Electricity Costs in Greece Climb Due to Market Inefficiencies and Export Growth

The average wholesale price of electricity reached €135 per megawatt-hour (MWh) in January, a 4% increase from €129 in December.

Greece’s electricity market is experiencing upward pressure on prices despite a decline in domestic demand, driven by structural inefficiencies and external market forces. The main factors behind this surge include increased reliance on expensive natural gas-fired

Recent data from the country’s Energy Exchange shows that the average wholesale price of electricity reached €135 per megawatt-hour (MWh) in January, a 4% increase from €129 in December. The rise becomes even more striking when compared to the 2024 average of €100 per MWh, representing an almost 30% jump. Meanwhile, figures from Greece’s Independent Power Transmission Operator (ADMIE) indicate that total electricity production grew by 10% compared to 2023, with natural gas plants registering a dramatic 60% increase. However, this rise in production is not being driven by domestic consumption, which actually fell by 2%, but rather by a surge in exports that now account for 8% of total demand.

At the heart of this price escalation is the European Union’s Target Model for electricity pricing, which sets costs based on the most expensive production unit. Greece, which has shifted from being a net importer to a net exporter of electricity, now sees its natural gas plants covering export demand. This in turn raises the overall production cost, with the burden ultimately falling on Greek consumers through higher retail electricity prices.

The situation worsened in February when the average wholesale price climbed to €153 per MWh, a 14% increase compared to January. These wholesale price hikes are expected to be reflected in consumer bills in March, with final retail prices likely exceeding 17 cents per kilowatt-hour (kWh), depending on supplier discounts. To keep prices at 15 cents per kWh, the government would need to increase state subsidies by over 2 cents per kWh.

The Greek electricity market’s pricing model has come under increasing scrutiny for its distortions, yet the European Commission remains reluctant to introduce reforms. Despite mounting calls for changes, the Target Model continues to dictate prices based on the highest-cost power plants, further exacerbating price volatility.

Addressing these challenges will require structural interventions in both pricing mechanisms and electricity export regulations. One potential solution would involve revising the pricing system to better reflect the real cost of electricity production, rather than basing it solely on the most expensive source. Additionally, introducing a regulatory mechanism for exports could prevent excessive cost burdens from being passed on to Greek consumers.

A long-term solution lies in expanding renewable energy production, developing energy storage systems, and optimizing hydropower resources. Stricter market oversight and greater transparency could also help curb artificial price inflation. While government subsidies may offer short-term relief, they are not a sustainable fix. More effective strategies include reducing production costs through tax incentives for cheaper energy sources and promoting self-generation initiatives, such as rooftop solar panels, which could help stabilize the market and protect consumers from future price shocks.