It is undeniable that current austerity measures are affecting entire professional sectors and traditional industries, which had previously developed successfully during economic growth. During the last few years, many people have been wondering what type of long-term plans are being developed to promote productivity and economic growth that are necessary for Greece to recover. One such area of potential growth is energy, a market that is attracting investors from around the globe, and may have positive chain effects for other market sectors, including construction.

Renewable energy sources play an important role in Greece’s energy production profile. One of the core components of Greece’s energy profile is solar energy. Worldwide, the total amount of investments in the area of renewable energy sources reached $211bn in 2010, and the total installed capacity in solar energy parks increased to 39.5GW in the same period, which represents an increase of 73 percent in relation to the previous year.

Greece has an advantageous sun radiation capacity, and it is estimated that one third of Greece’s energy requirements could be met with solar energy. Experts believe that the market will grow impressively and have a value of more than €4bn in just a few years.
Greece is encouraging the development of solar energy, and apart from the major global players in the energy sector, a number of small and mid-size companies have already invested in this sector. As a result, the installed capacity of renewable energy sources increased by 24 percent during 2002 and 2011. Solar energy covers approximately 22 percent of such installed capacity. Total sales of energy power from renewable energy sources reached €640m in 2011, from €148.8m in 2006. It is expected that electric power provided by renewable energy sources will keep increasing every year until 2020 by 15 percent.

The Greek government initiated project Helios, which includes the installation of 10GW solar energy, aiming to export solar energy in other European countries. Project Helios could attract new investments, create new employment opportunities, and give a boost to local businesses in the industry of solar energy. In the past four years, the sector has generated at least 4,250 full-time jobs. Greece’s natural and unexploited resource will be a key advantage for new industry growth.

Environmental regulations
Solar energy has a strong impact on the environment. It represents a decentralised energy source that results in lower energy losses for the system, lower grid infrastructure costs and a carbon dioxide free power generation. The European Union (EU) regulations outlining the auctioning of carbon emissions will drive up the cost of electricity that is produced from fossil fuels. The EU plans to gradually phase out free allowances and will auction off about 60 percent of all allotted CO2 permits in 2013. While this legislation may cause a spike in the cost of electricity, at the same time it can increase the viability and growth of the RES sector.

Investors are discovering the high potential that solar energy has in the Greek market. Beyond the positive environmental implications that PV systems present, there are currently some significant financial benefits for those interested in investing in a photovoltaic system.

The most significant is the Feed-In Tariff (FIT), which was enacted in Law 3468/2006. These tariffs guarantee a specific price at which PV-generated power will be purchased per megawatt (MWh), by the Public Power Corporation (PPC). Once FIT is granted, it is locked-in at that rate for a minimum of 20 years, with an annual adjustment to compensate for inflation that amounts to 25 percent of the previous year’s consumer price index. FIT’s for rooftop PV systems are being granted for 25 years. At current rates, a 10kWp rooftop system is priced between €35,000 and €40,000, which includes installation and generates an average revenue of €7,400 annually. At this rate, the system pays for itself in about five to seven years, depending on the financing and taxes involved. By the end of the 25 year period this investment has the potential to yield a profit of over €100,000 without any adjustment for inflation.

New regulatory framework
Greek licensing procedures for projects using renewable energy sources (RES) have been simplified. Indeed, Law 3894/2010 was passed by the Greek legislature specifically to remove roadblocks in the permitting procedure, and to fast-track large-scale strategic investments, including investments in renewable energy sources. The public agency Invest in Greece now operates as a system for investment planning procedures and oversees, coordinating all the necessary legal authorisations for project development. Under the fast-track procedures system in place, the project developers grant the agency the irrevocable authority to take all necessary steps in licensing procedure, and to apply and collect the necessary permits and licenses for projects. Greece’s new fast-track procedure ensures that all relevant permits and licenses for the investment are issued within two months after submitting an application to the appropriate agency.

In case the regular permitting procedure has been chosen, the first necessary permit is the Electricity Generation License (EGL). The Greek Regulatory Authority for Energy (RAE) grants the EGL after an evaluation process that assesses the investor’s technical and financial capability, and the project’s viability.

The Environmental Terms Approval (ETA) also needs to be obtained. Granting of the ETA depends on the level of the project’s environmental impact. Once the ETA is in place, an installation license is required. The project’s operator and the Greek Public Power Corporation S.A. (PPC) must agree on the terms and conditions for access to the grid, and must enter into a connection agreement. If the project will benefit from guaranteed FIT, the operator will have to enter into a Power Purchase Agreement. Once project construction is complete and the plant has undergone commissioning tests, an operation license is granted by the organisation that issued the Installation License.

In the past, the full authorisation procedure needed on average more than three and a half years to complete, even for small solar power plants and wind farms. It has reached seven years for larger projects. With the new streamlined approval process however, there is a coordination of all activities among the different administrative bodies.

The RES Law 3851/2010 has set mandatory deadlines, establishing a firm timeframe, within which authorisation should be completed. The whole licensing procedure must not exceed more than one year. Whether this accelerated processing will be achieved is yet to be seen.

Smaller scale projects, including the PV power stations with capacities up to 1MWp, are, to a certain extent, exempt from the licensing procedure. In order to provide assistance at the beginning of the investment, tax law provides a suspension period for VAT payments until the investment begins to generate profits. This way cash flow for investment purposes becomes easier.

Risk-free investment?
Although the legal, financial and regulatory framework actually works, and many global and local companies invested in solar energy and renewable sources, there are still many issues to be resolved. One factor that has led to such a large number of proposals being submitted is that licenses for solar systems can be sold to another purchaser once granted by the RAE. The idea is that a property owner, who does not have the financial means to invest in a solar park, can obtain a license, sell it and also lease the accompanying land to the purchaser, leading numerous property owners to pay experts to submit the appropriate paperwork on their behalf.

This has created problems where licenses have been granted to individuals who do not have the investment capital to build the PV installation, resulting in the exclusion of investors who have the capital, or forcing them to purchase a license. In a specific prefecture there may be a limitation on absorption capacity, so unused issued licenses may be blocking out real investors.

However, those who want to invest in the Greek PV market and do not want to deal with Greek bureaucracy are able to walk into the market, for a price. Measures have been taken to require many of the previously proposed projects be implemented by 2013, after which they will become void, allowing room for new applications. This space between the licensee and the investor is increasing the investment cost.

Other main concerns of the private sector are related to the business environment, which includes: an uncertain tax environment; the possible change of FIT due to unstable financial situation in the country; constantly changing regulatory framework and late payments for the finance provided. Despite remaining difficulties, the solar energy market in Greece could definitely prove to be one of the most profitable investments in the renewable energy sources market currently available now, and for the future.

For further information: www.ptlegal.eu; email: info@ptlegal.eu