Electricity subsidies continue

It is highly likely that the government will need to continue subsidizing electricity bills in September as natural gas prices rose toward the end of August, Environment and Energy Minister Theodoros Skylakakis said in a radio interview Friday.

The ministry is still waiting for electricity providers to announce their September prices, something that should be done by Sunday, at the latest, but, Skylakakis said, continuing subsidies will likely be necessary.

The August subsidy was 1.6 cents per kilowatt-hour, allowing most end-users to pay less than €0.15 per kWh. The ministry would like end-user prices to remain steady. The subsidy will be funded through a windfall tax, also dubbed the “temporary solidarity contribution,” on refineries’ additional profits.

“My hope is that there will be a subsequent [price] de-escalation due to the normalization of demand in autumn and the entry of new renewable energy sources” into the power generation mix, Skylakakis said.

Since Monday, August 25, electricity wholesale prices have been steadily rising. Up to a point, this is because of the decline in the contribution of renewables and their substitution by more expensive natural gas. Thus, on August 29, the maximum price spiked to €756 per megawatt-hour, with the low at €107. By early afternoon Friday, the wholesale price was €146.37 per MWh. In the past five years, the August average rose from just over €123/MWh to over €128. It is still lower than the July average of €135.54 per MWh.

The August subsidy for households consuming up to 500 kWh was, as mentioned above, was €0.016/kWh. This applied to 90% of households that use floating rate tariffs. For households on the Social Household Tariff, the subsidy was €0.05 per kWh, irrespective of the level of consumption.

There has been a rally in the price of natural gas: European futures contracts rose above €39 per MWh because of expected reduced supply. This is due to annual heavy maintenance works at Norway’s Equinor, Europe’s largest gas supplier.

There is also the constant threat by Russia of cutting off gas supplies to Europe as retaliation for its support of Ukraine. But, so far, flows of Russian gas through Ukraine have been uninterrupted.