Markets exist to serve consumers, not the other way around. And the liberal politician, because he has studied the markets all his life, knows their weaknesses, therefore he knows how to improve their operation, the Minister of Environment and Energy Theodoris Skylakakis tells Liberal about the reform of the electricity market, the problem that he sees in the competition, where no one knows the cheapest, and his efforts to apply the basic principles of the free economy in the field.
“I am here, as a liberal politician, to serve consumers, this is the true meaning of liberalism,” says Mr. Skylakakis, who is talking about the new special electricity tariff, through which the consumer will finally be able to compare prices of the providers, for the 400 million per year from electricity thefts that are passed on to citizens, but also for the strong paper of the energy sector in Greece, the rapid penetration of RES, where this year we expect a new record.
He refers to our comparative advantage, competitiveness in green energy, both existing and future regarding wind turbines in the seas and above all in the Aegean and explains why we often hear him say “not everyone can be satisfied”, as well as that “there is no risk-free RES investment”.
As for the issue of the Bulgarian tax on Gazprom’s gas, and how much it affects us, he answers that Greece is not worried by any interruption of Russian flows, stressing, however, that in every transaction the “pacta sunt servanda” must apply.
Interview with Giorgos Fintikakis
You have announced a number of interventions on energy costs, including the single tariff from 2024 for all providers, so that the consumer can easily compare prices. What makes you think that with this new “normal” in the market, competition will work better in the next 12 months, the marketing departments of the companies will work, as you have said, and we will possibly see lower prices?
Look, today no matter what consumer I asked, no one could tell me who the cheapest provider is. There is no competition without knowing the cheapest one. Therefore, we are bringing a new, special tariff, the green one, which will be completely uniform between different suppliers (the only thing that will change is the price that the consumer will know at the beginning of each month), with which for the first time he can , quickly and easily, to compare prices and see who is the cheapest.
In particular, on the 1st day of each month, the billing price will be announced on the website of each supplier and will be notified to the Waste, Energy and Water Regulatory Authority (RAAEF). This price will not change during the month, it will be “locked”. Entering a special platform of RAAEF, the consumer will compare the prices of the services related to the green tariff and will choose a supplier. If, for example, he finds that his supplier is systematically more expensive than someone else, he will be able – without penalties – to go to a more economical option.
We estimate that the majority of citizens will join this tariff – either by choice or precisely because many consumers will not go through the process of choosing. The fact that this particular product will appeal to many consumers, facilitating direct price comparison between suppliers, we believe will significantly stimulate competition and push prices down.
Some believe that a liberal politician like yourself should let the energy market run freely, without intervention or “helping it work better” as you have said. What is your opinion?
The liberal politician, because he studies the markets all his life, knows their weaknesses and therefore knows how to improve their functioning. Markets exist to serve consumers, not consumers the markets. In the classical economic model, on which the entire functioning of modern capitalism is based, there are certain assumptions, based on which markets maximize social and economic well-being. A key assumption is sufficient consumer knowledge of prices.
I have just explained to you that the prices are not known to consumers because the tariffs are so different that they cannot be compared with each other based on the time and knowledge of the average consumer. Therefore, for the market to function according to the basic principles of a free economy, suppliers must offer at least one tariff that allows the consumer to know who is the cheapest. I too am here, as a liberal politician, to serve consumers. This is also the true meaning of liberalism.
How will the consumer understand which tariff category suits him and why? And why not stay permanently on this special tariff, rather than choose another one, since there he will be able to easily compare the prices?
The establishment of the green special tariff, which will be common to all providers, facilitates – as I mentioned above – the comparison of the tariffs of different suppliers. However, consumers’ energy needs vary. For example, a household has different energy needs, a business has different energy needs, and so on.
And in the “triple” fixed (blue), variable (yellow) and dynamic (orange) tariff, suppliers can provide more than one product in each of these categories, which will be linked to services, to other products, to combination of these, etc. For me, the important thing is that consumers have choice and comparison tools. The comparison tool will be offered by RAAEF and in each bill or message the consumers of the suppliers will see a link that will lead them to the point on RAAEF’s website where the prices are compared.
Electricity theft and defaulters. What makes you believe that the measures you announced, apart from the sign of social justice, will also contribute to a reduction in energy costs?
Electricity theft amounts to approximately 4.8% of the total energy market. In order to understand the extent of the phenomenon, it is enough to point out that the Hellenic Electricity Distribution Network Operator (DEDDIE) detects approximately 13,000 outages per year, the majority of which concern businesses.
As a result of rheumatism, consistent consumers lose a total of approximately 400 million euros per year. Therefore, the treatment of rheumatism also leads to a reduction in the energy costs of the normal consumer. The same applies to strategic defaulters. They increase supplier costs and this is directly passed on to the prices consumers pay.
More than four months at the helm of the Ministry of Environment and Energy you have formed a picture of the market and the energy sector. What are the strong “cards” of the space, Mr. Minister? And what are his biggest arrhythmias?
The strong card of the area is the rapid penetration of Renewable Energy Sources and the competitiveness of the country in this sector, both the existing one regarding the current RES projects and the future one regarding the wind turbines in our seas and above all in the Aegean. In 2023, a record number of Renewable Energy Sources connections is expected – we estimate that they will exceed the 1.6 GW of new projects connected in 2022. Interest in new investments is high from both Greek and foreign investors. It is indicative that projects that are maturing and aimed at connections exceed our national goal by about 10 times.
At the same time, we recently announced the plan of the National Program for the Development of Offshore Wind Farms, which opens a big chapter in our country in the field of green energy. Offshore wind energy – distinguished for its extroverted and innovative characteristics – has significant added value for the Greek economy.
In this direction, we are promoting initiatives for the development of the sector (e.g. network infrastructure, necessary supply chain, licensing, strengthening of research, utilization of new technologies, etc.), with very ambitious goals (12 GW by 2040 -2045), which will make Greece a major exporting country in terms of green energy.
In relation to arrhythmias, the examples of rheumatism and strategic non-payers are typical, to deal with which we announced, at the beginning of the month, relevant initiatives. And of course, the issue of lack of electrical space.
We often hear you say that “not everyone can be happy” and that “there is no such thing as a risk-free RE investment”. Would you mind explaining to us what you mean?
That from now on there will be no “closed” tariffs and tenders will be held everywhere. The state has an obligation to facilitate the speed of entry and to offer in time and with known planning electrical space corresponding to the needs of the system and for investors to assume the risk of their investment.
The big problem in RES is the saturated electrical space but also the queue of 16 GW waiting at the door. Could the solution to this problem be tenders for battery-powered RES projects with the right to participate for those investors who already have connection conditions? Is this at the core of your plan?
Very soon we will have developments in this field. So, you will get the answer you are looking for and any queries will be solved.
What is your political bet, after all the interventions you are launching? What would you be satisfied with? Possibly, with the absorption – after some time – of all these changes by the energy market?
The concept of reform is very specific, it refers to increasing the efficiency of a system. In this regard, therefore, all the initiatives that we are taking, those that we have announced, transparency in electricity tariffs for the benefit of consumers, emergency support for the energy vulnerable, dealing with electricity theft and strategic non-payers, etc., but also the upcoming announcements, regarding the increase in investments in RES, etc. have as their main goal to achieve, a more efficient energy market.
How much does the escalation of tension between Bulgaria and Russia after the imposition of a tax on Gazprom’s Russian gas affect us? Have we understood correctly, that you see this particular development as an opportunity to definitively end the take or pay clause of DEPA and overall with Russian gas, so that we can harmonize with what is in force in the rest of the European Union?
First of all, the DEPA Trade – Gazprom contract provides that the agreed price cannot be changed by a tax imposed before Sidirokastro. Therefore, the imposition of a tax by Bulgaria does not affect the cost of Russian gas imported into our country by DEPA. The issue of Russian gas, in any case, is extremely complex. With the negotiation of DEPA Emporia with Gazprom (eg for prices, for the “take or pay” clause, etc.) in progress, we cannot make estimates, but wait for its outcome.
Greece with the infrastructure it has, together with the FSRU of Alexandroupoli which starts at the beginning of the year, does not depend on any specific country in terms of gas supply. As a country of legality, however, we have the general principle that agreements must be respected. Pacta sunt servanda. This is what we expect in every transaction. Both in type and substance.
(republished from liberal.gr)