Friday, 30 December 2011

The Greek Green Energy Bubble – II



The first confirmation of the coming pricing problems in Greek energy sector became visible  yesterday with the publication of the first official proposal on energy price increases by the Hellenic Ministry of Environment and Energy (YPEKA) and the Public Power Corporation(PPC).

These amount to an annual increase of 9.2% for the PPC’s own domestic generation cost plus 3% for the renewable energy cost.

While this is far below the initial suggestion of the Energy Regulatory Authority’s (RAE) 16% increase, as well as PPC’s 20% increase, the proposed increases have caused renewed public outrage.

The President of the Greek Chamber of Commerce and Industry, Mr. Dimitris Asimakopoulos, stated on SKAI TV that energy costs today are higher than social insurance costs in most enterprises.

It must also be remembered that the total cost PPC bill is magnified several times by additional taxes on either the base electricity price, or by the number of square meters of the property being supplied with energy. These include:

·       A municipal tax
·       A special tax on property
·       A tax for the state television and radio broadcaster, ERT
·       Value-Added Tax (VAT)

These indirect taxes routinely increase the electricity bill by at least 2x the price of electricity.

As such, the PPC bill is an example of failed government policy, in that it has transformed what should be a relatively simple billing exercise from an “independent power producer” into a focal point for public outrage and resistance. It is also an example of a massive public policy failure to properly plan for flexible feed-in tariffs for renewable energy, together with the lack of any real limitations on licensing of renewable energy installations.

This also points to the fact that Greece is now in the throes of an inflationary depression. GDP will fall by approximately 5-6% in 2011; inflation is currently running at 2.5% monthly, and higher on an annualised basis, primarily due to new indirect taxes. Together with official unemployment of about 18%, it is painfully clear that the choices in public policy mandated by the Troika and the government have failed, at least in the short term, and will lead to further severe economic damage in 2012.


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December 10, 2011


© Philip Ammerman, 2011
Navigator Consulting Group

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