Southeast Europe pays far greater energy costs
For Athens restaurant proprietor Christos Kapetanakis, hire has all the time been excessive, however now he faces what he calls “a second hire” as hovering electrical energy payments slash earnings and power him to lift costs.
Kapetanakis pays between 3,000 and three,800 euros ($3,083-$3,905) a month on energy, up 40% since Russia invaded Ukraine in 2022 and triggered a European vitality disaster. Electrical energy used to quantity to three% of month-to-month turnover and now it’s extra like 15%, he mentioned.
“The continual improve in costs, particularly within the tourism sector…will lead Greece to develop into much less aggressive in comparison with different Mediterranean nations,” he mentioned from his restaurant within the historic Plaka neighbourhood.
His predicament has been echoed throughout the continent for the reason that Ukraine battle interrupted Russian pipeline fuel provides to Europe and compelled nations like Greece to hunt dearer alternate options.
However southeast Europe has felt the impression way more than the northwest. Specialists say that can solely widen as winter hits, and may have a knock-on impact on financial development.
Wholesale energy in Greece and Italy in August had been 12 occasions greater than in Nordic nations and even dwarfed different southern European nations which had been experiencing scorching climate.
HIGHEST IN THE EU
Since 2021, Greece has spent 11 billion euros on vitality subsidies to attempt to defend prospects. In 2022, the spend amounted to five.3% of GDP – by far the best within the EU and double that of second-placed Italy, in accordance with France-based vitality consultancy Enerdata.
Regardless of Athens’ efforts to defend residents from the vitality price rises, the scenario has exacerbated a value of dwelling disaster in Greece within the wake of a 2009-18 debt disaster that slashed wages, pensions, and investments in energy manufacturing and transport.
“Elevated vitality costs and a unfavourable impression on GDP are a tautology,” mentioned Nikos Magginas, a senior economist at Greece’s Nationwide Financial institution.
“Elevated costs have a unfavourable impression on family consumption and on the price construction for industries, airways and delivery.”
A lot of the distinction between southeast Europe and its neighbours comes right down to funding. Whereas the northeast has energy and fuel traces that enable the simple switch of vitality between nations, in addition to a robust mixture of renewable sources, a lot of southeast Europe is fragmented and remoted.
Energy storage, which is changing into more and more essential in northern European nations, is nonexistent in components of the southeast. Germany has 1,668 megawatts (MW) of large-scale storage capability, versus none in mainland Greece, in accordance with information from LCP Delta, an Edinburgh-based energy consultancy.
“Southeast Europe and the Balkans are missing in (electrical energy) interconnects. Every time there’s a energy scarcity, and renewables output is low, they battle to import the required volumes,” mentioned Henning Gloystein, head of vitality, local weather and sources at Eurasia Group.
In distinction, Spain’s renewable energy technology has skyrocketed previously decade, partially because of EU funding. It generated nearly 60% of its electrical energy from renewable vitality within the first half of this 12 months, up from 51% a 12 months earlier than.
“If you happen to don’t make investments, vitality costs will keep excessive,” Gloystein mentioned.
MORE TO BE DONE
Europe’s energy community is in some ways an important success. In 2022, France elevated imports from Germany when nuclear energy output dipped. When Russian fuel provides to Europe by way of Ukraine had been halted final week, the value impression was muted as a result of the bloc had discovered alternate options.
However for some, extra must be finished. After energy costs spiked in Greece final summer season, Prime Minister Kyriakos Mitsotakis wrote to the European Fee demanding an answer to the “unacceptable” variations in electrical energy prices throughout Europe.
Greece shouldn’t be alone. A lot of the Balkans depends closely on fossil fuels and the regional energy system is weak. Final June, an influence outage hit Montenegro, Bosnia, Albania and Croatia when the grid was overloaded by air con wants throughout a heatwave.
Kosovo, which generates greater than 90% of its energy from coal, is struggling to meet up with the remainder of Europe in putting in extra renewables.
In December, it launched an public sale to put in 100 MW of wind capability. However the World Financial institution estimates that it wants 100 occasions that – not less than 10 gigawatts of latest capability – to satisfy its goal of eliminating coal utilization by 2050. This transition is estimated to price Kosovo 4.5 billion euros, a frightening sum for the small financial system.
With out sufficient cross-border integration or storage, typically there’s an excessive amount of energy for one market, forcing producers to curtail provide.
“If the goal is extra concretely to scale back costs, the simplest method to try this is to extend penetration of renewables or nuclear,” mentioned Fabian Ronningen, an analyst at consultancy Rystad Vitality.
Whereas Greece has no nuclear crops, Aristotelis Aivaliotis, secretary normal of the Vitality Ministry, is upbeat, noting renewable output is on the rise, two new gas-fired energy crops set to come back on-line this 12 months, and battery storage to be constructed by 2028.
Plans additionally name for energy hyperlinks with Italy, Albania and Turkey to be upgraded by 2031 at a value of about 750 million euros.
“Wholesale costs will regularly fall … and this can positively get handed on to shoppers in some unspecified time in the future,” Aivaliotis informed Reuters.
Greek prospects usually are not satisfied. Taxiarchis Fekas, who lives in a suburb of Athens, struggles to pay faculty tuition and allowances for his three kids as a result of energy payments are so excessive.
He urges his youngsters to scale back their laptop computer and pill use to avoid wasting energy – a tricky ask for younger kids glued to their units.
“We’re on the verge of changing into a financially struggling household,” he mentioned. “The federal government wants to concentrate.”
