Commission Decision (EU) 2024/1274of 29 April 2024granting the Hellenic Republic a derogation from certain provisions of Regulation (EU) 2019/943 of the European Parliament and of the Council and of Directive (EU) 2019/944 of the European Parliament and of the Council, as regards the island of Crete(notified under document C(2024) 2890)(Only the Greek text is authentic)(Text with EEA relevance)

Article 6, Article 7(1), Article 8(1) and (4), Articles 9, 10 and 11 of Regulation (EU) 2019/943

4.2.1.1.

The Application

(32) With regard to Article 6 of Regulation (EU) 2019/943, Greece submitted that the hybrid model currently applicable in the island of Crete does not include a balancing market. Hence a derogation from that Article would be necessary for the hybrid model to continue to apply until the island of Crete is fully interconnected.

(33) With regard to Article 7(1) and Article 8(1) and (4) of Regulation (EU) 2019/943, Greece notes that the hybrid model as currently applicable in the island of Crete does not provide for day-ahead and intraday markets, or trades on either of these markets. Hence, according to Greece, a derogation from those Articles would be necessary for the hybrid model to continue to apply until the island of Crete is fully interconnected.

(34) Likewise, following on from what is set out in recital 33, Greece considers that the integration of forward markets, technical bidding limits and the value of lost load referred to in Articles 9, 10 and 11 of Regulation (EU) 2019/943 do not apply to the hybrid model in the island of Crete. Hence, according to Greece, a derogation from those Articles would be necessary for the hybrid model to continue to apply until the island of Crete is fully interconnected.

4.2.1.2.

Assessment

(35) With respect to the requested derogation from Article 6, Article 7(1), Article 8(1) and (4) and Articles 9, 10 and 11 of Regulation (EU) 2019/943, those provisions refer to requirements regarding the forward, day-ahead, intraday and balancing markets. Based on the information submitted by Greece, it appears that those markets cannot be implemented effectively in the island of Crete considering the particularities of the electricity system currently applicable in that territory. Hence, a derogation from those provisions is justified.

4.2.2.

Article 40(4) to (7) of Directive (EU) 2019/944

4.2.2.1.

The Application

(36) Greece submitted that the hybrid model does not provide for a balancing market or market-based procurement of ancillary services. In order for the hybrid model to continue operating in the transitional period, a derogation from that Article would be necessary.

4.2.2.2.

Assessment

(37) Given the absence of a balancing market and of a market-based procurement of non-frequency ancillary services in the island of Crete, a derogation from the obligations in Article 40(4) to (7) of Directive (EU) 2019/944 is justified.

4.3.

No obstruction to the transition towards renewable energy, increased flexibility, energy storage, electro-mobility and demand response

(38) Pursuant to Article 64(1), fifth subparagraph, of Regulation (EU) 2019/943 and Article 66(2) of Directive (EU) 2019/944, a derogation decision is to ensure that it does not obstruct the transition towards renewable energy, increased flexibility, energy storage, electro-mobility and demand response.

(39) As regards the transition towards renewable energy and increased flexibility, including demand response, and energy storage, it should be noted that well-functioning forward, day-ahead, intraday and balancing markets, in accordance with the requirements set in Regulation (EU) 2019/943 and Directive (EU) 2019/944 should provide the necessary dispatch and investment signals to maximise the potential development of those technologies. This is expected to be the case once the island of Crete is fully interconnected with mainland Greece.

(40) As indicated in recital 56 of Decision (EU) 2022/258, prior to the completion of the Phase I interconnection, technical limitations were applied to Crete, imposing a maximum penetration of renewables to 25 % of the load, due to operational security constraints. The completion of Phase I relieved, to a certain extent, that limitation imposed on renewables. The hybrid model allows Crete to export its electricity in case of low load and high renewables generation, in order to avoid curtailment of renewables. Greece submitted figures in support of that statement, demonstrating that during 2021 and especially 2022, which marked the first full year of the operation of the Phase I interconnection, there was an increase in RES production compared to previous years.

(41) Greece notes that the requested derogation will not slow down the already ongoing development and preparation for the installation of new RES capacities on the island of Crete. Greece also submitted that upon completion of the full interconnection, Crete will accommodate at least 2150 MW of RES, which, considering the installation of storage units, may increase to 2500 MW.

(42) As regards increased flexibility, energy storage and demand response, the possibility of offering flexibility services, including storage, to support the electric system depends on the quality of the price signals and their ability to provide efficient investment and dispatch incentives to the providers of those services. As a rule, structural congestion within a bidding zone, which will be the case during the transitional period from Phase I to Phase II, can result in distorted investment signals for location-specific flexibility services. However, in a two-bidding zones approach for Crete and mainland Greece, the investment signals would be highly unstable, given the timeframe for the completion of Phase II and the full interconnection of Crete to mainland Greece, which will relieve structural congestion. Therefore, since the connection to the mainland will enable market-based provision of flexibility services, a short-term derogation which enables rapid integration of Crete into the mainland system is beneficial to the integration of demand response, energy storage and other flexibility sources.