“Third Memorandum” or Grexit: What are the implications for the Future of Greece’s Energy System?
Sean Sweeney, Ph.D.
Director, International Program on Labor, Climate and Environment
Murphy Institute, City University of New York
Presentation, July 18, 2015, Democracy Rising conference
Athens, Greece
It is understandable that this conference, Democracy Rising, should be deeply engaged in the intense political debates going on in Athens and all over the world about the decision by the Syriza government to sign the Third Memorandum and not walk down the Grexit road.
So the future of Greece’s energy system is not exactly the stuff of intense coffee-shop conversations going on right now. But energy will be at the heart of the struggles in Greece in the years ahead, Memorandum or Grexit. Energy poverty has grown with austerity and recession, and Syriza has taken measures to protect the poorest and most vulnerable from, for example, electricity disconnections.
But it is clear that the structure of Greece’s energy system also needs to change. The “Institutions”, through the Memorandum, have a clear sense of what restructuring energy means for them—full-on privatization. However, a left restructuring would seek to address two major challenges: firstly, Greece’s dependence on fossil fuel imports and, secondly, how to take advantage of its potential to generate large amounts of renewable energy. I will return to this later.
The Memorandum vs. Grexit debate – and left restructuring of energy
During yesterday’s discussion, and also the discussion on Thursday morning, speakers like Syriza MP Costas Lapavitsas criticized his party for not pursuing the Grexit option and for not preparing adequately for it. He and others have stated that leaving the European Monetary Union (EMU), while not painless, would be an altogether better option in terms of Greece’s medium- to long-term prospects. Others have argued that Greece's political isolation (the only anti-austerity government in power in the EU ; its lack of a productive base; its dysfunctional systems of administration, and so on, means that Syriza had no choice but to avoid bankruptcy, stay in power, and position itself for the longer struggle.
Along with others, I argue that a Grexit should indeed be prepared for so that the option becomes more real than perhaps it is at present. Prepared or not, Grexit is still a real possibility, because signing the Memorandum is one thing; implementing it is another. The Memorandum makes it clear that the creditors will withhold disbursements if Greece does not comply with the Memorandum’s directives within the stipulated time frames. If Syriza fails to implement the directives of the memorandum, a “Grexile” becomes likely—in other words, expulsion from the European Monetary Union (EMU). If this happens, social and economic restructuring will be back on the immediate political agenda.
Despite its many challenges (both known and unknown) Grexit is probably the best option from the perspective of building a new, better and cleaner, and democratically run energy system in Greece. However, while difficult to imagine at present, it is also possible that pressure will build within the EU and we will see a push back against Schäuble and Merkel – at this stage no one knows. With the IMF’s Debt Sustainability Analysis released on July 14th, it is clear that there is some kind of difference of opinion within the Troika.
The Thessaloniki program
The commitment to a left restructuring of the energy system is situated at the heart of Syriza’s goal of “and ecological transformation of the economy” as expressed in the political resolution passed at the Thessaloniki conference in September 2014. When viewed through the lens of the events of the past few days and weeks, the Program bears the marks of an ‘age of innocence’ that has suddenly, very suddenly, come to an end. But the radical and transformative dimensions of Syriza’s program must be kept intact. The Memorandum is not Syriza’s program and not the will of Syriza or the majority of the Greek people, so it should not be allowed to totally eclipse the party’s goals and vision. In other words, render to Syriza the things that are Syriza’s, and render to Schäuble what is—today—Schäuble’s. But there can be no ecological transformation without an energy transformation – and that means less fossil fuels, more conservation and better management of energy use, and a qualitative shift towards renewable sources of power.
And if Grexit happens, the Thessaloniki Program will provide a compass for Syriza and the left in the period ahead, and the development of an energy policy that is consistent with Syriza’s goals and vision will become a top priority.
Greece’s energy present
Energy costs are rising faster in Greece than in any other EU country, a situation that is leading to growing fuel poverty and serious hardship. According to data compiled by the EU’s Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER), an increase in energy costs of over 60 percent has been recorded in Greece during the last six years of the financial crisis (2008-2013).[1] The Regulatory Authority for Energy in Greece reports that there were 257,002 disconnections because of nonpayment of bills in the first nine months of 2014 alone. Also in 2014, Greece had the second highest number per capita of electricity and gas disconnections in the EU, behind only Portugal.[2]
But the problems are not just about the cost of electricity; the problems extend to the entire energy economy and reflect its present structure. Greece is today highly dependent on fossil fuels. Presently about 64% of the energy consumed is imported (considerably higher than the EU average of 46%). In 2013, the last year for which data is available, Greece also had to import more than 136 billion cubic feet of natural gas, mostly from Algeria, Turkey and Russia. [3] All of its oil and other petroleum products are imported, mostly to serve its fleet of motor vehicles. Greece consumed an average of 343,000 barrels of crude oil per day (2011 figures) of which almost half (46%) was used for transportation.[4] The cost of these imports today amounts to around 5% of Greece’s GDP.
Roughly 93% of Greece’s energy consumption comes from fossil fuels while the corresponding average in the EU countries is 75%. For electricity, 27% of power generated comes from imported oil and gas. Domestic lignite (or ‘brown coal’) produces 70% of Greece’s electricity.[5] Nevertheless, Greece still imported 255,000 tons of coal in 2012.[6]
Lignite is a particularly dirty form of coal. A typical power station using lignite emits 37 per cent more carbon dioxide per unit of power output than a power station using black coal. Lignite use has made a major contribution to Greece’s disproportionately large contribution to global warming pollution (GHGs) and poor air quality.
Importantly, Greece has enormous renewable energy potential, but only a tiny fraction of it is presently being used. Renewable energy devoted to the generation of electrical power is less than 7% of the total supply, and this is despite the fact that Greece’s solar, wind and geothermal potential is considerable, in fact unusually so. In fact Greece gets 1,500 kilowatt-hours per square meter of sunshine a year[7]—a resource that is imported from 93 million miles away but costs nothing.
Tragically, there is no domestic solar photovoltaic (PV) industry in Greece to speak of, which reflects the failure of the EU’s neoliberal approach to energy. The withdrawal of the feed in tariffs (FITs) aimed at encouraging solar installations in Greece (and several other countries in the EU) has in recent years led to the bankruptcy of many small and medium sized solar companies – and these have become targets of larger foreign multinationals who can position themselves for the longer term.[8] Non-Greek renewable energy companies, mostly German (but also Spanish and Chinese) opened offices in Greece during the Samaras period when renewable energy was identified as key to Greece’s recovery—and the government was looking for partners in order to help fulfill its potential.[9] But for now solar energy deployment has more or less stopped.[10]
What the Memorandum could mean for energy
Under the third Memorandum Syriza must raise €50 billion by selling state assets in order to pay back some of the national debt of €320 billion.
The Memorandum is particularly concerned about restructuring Greece’s energy sector through further privatizations. There have been a number of EU directives in the past 10-15 years that were designed to make electricity markets “competitive” by breaking up (“unbundling”) of what were once fully public natural monopolies. This process was set in motion by the EU’s directive on the Internal Energy Market for Electricity and Gas passed down to member states in 1996.[11]
Therefore, one of the main targets for privatization is the Public Power Corporation (PPC). Forty-nine percent of the PPC has already been privatized as a result of the EU directives, but the Greek state is still in control of 51% of the PPC, which is Greece’s largest company by far. It owns almost all of the country’s installed power capacity (generated by lignite, oil, hydroelectric and natural gas power plants.) It controls the lion’s share of Greece’s electricity generation. The PPC is a therefore big target for the privatizers.
Under Samaras, privatization of the electricity system was being fast-tracked in accordance with the conditions laid down by the Troika’s previous memorandum.[12] However, the day after the election of Syriza in late January this year, the privatization of the PPC was halted. Now the Third Memorandum has put the PPC’s privatization firmly back on the agenda, and Hellenic Petroleum and offshore oil or natural gas drilling parcels are also likely targets for a sell-off. The Memorandum also specifically demands “the privatisation of the electricity transmission network operator (ADMIE).”
Aside from leading to the sell off state assets to repay a (small) portion of the debt, the Memorandum will perpetuate Greece’s dependency on imported fossil fuels, and any offshore drilling of oil and gas will be performed by multinationals largely for the benefit of multinationals, as has been the case with the UK.[13] Samaras and the multinationals were developing plans for more fossil fuel exploitation in the eastern Mediterranean, south of Crete and in the Ionian Sea.
The Memorandum will also operate within the framework of existing EU energy directives that are hostile to the public sector. The Memorandum will therefore virtually ensure that renewable energy will continue to be confined to the margins, and if renewables do grow in future, albeit incrementally, the primary beneficiaries of Greek solar and wind potential will again be multinational companies that, through power purchase agreements (PPAs), will sell renewable power to Greece at a high price. Furthermore, EU policy (in keeping with World Bank and IMF preferences) strongly supports “Public Private Partnerships” as the basis for PPAs, which would see massive solar parks and offshore wind (such as the proposed Helios solar energy project or the wind farms in the Aegean islands).
The Memorandum therefore means the continuation of the EU’s neoliberal approach to climate protection, which has failed in Greece and throughout Europe. Neoliberal approaches to renewable energy deployment have led to a dramatic fall-off in EU investment in renewables from 2012 to the present. The EU’s Emissions Trading Scheme is an embarrassment. The price of carbon is so low it might as well not exist. In Greece, the PPC under Samaras had committed to buying renewable-source energy from independent producers at five times its selling rate until 2034.[14] Then, in November 2012, the Greek government zigzagged and introduced a retroactive tax on revenues earned by solar companies and the Samaras government also stopped issuing building permits for PV power plants in 2013. [15]/[16] Contrast this situation In Denmark and Germany renewable energy has grown impressively because it was either developed under public ownership (Denmark) or has been driven by remunicipalization efforts in dozens of cities (Germany).
Meanwhile, Greece is the highest emitter in the EU on a per capita basis, and the impact of climate change in the Mediterranean region will be particularly disruptive if scientific projections are at all accurate. Not only will Greece be unable to meet its own climate commitments, it will suffer disproportionately from the impacts of global warming. According to the Greek submission to the government’s national submission to the UNFCCC of some years ago: “The long-term predictions of climatic models for Mediterranean region are alarming,” and there is expected to be a remarkable decline in summer precipitation over the Mediterranean region as a whole. [17]
Energy and the Memorandum’s “Invisible Zones”
If Syriza succeeds in keeping Greece in the EMU, it has been said that it plans to pursue a range of positive actions in the areas not covered by the Memorandum—the phrase “invisible zones” has been used to describe this approach—while presumably complying with the Memorandum’s directives. The extent to which Syriza can ramp up public enthusiasm for actions in the invisible zones while at the same time imposing more austerity sounds like a complex political task to say the least. A lot will depend on how the zones are defined, the resources committed to them, and the willingness of the Greek social movements to self-organize in these spaces.
In terms of energy, the invisible zones seem particularly illusive because of the nature of a present system characterized by import dependency and the presently large role of the PPC, which, as we have noted, has been targeted for privatization under the Memorandum. In other sectors – such as farming and food distribution, provision of health services, the utilization of unused skills etc., actions in these zones could begin to make important changes and improvements.