The Future of the Energy Sector

Electricity plays a pivotal role in numerous aspects of contemporary life within modern societies, and its significance is expected to grow further as it assumes a more substantial role in transportation and heating, thanks to technologies like electric vehicles and heat pumps. At the same time, the ongoing global energy crisis has caused significant concerns worldwide regarding the security of supply and affordability of electricity.

KPMG's latest research in Greece, “The Future of the Energy Sector: Focus on the Greek Electricity Market”:

• Explores the structure and size evolution of the sector for both electricity demand and generation.
• Contrasts the Greek market with trends and developments in the European Union and analyzes the main challenges and priorities for the next day.
• Evaluates the overall value of the energy market by referring to the largest companies that make up the competitive landscape of the sector combined with their key performance indicators.
• Analyzes the most important priorities for the next day in the Greek electricity market and highlights potential constraints that may arise from their non-implementation.
• In collaboration with the Aristotle University of Thessaloniki, analyzes possible benefits from the interconnection of Greece with central Europe.

Key findings:

• Electricity generation is globally the largest source of CO2 emissions, however it is also the sector that is leading the transition to net zero. In Greece, the reduction rate of CO2 emissions in electricity generation is actually greater than the European average, presenting a CAGR of -7.6% compared to -2.4% of the EU-27 for the years 2010 to 2021.
• The pandemic led to a drop in electricity demand of -4.1% in 2020 – compared to 2019 – but in 2021 with the recovery of economic activity it returned to pre-pandemic levels. However, the energy crisis of 2021-2022 led to a further decline in demand in 2022, which is estimated to recover after mid-2023.
• Government subsidies initially as well as the windfall profit taxation mechanism later helped to mitigate the energy price crisis by providing significant support to end consumers – residential, commercial and industrial.
• The power generation sector is developing at a rapid pace and the participation of RES is constantly increasing both in generation mix as well as in the installed capacity. In fact, for the years 2010 to 2022 the penetration of RES in the installed capacity revealed a CAGR of 9.4% compared to 7.6% of the EU-27.
• Strengthening and modernizing networks is of great importance in the context of continuous penetration of RES and batteries. At the same time, outdated grid infrastructure and a lack of advanced metering systems jeopardize the effective implementation of important technologies and tools such as demand-size participation in the energy market through demand response.

Main trends and challenges:

• Establishment of clear and consistent legal and regulatory frameworks that facilitate the timely implementation of renewable energy and electricity infrastructure projects.
• Simplification of spatial planning and licensing procedures to expedite project deployment.
• Re-evaluation of financial support measures to incentivize investments aligned to the energy transition.
• Prioritization of initiatives related to the energy efficiency of buildings.
• Greater electrification of transport through light and medium vehicles with simultaneous development of charging networks.

Key points from study that addresses a new green electricity corridor to Germany through the SENEH route (South East-North Electricity Highway):

Various parameters were analyzed to formulate 3 long-term electricity market simulation scenarios. The ultimate goal of this analysis is to estimate the total cost of electricity supply to end consumers as well as the potential benefit to the national economy associated with increased cross-border activity. The analysis shows that the development of a DC interconnector to Germany will lead to a number of economic benefits such as lower prices to consumers along with additional surplus for the Greek economy as a result of increased export activity. Comparing the 3 scenarios, the results show that there is a huge value for both end customers and producers. Depending on the level of RES and battery penetration, the total benefit for the Greek economy is estimated between 6.2 and 17.5 billion euros.