Why the Government is Worried About Gas Prices - No Discussion on Reinstating Subsidies on Bills
The possibility of a new electricity bill subsidy is not currently on the table.
The government is closely monitoring developments in the natural gas market, as it notes that despite the de-escalation of geopolitical tension in the Middle East, TTF prices remain significantly higher than what the market expected.
However, according to government sources, there is currently no discussion about reinstating subsidies on electricity bills, as the wholesale market picture does not yet justify such an intervention.
As the same sources explain, the average wholesale electricity price in July is around €113 per megawatt-hour, a level similar to that prevailing for several months during the past winter. At the same time, prices in neighboring markets also remain high, with Bulgaria at similar levels and Romania and Hungary recording even higher prices, indicating that the pressure is regional and not solely a Greek phenomenon.
Where the Government Attributes the Electricity Market Picture
Government officials point out that the electricity market picture has been burdened mainly by the significant decline in wind generation. While a few weeks ago renewable energy sources were producing 120 to 130 GWh daily, production has now been limited to 70 to 80 GWh due to weak winds. This development increases the share of natural gas units in the energy mix and leads to higher wholesale prices.
At the same time, increased tourist activity and heavy use of air conditioning have significantly raised electricity demand. According to government estimates, consumption has increased by about 20% in recent weeks, not due to extreme heatwaves but mainly due to summer tourism.
Despite the worsening conditions, government sources clarify that there is no proposal nor has any discussion begun on state subsidies for green tariffs. As they point out, the current market picture is far from the conditions that prevailed in previous crisis periods, when the wholesale price soared even above €150 per megawatt-hour.
Furthermore, it is emphasized that the impact of the wholesale price on final bills is not linear, as when the day-ahead market price increases, balancing costs often decrease, which acts as a counterbalance in the formation of final supply tariffs. For this reason, as the same sources note, the need for subsidies cannot be assessed solely based on the average wholesale market price.
The greatest concern lies in the European natural gas market. Despite the ceasefire in the Middle East and the significant de-escalation of international oil prices, the Dutch TTF contract remains near €48-49 per megawatt-hour, a level significantly higher than what the Greek side considered likely after the de-escalation of the crisis. Government sources note that they expected the market to move toward the €30 level, a development that ultimately did not materialize.
Concern is heightened by the fact that the forward curve currently provides no incentive for natural gas storage. With next winter's prices even lower than current ones, trading companies have no economic reason to buy gas now, bear storage costs, and sell it later. This complicates the filling rate of European storage facilities and is one of the main reasons for concern in Brussels.
The focus is mainly on countries like Germany and the Netherlands, which are experiencing delays in replenishing natural gas reserves. The Greek government is in constant contact with European institutions, assessing the progress of reserves and their potential impact on the market ahead of winter.
At the same time, government officials estimate that Greece has begun to be more affected by developments in Southeastern European markets. The weakening of electricity exports and the stronger interconnection with Bulgarian and Romanian markets have limited the advantage that the Greek market had in previous months, when high exports acted as a "relief valve" for domestic prices.
The general conclusion drawn from government sources is that the situation does not cause panic but requires close monitoring. Prices have returned to winter levels and not the very low spring levels, while developments in the natural gas market, the course of European reserves, and weather conditions will be the main factors determining the price trajectory in the coming months.
For now, however, the possibility of a new electricity bill subsidy is not on the table.
Source: capital.gr
