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Will Greece's gamble to decarbonise fast pay off?

Will Greece's gamble to decarbonise fast pay off?By Costis Stambolis

Last September Greece's newly elected prime minister Kyriakos Mitsotakis speaking at the UN general assembly on Climate Change and the need to take firm action in order to stop its adverse effects announced his government's decision to eliminate all coal use in the country's energy system by 2028.

The announcement, which surprised everyone even high ranking members of his own New Democracy party, was greeted with cries of relief and jubilation by the green lobby which has long advocated the total elimination of lignite, an indigenous form of poor calorific value coal, but with great consternation and anxiety by the local communities in West Macedonia and Megalopolis where lignite fired power stations are located. According to sources close to labour unions in northern Greece the closure of all lignite facilities will lead to massive unemployment which is likely to exceed 25,000 people over the next three years.

"Greece's decision to be proactive in decarbonizing power generation did not come out of the blue but it was rather the result of a long process over the last few years whereby lignite use for power generation has gradually become marginalized in economic terms", says a highly placed source in Greece's Ministry of Environment and Energy. "The steep rise of emission costs over the last 2 years and the low efficiency of lignite power plants has made their electricity generation uneconomic", note Athens based energy experts.

Consequently since the start of this year lignite power is used to cover only a small fraction of the total generation mix. Most characteristically in the second week of May power generated in Greece was without any use of lignite. As it was then reported by the Institute of Energy for SE Europe (IENE) in its Electricity Market Analysis Bulletin (issue no 80, May 12) "Public Power Corporation, Greece's incumbent electricity company, for the first time ever did not use lignite fired plants to provide the local pool system with electricity for an entire week”. As the IENE Bulletin points out " most notably, PPC's lignite fired generating units, having operated at a particularly high and non-competitive production cost, were thrown out of the dispatching schedule during Week 19”.


As a result, "gas fired units ramped up their weekly output to compensate for the deficit, generating 298.07 GWh ( + 15,58% or + 40.17 GWh w-o-w) At the same time weekly RES output increased significantly to 244.34 GWh ( + 9.46% or + 21.13 GWh w-o-w), limiting the upward pressure to the system’s marginal price. However, in spite of a balanced energy mix and sizable contribution from local RES and hydro Greece's average wholesale electricity prices remained some of the most expensive in Europe all of last week when the average price reached €29,27 per MWh with only Poland recording an even higher price at € 38,27 per MWh”.

"During that second week of May Greece's electricity imports remained significantly high, accounting for 22% of the country's weekly electricity demand, despite the incremental upward trend of regional wholesale electricity prices. With zero input from lignite fired units the country's electricity balance was dominated by gas which covered 40% of electricity demand, followed by Renewables which contributed 22% of the demand and hydro which filled in the remaining 5%”. Ever since, lignite has been contributing only a small fraction of the electricity generation mix averaging some 6,0% of generated power daily.



Lignite use has become an expensive proposition

High emission prices in addition to PPC's substantial operational and maintenance costs, for both power units and lignite mines, have made coal generated electricity in Greece an expensive proposition. With PPC currently operating 14 lignite fired stations, along with several mines, with total installed capacity of some 4.0 GW, the financial blow stemming from their expensive operational maintenance and almost zero contribution to the country’s electricity production is really huge and a constant drain on the corporation’s resources. Consequently PPC is speeding up its decommissioning programme aiming to have fully removed or mothballed its entire lignite power station fleet by 2023 save one major station, the Ptolemaida V, currently under construction and slated to come on stream next year, which if necessary could be later converted to operate with biomass or with a CCUS facility.

"Although Greece's decision to go ahead now with decarbonisation plans are in line with EU stated policies and objectives it comes ten year earlier than the date set by Germany, which will stop power generation from coal plants in 2038, and whose green credentials are beyond reproach”, note critics of this latest government decision. However, the government's determination to take swift action in order to decarbonise fast its power generation is not a one sided harsh and ill conceived move as its was originally portrayed by several energy market players and labor organizations. The decision is in line with EU's clearly stated policy and well defined targets agreed by member countries, including Greece, to lower greenhouse gas emissions by 40% and at the same time increase the participation of Renewable Energy Sources( RES) to 32 % and energy efficiency by 32,5% , and all that by 2030. Earlier this year, along withother member countries, Greece submitted its revised National Energy and Climate Plan (NECP) plan where it aims for an RES contribution of 61% to 65% in its power generation mixand for 35% input in its final energy consumption by the end of this decade.

These are indeed highly ambitious targets which correspond to some 8,0 to 10,0 GW of new RES installed capacity by the end of this decade. In view of the fact that all investments will have to be made by the private sector the government now faces the Herculean task of having to prepare an imaginative legal and administrative framework and provide adequate incentives in order to attract much needed investment.According to latest statements by senior officials the government appears confident that over the next five years or so its "green policies" will work out and will manage to attract sufficient interest and also leverage enough funds in order to create many employment opportunities so as to fully replace the jobs which will be lost due to the currently pursued accelerated decarbonisation plans.

A high social cost

Today, some 8,000 people are employed in PPC’s lignite operations with at least 6,000 of them becoming redundant once power generation and lignite mining ceases in 2024. A small number of employees will be retained to operate the Ptolemais V lignite power station, a high efficiency plant of some 680 MW, currently under construction, which is slated to come on stream next year. However, the impact in terms of job losses in the lignite regions is estimated to be much higher since each job in lignite operations sustains at least 2 extra jobs in the vicinity. With some 18,000 to 20,000 jobs being lost in these regions, which already suffer from a high unemployment rate, the social impact will be devastating to say the least.

In view of the large number of people who will suddenly become reductant, the government appears to be taking a huge gamble since it promises that over the next two to three years it will replace the abandoned lignite plants with new productive activities, with minimal impact to the environment and 100% job replacement. "This sounds too good to be true”, observes a senior official in the West Macedonia regional authority who along with other colleagues seriously question the government’s ability to attract large investments and create new employment opportunities at a time of acute financial depression.

What is striking is that government planners in making such bold claims over job creation, appear to take no notice of the fast-changing global work environment, where advanced automation and AI are having a huge impact in terms of creating and sustaining new jobs. Jobs which at any rate will not have any of resemblance to the industrial type of jobs, which was the norm over the past decades in the lignite producing regions of Greece.

What kind of new jobs?

As Yuval Noah Harari very pointedly says in her latest book* "… no remaining human job will ever be safe from the threat of future automation because machine learning and robotics will continue to improve. A forty-year-old unemployment Walmart cashier who by dint of superhuman efforts manages to reinvent herself as a drone pilot might have to reinvent herself again after ten years later, because by then the flying of drones may also have been automated. This volatility will also make it more difficult to organize unions or secure labour rights. Already today, many new jobs in advanced economies involve unprotected temporary work, freelancing and one-time gigs. How do you unionise a profession that mushrooms and disappears within a decade?”

According to the government’s latest thinking as PPC will be closing down lignite power plants and unnecessary mines a whole series of photovoltaic plants and wind farms will be installed in or near the affected areas while plans include too the loosing of industrial activity for the manufacturing of batteries, charges but also hydrogen. Apart from the surge in labour force, during construction, the operation of such plants is remote and highly automated, and therefore the number of new and highly skilled jobs is minimal and it will not require more than 1,000 people at most and provided that the 4,0 GW of existing lignite capacity will be replaced entirely by an equivalent renewable potential. However, such a promising prospect although welcome is far from realistic, given the extensive red tape in Greece’s bloated state bureaucracy and the prevailing investment disincentives. What is for sure is, that even if somehow sufficient new energy investment is secured, it will take the best part of the current decade for them to materialise.

In this context even more prescient are Harari’s subsequent remarks when she observes that "Consequently, creating new jobs and retraining people to fill them will not be a one-off effort. The AI revolution won’t be a single watershed event after which the job market will just settle into a new equilibrium. Rather, it will be a cascade or ever-bigger disruptions. Already today few employees expect to work in the same job for their entire life. By 2050, not just the idea of ‘a job for life’, but even the idea of ‘a profession for life’ might seem antediluvian.”

Therefore, it comes as no surprise that the majority of economic policy makers and labor market experts whom we talked to during the preparation of this analysis, expressed deep concern over the government's ability and plans to attract sufficient investments in the two major lignite producing areas in order to create alternative job opportunities on a large energy scale in order to tend off social unrest and dissatisfied voters. Hence, it remains to be seen if and how the government will proceed in resuscitatingbusinessactivity in what looks likely to become yet another economically depressed region.

High emission prices in addition to PPC's substantial operational and maintenance costs, for both power units and lignite mines, have made coal generated electricity in Greece an expensive proposition. With PPC currently operating 14 lignite fired stations, along with several mines, with total installed capacity of some 4.0 GW, the financial blow stemming from their expensive operational maintenance and almost zero contribution to the country’s electricity production is really huge and a constant drain on the corporation’s resources. Consequently PPC is speeding up its decommissioning programme aiming to have fully removed or mothballed its entire lignite power station fleet by 2023 save one major station, the Ptolemaida V, currently under construction and slated to come on stream next year, which if necessary could be later converted to operate with biomass or with a CCUS facility.

"Although Greece's decision to go ahead now with decarbonisation plans are in line with EU stated policies and objectives it comes ten year earlier than the date set by Germany, which will stop power generation from coal plants in 2038, and whose green credentials are beyond reproach”, note critics of this latest government decision. However, the government's determination to take swift action in order to decarbonise fast its power generation is not a one sided harsh and ill conceived move as its was originally portrayed by several energy market players and labor organizations. The decision is in line with EU's clearly stated policy and well defined targets agreed by member countries, including Greece, to lower greenhouse gas emissions by 40% and at the same time increase the participation of Renewable Energy Sources( RES) to 32 % and energy efficiency by 32,5% , and all that by 2030. Earlier this year, along withother member countries, Greece submitted its revised National Energy and Climate Plan (NECP) plan where it aims for an RES contribution of 61% to 65% in its power generation mixand for 35% input in its final energy consumption by the end of this decade.

These are indeed highly ambitious targets which correspond to some 8,0 to 10,0 GW of new RES installed capacity by the end of this decade. In view of the fact that all investments will have to be made by the private sector the government now faces the Herculean task of having to prepare an imaginative legal and administrative framework and provide adequate incentives in order to attract much needed investment.According to latest statements by seniorofficials the government appears confident that over the next five years or so its "green policies" will work out and will manage to attract sufficient interest and also leverage enough funds in order to create many employment opportunities so as to fully replace the jobs which will be lost due to the currently pursued accelerated decarbonisation plans.

A high social cost

Today, some 8,000 people are employed in PPC’s lignite operations with at least 6,000 of them becoming redundant once power generation and lignite mining ceases in 2023. A small number of employees will be retained to operate the Ptolemais V lignite power station, a high efficiency plant of some 680 MW, currently under construction, which is slated to come on stream next year. However, the impact in terms of job losses in the lignite regions is estimated to be much higher since each job in lignite operations sustains at least 2 extra jobs in the vicinity. With some 18,000 to 20,000 jobs being lost in these regions, which already suffer from a high unemployment rate, the social impact will be devastating to say the least.

In view of the large number of people who will suddenly become redundant, the government appears to be taking a huge gamble since it promises that over the next two to three years it will replace the abandoned lignite plants with new productive activities, with minimal impact to the environment and 100% job replacement. "This sounds too good to be true”, observes a senior official in the West Macedonia regional authority who along with other colleagues seriously questions the government’s ability to attract large investments and create new employment opportunities at a time of acute economic depression.

What is striking is that government planners in making such bold claims over job creation, appear to take no notice of the fast-changing global work environment, where advanced automation and AI are having a huge impact in terms of creating and sustaining new jobs. Jobs which at any rate will not have any of resemblance to the industrial type of jobs, which was the norm over the past decades in the lignite producing regions of Greece.

What kind of new jobs?

As Yuval Noah Harari very pointedly says in her latest book* "… no remaining human job will ever be safe from the threat of future automation because machine learning and robotics will continue to improve. A forty-year-old unemployment Walmart cashier who by dint of superhuman efforts manages to reinvent herself as a drone pilot might have to reinvent herself again after ten years later, because by then the flying of drones may also have been automated. This volatility will also make it more difficult to organize unions or secure labour rights. Already today, many new jobs in advanced economies involve unprotected temporary work, freelancing and one-time gigs. How do you unionise a profession that mushrooms and disappears within a decade?”

According to the government’s latest thinking as PPC will be closing down lignite power plants and unnecessary mines a whole series of photovoltaic plants and wind farms will be installed in or near the affected areas while plans include too the looring of industrial activity for the manufacturing of batteries, chargers but also hydrogen. Apart from the surge in labour force, during construction, the operation of such plants is remote and highly automated, and therefore the number of new and highly skilled jobs is minimal and it will not require more than 1,000 people at most, and provided that the 4,0 GW of existing lignite capacity will be replaced entirely by an equivalent renewable potential. However, such a promising prospect although welcome is far from realistic, given the extensive red tape in Greece’s bloated state bureaucracy and the prevailing investment disincentives. What is for sure is, that even if somehow sufficient new energy investment is secured, it will take the best part of the current decade for them to materialise.

In this context even more prescient are Harari’s subsequent remarks when she observes that "Consequently, creating new jobs and retraining people to fill them will not be a one-off effort. The AI revolution won’t be a single watershed event after which the job market will just settle into a new equilibrium. Rather, it will be a cascade or ever-bigger disruptions. Already today few employees expect to work in the same job for their entire life. By 2050, not just the idea of ‘a job for life’, but even the idea of ‘a profession for life’ might seem antediluvian.”

Therefore, it comes as no surprise that the majority of economic policy makers and labor market experts, whom we talked to during the preparation of this analysis, expressed deep concern over the government's ability and plans to attract sufficient investments in the two major lignite producing areas in order to create alternative job opportunities at a scale large enough in order to fend off social unrest. Hence, it remains to be seen if and how the government will proceed in resuscitating business activity in what looks likely to become yet another economically depressed region.

 

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* Yuval Noah Harari, "21 Lessons for the 21st Century”. Vintage Publishing, London, 2019
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