State-owned utilities are, for lack of a better word, stupid.
The only folks that really benefit are the politicians and insiders who forge the deals. Consumers, on the other hand, are often left to fund these systems through special subsidies and utility bills that never correlate with the real cost of what it takes to source, generate, and distribute electricity.
A perfect example would be the welfare state of Greece, which loves its handouts but hates ponying up when it’s time to pay the fiddler.
We know this to be true when it comes to the current crisis in Greece, but it’s also true in the case of energy.
You see, the Greeks are shackled to a state-owned public power corporation (PPC) that controls 96% of the market.
The result: The Greek government won’t allow the PPC to adjust electricity bills to reflect actual production costs. The price is actually set by the government, not the market. And that has resulted in the inability to invest in new, superior energy technologies.
Instead, the beautiful country of Greece continues to rely heavily on old, outdated coal-fired power plants for the mainland and oil for its islands — which, by the way, must be imported.
To make matters worse, the government allows the PPC to use lignite coal and water reserves for free. Of course, it’s not really free. Nothing is free; someone ultimately pays. And in this case, it’s the citizens of Greece that I would guess — for the most part — are completely clueless to the fact that their natural capital is being depleted faster than their bank accounts.
It should also be noted that the state financially backs fossil fuel production with a somewhat confusing basket of subsidies that run more than $2 billion a year. That’s more than the $1.7 billion Greece was supposed to pay back to the IMF last week.
What a train wreck!
Here’s where it gets good
As reported in The Ecologist:
Energy poverty in Greece has since developed into a humanitarian crisis, with an estimated 6 out of 10 households falling below the energy poverty line.
According to official statistics, 3 million people — nearly a quarter of the population — cannot afford proper heating during winter, with many not actually using heating at all. Meanwhile Syriza’s energy minister clearly doesn’t believe energy efficiency can tackle energy poverty.
He is also committed to completing the construction of new lignite and oil power plants, including Ptolemaida 5. However the project is turning out to be a disaster. No private stakeholder is interested in buying old PPC units, and so the government is short €1.4 billion needed for its construction.
Greece is blessed with one of the best solar resources on the planet, and when it comes to installed solar PV per capita, Greece ranks sixth in the world. But it’s hard to sell solar when no one’s got any money!
Of course, last month we heard Greece installed 7 megawatts of new solar PV from January through April. What most of these reports didn’t include, however, was the fact that all of those new installations came in January and February. March and April delivered a big fat goose egg.
The earlier part of the year saw those installations as a result of older licensed projects that were already completed but only recently connected to the grid.
Look, the bottom line is that the good people of Greece would be wise to put the same amount of effort they put into strong-arming the EU and the IMF into strong-arming the state-run utility.
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Keynesian Demons
Quite frankly, the only thing that could possibly re-invigorate the energy economy of Greece is the real privatization of its energy market. A new life line on solar would certainly be thrown by private solar companies that have the capital to operate solar leasing systems similar to those used by SolarCity (NASDAQ: SCTY) and Vivint Solar (NYSE: VSLR).
Roof-mounted solar and smaller micro-grids would not only ensure more reliability, but they would also serve as huge job creators.
Now, I don’t know exactly how things work in Greece, but if the regulatory environment is too burdensome for solar companies to operate, perhaps some should just start a black market for solar. It’s not like much would happen to them.
After all, the government can’t even get people to pay their taxes that go to cover all the extravagances and trappings of a welfare state. I highly doubt it has the time or inclination to go after a dozen or so solar installers.
I wish the people of Greece the best of luck in the coming months as they struggle with poverty, government corruption, and the lack of free market fundamentals.
The truth is, I do believe that if you owe someone money — regardless of how horrendous that lender may seem — you should pay it back according the terms agreed upon. After all, it’s not as if Greece entered into the euro kicking and screaming.
However, if Greece cuts loose, I hope its citizens use the opportunity to conquer their Keynesian demons, kick the bureaucrats to the curb, and allow a free market phoenix to rise from the ashes of this failed experiment.
To a new way of life and a new generation of wealth…
Jeff Siegel
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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
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