Greece passes long awaited law on RES licensing regime

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On 4 July 2022 and following a waiting period of almost two years, the Greek Government has enacted 4951/2022 (the “Law”) on the reform of the second-phase RES licensing process and the energy storage framework.

The Law comes at a time of rich legislative activity in the energy climate and environmental front and aims to ensure Greece’s compliance with its National Plan for Energy and Climate, as well as with its National Recovery and Resilience Plan “Greece 2.0”, which would ultimately help release funding for energy-related investments.

The key areas covered by the Law are the following:

  • Reform and acceleration of the RES licensing process
  • Grid capacity
  • Storage

Reform of the RES licensing process

The first area touched upon the Law is the reform of the RES licensing process. The law introduces some key amendments affecting the 2nd Phase of the licensing process, in an effort to make it swifter and more efficient reducing its duration from 5 years to 14 months. The most important changes introduced in this regard may be summarised as follows:

Abolition of the provisional grid connection offer
The new law provides for the abolition of the provisional grid connection offer. This means that contrary to the previous regime, the producers will directly apply for the issuance of a Final Grid Connection Offer (“FGCO”) by also submitting the required grid connection bond (“GCB”), whilst the Operators must respond to the above application by granting a FGCO or by rejecting the application within 2 months as of the date of completion of the application. Meanwhile, for those applications submitted to the Operators prior to the publication of the new Law which are currently pending, interim provisions stipulate that the applicants are required to submit such GCB within 4 months from its publication. In case such GCB is not submitted within the above deadline: (i) the application for the Grid Connection Offer will be considered incomplete, meaning that current priority may not be maintained, and other Grid Connection applications will take precedence in their examination by the competent Operator; and (ii) the producer’s certificate of the project concerned will be revoked unless a Producer’s Certificate Letter of Guarantee is submitted to RAE within the above deadline. Nevertheless, in the event that the competent Operator issues a FGCO prior to the expiry of the aforementioned 4-month deadline, whilst the project owner has not submitted the GCB by that time, the project owner shall be obliged to submit the GCB upon acceptance of the FGCO.

While the amendments introduced are expected to reduce timing, they are also bound to create uncertainty as investors will be henceforth required to submit the requested grid connection bonds without having visibility on the technical and financial parameters of the offers to be issued by the respective Operator. This is especially so given that investors may also face curtailment clauses in their FGCOs or face an overall suspension of the grid connection process which is also allowed under the provisions of the new Law.

Installation licence
The procedure for the issuance of the installation licence is not radically amended. The most noteworthy point, introduced in this regard, is that the submission of an application for the issuance of the installation licence constitutes an additional milestone investors need to comply with on risk of losing the project. More concretely, investors need to have applied for the issuance of the installation licence within 12 months (for photovoltaic and hybrid stations, as well as onshore wind farms,) 18 months (for other RES and CHP stations and/or energy storage stations) and 24 months (for special or hybrid projects comprising the construction of undersea connection of two or more non-interconnected islands) from the date of acceptance of the FGCO respectively. To be noted that the aforementioned periods of 12, 18 and 24 months respectively may be extended for an additional period of 12 months subject to the payment of a monthly fee of Euro 1,000/MW. In case the above deadline is not complied with, the project’s Producer’s Certificate is automatically revoked. The same fee will also need to be paid in case the investor requests for the extension of the installation licence for an additional period of 12 months.

The recent amendments which are expected to be further detailed through a Regulation to be enacted soon are expected to put pressure to projects, especially photovoltaics to complete the procedure for securing the land as swiftly as possible in order to avoid paying the substantial extension fee which is almost ten times higher than the one foreseen by Law 4685/2020 for the extension of the time period provided for submission of the application of the Approval of Environmental Terms (“AET”) and the application of the grid connection offer.

Digitisation
One of the most innovative and long-awaited parts of the new Law is the official introduction of the digitisation of the licensing process. This covers, among others, communications with the authorities through electronic means, submission of applications through e-platforms interconnected with gov.gr, online posting of pending applications for the issuance of Grid Connection Offer and Connection Agreements and other development details of RES projects, etc. Additionally, a unified information electronic system is also introduced, which is expected to facilitate the day-to-day business of both investors and authorities. Such system is expected to be interconnected with the electronic platforms of all authorities and operators involved in the licensing of RES projects. Until such unified system becomes operational, new Law dictates all market players shall communicate through electronic means.

Important Grid Issues

Curtailment
Among the most controversial provisions of the new Law are the ones relating to curtailment. By virtue of the Law, Operators may at their discretion include in the FGCOs issued by them or in the Grid Connection Agreements clauses whereby curtailment will be allowed in case this will result in efficient utilisation of the System and Grid’s infrastructure and the possibility to allow more stations to connect to the grid. Thus, Operators may impose operational restrictions to the injection of electrical power to the grid prior to the issuance of a relevant Ministerial Decree by the Minister of Environment and Energy that will set forth the details of the enactment of the above, where required. Until the issuance of said Ministerial Decree, curtailment shall not exceed 5% of the annual capacity of electricity production by RES and CHP stations per area. In addition, the operational restrictions up to 5% may also apply retrospectively; this means that Operators may impose said restrictions to projects that have obtained FGCO prior to the publication of the Law, unless these projects fall into one of the following five cases: a) have already entered into a Grid Connection Agreement or b) have submitted a complete application for a Grid Connection Agreement upon enactment of the new Law or c) are already operating or have submitted or shall submit a declaration of readiness until 31 December 2022 or d) have been chosen to be included in the operating aid regime through a competitive bidding process or e) are exempted from the competitive bidding process.

It is noted that although the enactment of the above promotes efficient utilisation of the available RES and CHP potential, its application to certain stations may result in the reduction to the expected revenues from the power generation of the stations concerned, since the producers are not entitled to compensation under the new Law, unless applicable curtailment limits (i.e., 5%) are infringed by the Operators.

The introduction of these provisions, which has been strongly criticised by market players, brings to the surface the issue of grid expansion and modernisation which becomes even more imminent as electricity generation from RES sources will be expected to increase.

Private Grids and Special Registries
The new Law allows for the construction of the private grids. Specifically, the owners of RES stations are under the provisions of the Law entitled to construct medium voltage private grids, without submitting a joint application for the granting of a FGCO to IPTO. Furthermore, under the new regime, said owners maintain ownership of the grid and assume responsibility of its operation and maintenance. RES and CHP stations that connect to the exclusive private grids must meet certain conditions provided by the Law. It is noted that the construction of said grids would be primarily underground, whilst overhead grids would be constructed in exceptional cases and under certain conditions specified by the new Law. However, said provision shall not apply to RES stations for which FGCO have been granted prior to 01.07.2022.

In addition, special registries for the private medium and high voltage grids constructed by RES and CHP producers will be established and maintained by both competent Operators (IPTO and HEDNO), where the visualisation of grid works will be available.

Release of grid capacity
The new Law has inserted various provisions which aim at decongesting the available electrical space. To this effect, the Law includes provisions for (a) the readjustment of the capacity margins in congested areas, through appropriate amendments in the regulatory framework, (b) the release of the electrical space from non-operational power stations and (c) the suspension of submitting applications for FGCOs.

More specifically, with respect to the suspension mentioned above, the Law stipulates that from 01.09.2022 for all PV stations or 01.10.2022 for PV stations located in the Region of Western Macedonia, HEDNO shall not accept new applications for granting of a FGCO, except if such applications concern net – metering, household PV systems or other categories of PV stations in congested areas. Nevertheless, if, after the publication of the new margins of power capacity, which will take place every 3 months by HEDNO, there is a limited number of pending applications in a specific area, HEDNO shall revoke said probation and thus accept new applications of PV stations and grant FGCOs for the relevant area under the limitations set out by the new Law.

In addition, in order to decongest the processing of pending applications for the issuance of FGCOs, the new Law provides that IPTO may suspend the submission of the new applications for a maximum period of 6 months. To do so, the said Operator must inform the interested applicants respectively at least 90 days before the implementation of the relevant probation. If the above suspension applies, said period shall not be taken into consideration for the calculation of the deadline within which the investors have to file an application for a FGCO.

Energy Storage

The Law introduces long awaited provisions for energy storage projects, reforming existing regulatory framework, addressing regulatory gaps for projects combining electricity production and energy storage and implementing EU Directive 2019/944 on common rules for the internal market for electricity. The implementation of energy storage projects is considered of high importance and is expected to resolve issues such as balancing and congestion management and variability in the production of electricity from RES.

The provisions of the Law regulate projects used exclusively for energy storage, as well as projects that combine electricity production from RES and CHP and energy storage. Combined projects are further distinguished to those which cannot absorb and store electricity from the grid and those which absorb and store electricity from the grid. The latter must obtain a Producer’s Certificate for special RES projects and are not permitted to enter into Operating Aid Agreements. Both categories may participate in the balancing energy markets.

New Law describes the procedure for the issuance of Energy Storage Licence for projects operating exclusively for energy storage or the issuance of Producer’s Certificate for combined projects, including provisions for the application process and timing, the payment of one-off application and issuance fees, the process for resolving territorial overlaps, the objections process, the procedure for the amendment and the transfer thereof, etc. The above will be further regulated in detail by the Regulation of Energy Storage Licences to be issued by RAE and the Regulation of Producer’s Certificates.

Attention should be drawn to the interim provisions of the new Law, which require that owners of existing licences must submit additional documentation in compliance with the newly adopted provisions within 3 months from the announcement of RAE. RAE will revoke existing licences which do not comply with the requirements of the new Law. In addition, pending applications for combined projects at the date of the adoption of the new Law are rejected.

Finally, applications for FGCO of projects used exclusively for storage, which do not limit the capacity of the grid for the absorption of the energy produced by RES and CHP, are processed separately by the IPTO and HEDNO.

Conclusions

The new law comes at a time where all stakeholders, ranging from investors and energy producers to big energy consumers and households, are affected from the energy crisis. Energy security emerges as of utmost importance and the expectations for a solid RES legal framework are certainly increased. While the amendments introduced by the new Law are expected to reduce the timing aspects of the licensing procedure, they are not radical in most of the fronts. Moreover, they seem to introduce additional obligations and contingencies to investors (e.g. curtailment) which are due to long standing inefficiencies and lack of investment in the grid. On the other hand, the overall framework for RES licensing and other important issues such as storage is now in place and is hopefully going to have a positive impact on the much-desired further integration of RES projects.