The letter of Prime Minister Kyriakos Mitsotakis to European Commission president Ursula von der Leyen follows:
Dear President,
I am writing to you about the issue of electricity prices. In the span of a few months,
wholesale electricity prices in Greece have more than doubled from 60 €/MWh in April
to 130 G/MWh in August.
This increase has occurred despite our remarkable progress in accelerating the
energy transition. Relative to last summer, our generation from wind and solar
increased by 25%, while output from lignite fell 27%. This is exactly what we want in
our electricity system. Yet prices rose to levels last seen in early 2023, when we were
still coping with the aftermath of the most acute energy crisis in our history.
This disconnect between an energy transition that is highly successful, and electricity
prices which jump suddenly to extreme levels requires a political response. Left
unaddressed, it threatens our citizens and our competitiveness. It could undermine
support for our EU Green Deal.
In large part, the increase in prices in Greece reflected regional factors. Similar
increases were seen in Bulgaria, Romania, Hungary, Croatia, and other Member
States. This is a regional crisis.
A number of factors explain this shock: very warm weather, exacerbated by climate
change, outages of generation and cross-border capacity, and low rainfall during the
winter, which left reservoirs with less water for the summer season.
But our region has faced an additional burden: Russia’s attacks against the Ukrainian
grid have turned Ukraine into a significant net importer. This deficit is being met by EU
countries. This is another cost that Russia’s devastating war is imposing on our
economies.
At the same time, this shock has not impacted all Member States equally. The region
from the Czech Republic to Greece normally has similar electricity prices. In early
2024, the average monthly price among countries in this region varied by just a few
euros.
But this summer, the disparities in prices grew larger. Some hours the price varied by
over 100 €/MWh among neighbors. Often, the differences were much higher. At one
extreme point, the price of electricity in Hungary reached 940 G/MWh while in
neighboring Austria it was 61 €/MWh — a 15-time difference for the same product at
the same time across an internal EU border.
Over several weeks, these disparities add up. What used to be a difference of a few
euros became a difference of almost €100 during July. In August, the gap between
the most and least expensive EU member state in this region was €45. Multiplied by
the amount of electricity consumed, this is an unprecedented extra cost. And it
undermines the spirit and purpose of the internal market.
What is even more worrisome, the system is so complex and opaque that is virtually
impossible to understand precisely what is driving prices at any given point and time.
We have created an incomprehensible black box—even to experts. And we cannot
explain convincingly to our citizens why the price they pay is rising so suddenly. This
is politically unacceptable.
In light of these developments, we propose the following.
First, we need stronger governance. This episode underscores the need for more
coordination and planning at a regional level. It is especially important to ensure that
country-level decisions (e.g., a planned outage) are taken with a view towards
broader regional dynamics to avoid instances where such an event causes ripple
effects across a much wider space than anticipated. We need a system that allows
more EU input into country decisions.
Second, we need more EU regulatory oversight. When prices in one country are
shaped by events hundreds or even thousands of kilometers away, country-level
regulation is of limited use. No regulator has a remit to inspect actors across such a
wide geography to ensure that markets are functioning properly. This is a job that
must be taken up by the EU. We need an EU-wide regulator for electricity that can
look at multiple markets at once—and reassure consumers that there is no foul play.
Third, we need a special accommodation regarding Russia’s targeting of Ukrainian
infrastructure. Without sufficient electricity transfers within the EU, the impact of
electricity exports to Ukraine is only felt only by some countries. The new Electricity
Market Design offers some options to deal with a prolonged crisis that raises prices.
Greece will explore these options with the aim to claw back windfall profits from
producers and protect consumers during this shock.
And finally, we need a new push for electricity interconnectors. We must complete the
internal market. Localized congestion can affect a broad geography, making each
cross-border point a matter of general interest—a fact that should affect how we plan
and promote cross-border capacity. Moreover, when price disparities between
countries can reach such extreme levels, the cost-benefit proposition of
interconnections is much stronger. With these points in mind, the new Commission
should take up the task of pushing through more cross-border capacity.
The events of the past few months underscore something we have long known: that
the energy transition is a journey. It will require constant vigilance and adjustment. I
believe the ideas we have articulated here can help correct some of the weaknesses
in our market — and they are aligned with the clear message of the Draghi report that
we must strengthen the internal market for energy. It is imperative that we take up this
challenge. The success of the EU Green Deal depends upon it.