Battery Energy Storage Systems in the Greek Electricity Market
Battery Energy Storage Systems in the Greek Electricity Market
October 2024
Gus Papamichalopoulos, Senior Partner, Konstantinos Varelas, Senior Associate, and Iakovos Kouloris, Senior Associate
Kyriakides Georgopoulos Law Firm
In view of the increasing interest by national and international stakeholders in the developing market of the Battery Energy Storage Systems (hereinafter “BESS”) in Greece, KG Law Firm’s Energy practice breaks down the major elements related to the compensation of BESS projects.
Q: Is the BESS market developed in Greece?
A: In view of the state of the Greek energy landscape (grid congestion, high penetration of PVs), during the past few years, the Greek State has been implementing measures aiming to achieve the early adoption of the BESS technology. Amendments in the core energy regulatory framework now allows the development and operation of BESS connected to the grid. Many projects have now made significant licensing progress and the first BESS are expected to commence operation within 2025.
Q: How are BESS compensated?
A: BESS, like all electricity production plants are required to participate in the organized electricity market. BESS owners are allowed to do so either directly or indirectly, through an aggregator. Hence, the compensation of electricity injected into the grid and any services provided by BESS to the grid, is in principle derived through the transactions performed in these markets. It is noted that Greek Electricity Markets are as of 2020 aligned with the EU Target Model and consist of the Day Ahead Market, the Intra-Day Market and the Balancing Market. Therefore, BESS are expected to mainly generate revenues through market participation and more specifically, through the successful management of the projects’ schedule in order to take advantage the Intra-Day and Balancing Markets mechanisms.
Q: Is there any state aid available for BESS?
A: In an effort to encourage the kick-start of BESS and with a view to counteract the grid bottleneck, the Greek State has introduced mechanisms for the provision of state aid through both “investment support” and “operating aid” for up to 1GW of BESS. The investment support regards the provision of monetary incentives for the development and implementation of the projects while the operating aid support aims to guarantee certain revenues of the BESS projects for an operational period of ten years.
Q: How is state aid for BESS granted?
A: Investment support and operating aid are exclusively secured through the successful participation in BESS Tenders. Operating aid, in particular, is provided by the Greek Operator of RES and Guarantees of Origin (DAPEEP, per its Greek initials) after the successful participation in the BESS Tenders and the execution of an “Operating Aid Agreement”. The tendering process framework provisioned three separate tender processes; currently only one, region specific tendering process is pending. The 1st BESS Tender was conducted for a total capacity of 400 MW for BESS, while the 2nd BESS Tender for approx. 290 MW, to be developed throughout the country with the exception of the island of Crete.
The average bidding price (Reference Tariff), in €/MW/year of the 1st BESS Tender was 49,748.18€ and for the 2nd BESS Tender was in the range of 47,680.36 euros/MWh/year. BESS selected through the 1st BESS Tender secured an investment grant of 200,000.00 €/MW while projects selected through the 2nd BESS Tender received an investment grant of 100,000.00 €/MW.
Q: Which are the key points of the compensation elements of BESS through market participation?
A: Owners of BESS who have not secured operating aid must submit an irrevocable declaration stating their intention to solely be reimbursed through their participation in the Electricity Markets. Moreover, the BESS producers shall have, either directly or through an aggregator, to:
- Register with the Registry of the Hellenic Energy Exchange (HEnEx) as participants in the Day-Ahead Market and the Intra-Day Market.
- Enter into a “Balance Responsible Party Contract” and optionally a “Balancing Service Contract” with IPTO (Independent Power Transmission System Operator), the operator of the grid and of the Balancing Market.
However, since no BESS has become operative in the country yet, the relevant markets are not entirely mature, in the sense that and HEnEx and IPTO shall have to suggest amendments to the Electricity Markets Rulebooks regulating specific issue regarding the participation of BESS.
Q: How does a BESS Operating Aid Agreement function?
A: An Operating Aid Agreement (hereinafter “OAA”) is a standard “accession” type agreement, in the sense that its terms cannot be negotiated as these will be set out by virtue secondary legislation, per the paradigm of the RES OAA. The validity period of the OAA is set to ten (10) years starting from the commercial operation of the BESS and the payment of the Operating Aid is made on a monthly basis by DAPEEP.
The OAA is under the form of a Contract for Differences (“CfD”), as the amount of the annual operating aid is calculated based on the difference between a) the cap revenues on an annual basis, which shall be received by each BESS project selected on the basis of the tariff secured through the BESS Tender (the Reference Tariff) and b) the net revenues received through the participation in the Electricity Markets.
Per the applicable framework, the final “Methodology” for the calculation of the annual support of BESS will be determined by virtue of a decision issued by RAE on the basis of reference groups of the successfully tendered BESS and the non-tendered BESS. Following the issuance of the Methodology, RAE will define the Estimated Market Revenues of each reference group for a “Regulatory Period” of a maximum of three (3) years.
The annual operating aid shall be in the form of €/MW and will be calculated separately for each BESS before the start of each Regulatory Period as the difference between the “Estimated Market Revenues” of the applicable reference group and its Reference Revenues (the aggregate annual revenues of the BESS, which secure the viability of the investment, defined by the reference tariff secured in the tender).
The annual operating aid of each selected BESS will be cleared based on the Methodology issued by RAE and following such clearance, the BESS will either receive additional revenues in case that the Estimated Revenues through the Electricity Markets are greater than the final revenues secured in the Electricity Markets by the Reference Group or the holder of the BESS will be required to return any difference.
Q: Are there any other marketing options available for BESS?
A: The vast development of RES projects in the country has led to significant development of the virtually non-existent in the recent past, domestic PPA market, signifying also the entrance of major global stakeholders. In view of the limited reach of state aid to BESS (per the current framework) in contrast with the discussed grid necessities, it is reasonable to expect that the gradual maturity of the electricity markets of the country will result to the development of landmark bilateral contracts for services directly among BESS developers and large scale energy consumers and/or utilities.
October 2024
Gus Papamichalopoulos, Senior Partner, Konstantinos Varelas, Senior Associate, and Iakovos Kouloris, Senior Associate
Kyriakides Georgopoulos Law Firm
In view of the increasing interest by national and international stakeholders in the developing market of the Battery Energy Storage Systems (hereinafter “BESS”) in Greece, KG Law Firm’s Energy practice breaks down the major elements related to the compensation of BESS projects.
Q: Is the BESS market developed in Greece?
A: In view of the state of the Greek energy landscape (grid congestion, high penetration of PVs), during the past few years, the Greek State has been implementing measures aiming to achieve the early adoption of the BESS technology. Amendments in the core energy regulatory framework now allows the development and operation of BESS connected to the grid. Many projects have now made significant licensing progress and the first BESS are expected to commence operation within 2025.
Q: How are BESS compensated?
A: BESS, like all electricity production plants are required to participate in the organized electricity market. BESS owners are allowed to do so either directly or indirectly, through an aggregator. Hence, the compensation of electricity injected into the grid and any services provided by BESS to the grid, is in principle derived through the transactions performed in these markets. It is noted that Greek Electricity Markets are as of 2020 aligned with the EU Target Model and consist of the Day Ahead Market, the Intra-Day Market and the Balancing Market. Therefore, BESS are expected to mainly generate revenues through market participation and more specifically, through the successful management of the projects’ schedule in order to take advantage the Intra-Day and Balancing Markets mechanisms.
Q: Is there any state aid available for BESS?
A: In an effort to encourage the kick-start of BESS and with a view to counteract the grid bottleneck, the Greek State has introduced mechanisms for the provision of state aid through both “investment support” and “operating aid” for up to 1GW of BESS. The investment support regards the provision of monetary incentives for the development and implementation of the projects while the operating aid support aims to guarantee certain revenues of the BESS projects for an operational period of ten years.
Q: How is state aid for BESS granted?
A: Investment support and operating aid are exclusively secured through the successful participation in BESS Tenders. Operating aid, in particular, is provided by the Greek Operator of RES and Guarantees of Origin (DAPEEP, per its Greek initials) after the successful participation in the BESS Tenders and the execution of an “Operating Aid Agreement”. The tendering process framework provisioned three separate tender processes; currently only one, region specific tendering process is pending. The 1st BESS Tender was conducted for a total capacity of 400 MW for BESS, while the 2nd BESS Tender for approx. 290 MW, to be developed throughout the country with the exception of the island of Crete.
The average bidding price (Reference Tariff), in €/MW/year of the 1st BESS Tender was 49,748.18€ and for the 2nd BESS Tender was in the range of 47,680.36 euros/MWh/year. BESS selected through the 1st BESS Tender secured an investment grant of 200,000.00 €/MW while projects selected through the 2nd BESS Tender received an investment grant of 100,000.00 €/MW.
Q: Which are the key points of the compensation elements of BESS through market participation?
A: Owners of BESS who have not secured operating aid must submit an irrevocable declaration stating their intention to solely be reimbursed through their participation in the Electricity Markets. Moreover, the BESS producers shall have, either directly or through an aggregator, to:
- Register with the Registry of the Hellenic Energy Exchange (HEnEx) as participants in the Day-Ahead Market and the Intra-Day Market.
- Enter into a “Balance Responsible Party Contract” and optionally a “Balancing Service Contract” with IPTO (Independent Power Transmission System Operator), the operator of the grid and of the Balancing Market.
However, since no BESS has become operative in the country yet, the relevant markets are not entirely mature, in the sense that and HEnEx and IPTO shall have to suggest amendments to the Electricity Markets Rulebooks regulating specific issue regarding the participation of BESS.
Q: How does a BESS Operating Aid Agreement function?
A: An Operating Aid Agreement (hereinafter “OAA”) is a standard “accession” type agreement, in the sense that its terms cannot be negotiated as these will be set out by virtue secondary legislation, per the paradigm of the RES OAA. The validity period of the OAA is set to ten (10) years starting from the commercial operation of the BESS and the payment of the Operating Aid is made on a monthly basis by DAPEEP.
The OAA is under the form of a Contract for Differences (“CfD”), as the amount of the annual operating aid is calculated based on the difference between a) the cap revenues on an annual basis, which shall be received by each BESS project selected on the basis of the tariff secured through the BESS Tender (the Reference Tariff) and b) the net revenues received through the participation in the Electricity Markets.
Per the applicable framework, the final “Methodology” for the calculation of the annual support of BESS will be determined by virtue of a decision issued by RAE on the basis of reference groups of the successfully tendered BESS and the non-tendered BESS. Following the issuance of the Methodology, RAE will define the Estimated Market Revenues of each reference group for a “Regulatory Period” of a maximum of three (3) years.
The annual operating aid shall be in the form of €/MW and will be calculated separately for each BESS before the start of each Regulatory Period as the difference between the “Estimated Market Revenues” of the applicable reference group and its Reference Revenues (the aggregate annual revenues of the BESS, which secure the viability of the investment, defined by the reference tariff secured in the tender).
The annual operating aid of each selected BESS will be cleared based on the Methodology issued by RAE and following such clearance, the BESS will either receive additional revenues in case that the Estimated Revenues through the Electricity Markets are greater than the final revenues secured in the Electricity Markets by the Reference Group or the holder of the BESS will be required to return any difference.
Q: Are there any other marketing options available for BESS?
A: The vast development of RES projects in the country has led to significant development of the virtually non-existent in the recent past, domestic PPA market, signifying also the entrance of major global stakeholders. In view of the limited reach of state aid to BESS (per the current framework) in contrast with the discussed grid necessities, it is reasonable to expect that the gradual maturity of the electricity markets of the country will result to the development of landmark bilateral contracts for services directly among BESS developers and large scale energy consumers and/or utilities.
