REWIRED FOR THE FUTURE

The Investor Greece 2022  I  Energy & Industry  I  Overview

“THE PUSH FOR A TRANSITION TO CLEAN ENERGY WOULD SEEM A HERCULEAN TASK FOR GREECE BUT AS THE EUROPEAN UNION SEEKS TO BE A GLOBAL LEADER IN THE RACE TO STOP CLIMATE CHANGE, THE COUNTRY IS BETTING THAT TURNING TOWARD A CARBON-FREE FUTURE CAN RESHAPE ITS ECONOMIC DESTINY.”

A GREEN TRANSFORMATION

 

Greece aims to produce 60 percent of its power from renewable energy sources by 2030 and be climate neutral by 2050. It is getting a powerful financial boost to underwrite its renewable energy and sustainable efforts: 30 billion euros — equivalent to a fifth of Greece’s economy — from a European Union recovery fund designed to power a rebound from the coronavirus pandemic. This transformation is necessary and strategic. Greece’s economy is forecast to rebound 6.1 percent this year after shrinking by nearly 10 percent during the pandemic and by a quarter during the debt crisis. But the government still needs to attract billions in clean-energy investments to help tackle its lingering mountain of debt and a 14 percent unemployment rate, and to build a more solid foundation for future growth.

 

BlackRock, Quantum Energy Partners and Fortress Investment Group have said they see a potential bonanza in investing in green development here. American, Chinese and European companies are pitching wind and solar parks, hydroelectric power installations and hydrogen and battery projects to store renewable energy. The shift has been a long time coming. While turbines and solar panels are scattered across the country, Greece clung to oil and lignite coal for decades as vested Greek oil industry interests thwarted change. Around half of Greece’s energy was still fueled by petroleum products in 2017. But renewable energy and imported natural gas are now grabbing a greater share. The country's Independent Power Transmission Operator, or IPTO, is overseeing a major grid transformation, which includes using underwater cables to link Greece's numerous islands to the mainland thereby discontinuing the use of island-based generators that burn oil. The undersea cable will stitch together Greece’s most popular tourism islands, including Mykonos and Santorini, linking them to the mainland power grid for the first time and more than quadrupling their energy capacity, A parallel program aims to turn around 20 small islands into zero-emission testing grounds for companies partnering with the Greek government.

 

The plans are ambitious, calling for carbon-neutral farming, photo-voltaic fields, sustainable tourism and entrepreneurial start-up campuses that would theoretically modernize Greece — and create up to 200,000 new jobs in energy and the environment. The Greek government has set a goal of withdrawing all lignite plants by 2028, with the majority of units - representing over 80% of current installed capacity - being withdrawn by 2023. This goal marks the formalization of Greece's transition to a differentiated mixture of electricity production that will not be based on lignite. After all, the process of decarbonization has already started in the early 2010s with the gradual reduction of lignite activity. The goal of complete decarbonization of the country, by 2028, is reflected in the forecasts of the National Energy and Climate Plan, which ensures the stability of the electrical system and the energy security of the country.

Throughout the decarbonization effort, a central priority is to ensure a fair development transition of the lignite areas of Western Macedonia and Megalopolis, which is based on three pillars: employment protection, compensation of the socio-economic impact of the transition and energy self-sufficiency of lignite areas and the country at large. With these axes, the preparation of a holistic, ambitious but realistic plan of fair development transition became crucial, the implementation of which will make Greece a pioneer in Europe and an international example of best practice for fair development and fair transition.

 

Recently, Greece's Prime Minister Kyriakos Mitsotakis has inaugurated the largest installation of double-sided - or bifacial-solar panels in Europe, as part of the nation's transition to green energy. He said the government also plans to streamline the licensing process for renewable energy projects, which could signal further cooperation with Chinese companies that already own stakes in several Greek wind farms and in the operator of the national grid. "This project reflects our national goals for cheap and clean energy from the sun, from the wind, from the water," Mitsotakis said at the opening ceremony in Kozani, a city in northern Greece. Built by Hellenic Petroleum, one of the largest oil companies in the region, the 204-megawatt solar park represents a pivot to renewable power that Greece hopes will spur recovery from the COVID-19 pandemic and the 2007-2008 debt crisis that upended its economy.

 

Greece will also conduct its first test drilling for natural gas in more than a decade. Mitsotakis said recently that any gas found would "boost our energy independence and our energy security".

 

TRANSFORMATION

 

After reviewing the uneven effects of the crisis across regions in Greece, the Government has decided to focus on four main enabling factors for future regional growth: human capital, technology, social capital and environmental capital. The allocation of human capital to productive activities, and the need to boost investment in innovation and technology in order to strengthen regional innovation systems that can serve as a backbone for regional development is a major priority.

 

Greece faces two competitive pressures and a strategic choice. On the one hand, Greece – at the European Union’s periphery – faces competition in goods and services from countries with low labour costs such as Turkey. On the other hand, Greece also faces competition within Europe from countries with higher labour costs but considerably stronger technological and productive capacities. A general challenge for Greece is to strengthen value-added services and activities in enterprises and to scale up and cluster activities in order to boost productivity and generate employment. Raising labour productivity is not only essential for long-term economic prosperity but also the only way to ensure sustainable wage growth. Beyond economic output and income levels, productivity matters for many other dimensions of well-being.

 

The vast majority (99.9%) of enterprises in Greece are small- to medium-sized – i.e. firms with less than 250 employees. SMEs constituted approximately 86.5% of employment out of the total business economy in enterprises but just 54% of value-added in 2018. Greece’s business landscape is particularly dominated by microenterprises. Among all SMEs, microenterprises with between 1-9 employees are the largest share of all business types in Greece at 56%, which is significantly above the OECD average of 30%. Strengthening entrepreneurship, supporting business development and enhancing the innovativeness of businesses have been top priorities for Greece’s national and regional governments for some time. For example, enhancing business competitiveness and extroversion, shifting to qualitative entrepreneurship spearheaded by innovation and higher domestic added-value is a priority both in the National Growth Strategy and for the Partnership Agreement.

 

Another important initiative is the National Strategy for Extroversion (NSE) launched in 2021 by Entreprise Greece. Among its multiple objectives, it aims to bring FDI to 4% of GDP by 2023 from 1.8% in 2019 and increasing exports to 48% of GDP by 2023, from 37% in 2018. This will be done with the development of existing markets as well as new markets for Greek products and services. Some of the most important industries for export are pharmaceutical, aluminium and copper products, agri-food products and beverages, construction material and paints. Another key strategic point is the global transport and logistic networks through the development of international connections with Greece via road and railroads axis with neighboring countries.

 

The NSE initiative is also focused in making Greece one of the 20 most recognizable countries in the world, from the 34th position in 2019. The Government is also working in supporting national priorities and positions on the negotiated free trade/investment agreements between EU and Australia, New Zealand, Mercosur, Mexico, India, China, among others.