental electricity system. In case that there will be not enough wind capacity on the islands during some days, energy will be transported from the continental system through the same interconnection towards the islands to cover their demand. Furthermore, a photovoltaic capacity of 200 MW has been already installed and has been operating on these islands since 2008, injecting energy into the local grids.

Who will take over the installation of the wind parks on the islands?

Private companies of course. There are groups of private energy companies that are licensed to install wind capacity on the islands and they are able, willing and interested in carrying out this business. The same companies have great interest to participate in the construction of the necessary loops among the islands and, obviously, in the construction of the final interconnection to the continental electricity system.

Is it necessary to install wind parks on every island?

Not at all. Anyway, this is not possible. There are strict spatial restrictions for the installation of wind parks on the islands. The licensees usually plan to install the wind parks on bigger islands with the ideal morphology, so that the whole landscape of the islands will be respected.

Do you have an idea about the probable wind capacity to be installed on the NII for this project?

In my opinion, a capacity of minimum 1500 MW of wind parks could be installed, replacing an analogous capacity of polluting energy in both continental (lignite) and NII (oil). Considering that there is already an almost 250 MW of wind park capacity on these islands, mostly in Crete, the economic, social and environmental benefit seems to be significant.

This project will ensure the security of supply, in quantity and quality, of all islands concerned. The security of electrcity supply of Southeastern Europe will be strengthened.

What are the exact benefits of this project?

I can refer to many of them. First of all, this project will ensure the security of supply, in quantity and quality, of these islands themselves. When the entire interconnection will operate, the polluting lignite power plants, operating in the continental system and the polluting oil power plants on the islands will be withdrawn (decommissioned) because this energy will be replaced by the wind energy.

The security of electricity supply of Southeastern Europe will be strengthened and when the Euroasia Interconnection (Cyprus-Crete-Greece-Italy-other member states) will be under construction, it will already have a pathway to Greece. The local grids on the islands will be upgraded, so the quality of electricity there will be improved. It is obvious that the energy dependence on fossil fuels will be mitigated, while the regional growth will improve.

In addition, the project will offer significant geopolitical effects to EU, as it will offer a safe alternative for security of supply from the borders of the EU (Kastelorizo island, the last island-border of EU) to all Southeastern European state members. Another important issue is the ensuring of the European Exclusive Economic Zone before third countries, since the economic life of the islands will be strengthened, too. Last but not least, the interconnection will reduce the greenhouse emissions (compatibility with the COP-21, Paris Convention) at European level, since the electricity will be produced by green energy.

This project will offer significant geopolitical effects to the EU, as it will offer a safe alternative for security of supply from the borders of the EU.

Will this project benefit the consumer?

Absolutely. All Greek consumers are burdened every year with at least 400-800 million euros due to Public Service Obligations (PSOs), in order to maintain the price of the KWh on the NII at the same level with the continental KWh. Upon starting the operation of the interconnection, this money will be deducted from the electricity consumers’ bills. It will be an important economic relief.

Which is the estimated cost of the whole project?

In 2008, the cost of the entire project was evaluated to 4-5 billion euros. It should be more or less the same cost even today. If for someone this cost seems to be high, it is not when considering the total profit, as mentioned above. Imagine that in 10 years of the future operation, 5-8 billion euros could be saved only from the PSOs! Anyway, projects like that cannot be considered with a short economic view but with a projection of 30-50 years and the overall profit.

Banks were reluctant to support this sort of projects due to the economic situation in Greece. The mere possibility of ‘Grexit’ caused a lot of problems to the country’ s growth.

Why did this project not proceed?

There are multiple reasons why this project could not proceed until now. First of all, there is the difficulty of funding the project. This project could be realized with the cooperation between the private sector and the public. However, the banks were (and are) reluctant to support this sort of projects due to the economic situation in Greece. You see that the mere possibility of ‘Grexit’ caused a lot of problems to the country’ s growth.

Another essential obstacle is the lack of acceptance of some local island inhabitants. Some local societies are reluctant to accept the installation of wind parks on their territory and are trying to stop them through judical measures. Sometimes the judical procedures are successful. In our opinion, there is a lack of information for the inhabitants of some islands. The local authorities do not inform the people properly. Perhaps, sharing the experience of mayors in other member states could be one option to eliminate the negative arguments.

Furthermore, there is a lack of decisive government support. The political party that is in government now, supported the environmental importance of renewable energy everywhere when in opposition, but when in government it does not take a specific and clear position, leaving the whole issue beyond the political control. However, the Regulatory Authority for Energy brought recently in public its decisive intention to promote the project.

The lack of acceptance of some local island inhabitants is an essential obstacle.

How, in your opinion, could these problems be overcome?

As far as it concerns the economic problems, it should be a decisive interest of the EU to support this approach. Thus, foreign and local banks should be encouraged to fund the project, along with the World Bank, the European Investment Bank and others. The problem of local societies refusing the project is quite complicated; people need to be informed about the benefits of the entire project for their own societies. This is the job of the central government and the local authorities. However, these authorities should be convinced first of all themselves, in order then to convince the citizens.

It should be a decisive interest of the EU to support this approach. This project is not only a national project but also a European one.

Actually, the same authorities should be convinced that they would have nothing but benefits from this project and that there is only one way to accept the project for public interest reasons. Perhaps, the likely participation (obviously not in the management) of the local municipalities in the project might be useful. However, it should be done very carefully and commitments should be given to the private sector to make sure that the local authorities do not jeopardize the project, that is to say not to take the matter to a political bargain. A targeted information campaign on behalf of the government would be very useful too. Finally, as the project is of a common European and national interest, a constant consent of the main political powers should be achieved.

What could the EU do to foster this approach?

The participation of the EU could be very important. First of all, the EU should realise that this project is not only a national project but also a European one. It is a project of real growth. The European institutions should also support, each under its jurisdiction, this approach by any means. The Greek electricity market is already and directly interconnected to other member states such as Italy or Bulgaria and it is important to ensure this interconnection, in order to offer more security of supply and energy independence to these state members. Finally, the EU could push the Greek government to eventually proceed further in this very important project by all means.

The interview has been conducted by Vanta-Vasiliki Kyriakou.

Dr. Theodore Panagos is Visiting Professor in Energy Law at the International Hellenic University (Thessaloniki, Greece) and Managing Partner at the PFG Law Firm. He served as Vice Chairman at the Regulatory Authority for Energy (2005-10) and he was a member of the National Energy Council (2006-9). He lectured (2017) Oil and Gas Law at the Law School of Exeter University (UK). On top of that, Dr. Panagos has published Energy Law books, including Hydrocarbons Law and Policy, as well as numerous papers on energy issues.