Will a Grexit affect my Energy Prices?

This week has been a busy week in the UK Energy industry, what with the CMA report being published on Tuesday, problems in China’s manufacturing sector and of course much talk of an Inevitable Greek exit from the Euro zone looking more likely. My Utility Genius has been asking how this week’s events will affect your energy prices.

Greece’s Energy Industry Background

Historically Greece’s mainlandAre Greece on the verge of a Grexit? has relied upon lignite power (Brown Coal) and oil imports to power its islands. Its main domestic supplier Public Power Corporation (PPC) controls the market with 96 % of the total domestic market share. The Greek government let PPC use Greece’s Lignite and Water reserves for free and has subsided its fossil fuel productions at €1.9 billion a year.

The least energy efficient building in Europe with 66% of Greek buildings not being insulated and still use Oil for heating homes, causing the average Greek household to using about 7%  more Energy than the average UK household. The Greek government control the price of energy to consumers effecting PPC’s ability to increase revenues and to invest in new more efficient energy technologies.

At the origins of the original Greek crisis at the turn of the decade, PPC opted to close down many of these Lignite mines rather than restructure Greece’s energy Industry orientated to more efficiency in the long run.

Greek Solar PV Energy vs. Greek Fossil Fuel Reliance

In 2010 PPC where forced into closing several Lignite production sites leaving it with a vastly smaller workforce and more inefficient units to work with. This caused a surge in Greek Sola PV creating 50,000 jobs but this ended when the Greek Government started to block new solar applications in favour of preserving the Greek Lignite industry, a move which cost Greece 45,000 jobs. Not only was this a costly process the new proposals haone of Greeces Lignate Plantsd a funding gap of €1.4 billion to find.

As part of the original Greek bailout Europe wanted more competition in Greece’s Lignite industry, a market which was previously hard to touch as Greece’s national industry. However a deal was reached with the German Development Bank KFW to fund half of the €700 million needed to reconstruct the industry.

The Future of Greek Energy after a Grexit

As of 2014 6 out of 10 homes in Greece are suffering Fuel Poverty, roughly 3 million people. At the moment Syriza is committed to investing in Lignite and Oil power plants, as Syriza’s energy minister does not believe that Renewable s will help tackle Energy Poverty. What with mass unemployment expected to rise, international creditors on Greece’s back and a fall in the price of the Euro falling against other International currencies making imports more expensive; even a deal with Russia to import Russian Gas to Greece will not be able to help get Greece out of Fuel Poverty.

What does this mean for the UK?  

Apart from the obvious opportunity for British renewable technology firms to exploit the fuel poverty situation in Greece, economically speaking, the UK is relatively unexposed to the Greece crisis as Greek trade accounts for only 1.2% of UK exports, however the to the current strength of the £ against the €, matched with an expected fall in demand across Europe with the effects of contagion on the back of a predicted Grexit, the prices of Energy should fall on the commodity markets with reduced demand. Weather this is shown in your final energy bill is another matter with This is Money suggesting that households could face a bill rise of up to £208 this winter. The advice is to fix your prices now to avoid any uncertainty in the market; you could end up saving your household a fortune over the next year.

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