Greece as a southeast European energy hub—integration, flexibility (storage) and the road ahead

Greece is rapidly emerging as a Southeast European energy hub, driven by rising renewables, stronger interconnections, and growing flexibility and grid investments. AFRY and China Energy Europe Renewable Energy have collaborated on an in‑depth report analysing Greece’s power market at a pivotal moment, and this summary highlights the key findings.

Structural transformation

Over the past five years, Greece has undergone a significant structural transformation of its power sector. The country has shifted from a lignite-dominated, net-import‑dependent system to one characterised by high-RES penetration and increasing regional integration. As lignite continues its phase‑out and RES expands, Greece is consolidating its position as an emerging energy hub in Southeast Europe, facilitating electricity and gas flows between the Balkans, the Eastern Mediterranean, and the wider EU market.

This transformation has been primarily driven by large-scale deployment of solar PV and the progressive reinforcement of regional interconnections. However, the rapid pace of change has introduced new system integration challenges, shifting the focus from capacity expansion to system operation, grid adequacy, and flexibility.

PV rise and associated challenges

Recent years have seen a marked increase in solar PV capacity, supported by robust permitting and development activity. In 2024, renewables accounted for around 43% of total electricity generation, with solar PV representing the main source of new capacity additions.

The pace of renewable deployment has far outstripped both the evolution of electricity demand and the grid’s ability to accommodate new connections. Despite expectations for a stronger rebound and a faster electrification of transport, heating and industry, demand has remained subdued, with only modest growth following the 2022–2023 energy crisis. This lower-than-anticipated demand growth has not been sufficient to absorb the increased RES supply, exacerbating system integration challenges. Transmission bottlenecks, especially in processing new grid connection applications, have become more pronounced.

Looking ahead, there is increasing anticipation that new sources of demand, such as large-scale data centres, may play a more substantial role in supporting system balance and absorbing renewable output, although their impact has yet to materialise in Greece.

Market effects and policy response

Structural imbalances are now evident, including periods of renewable oversupply during high-solar hours, the introduction of static curtailment measures by the Greek TSO, and increased revenue pressures on solar generators due to midday price cannibalisation. These effects are reflected in the wholesale market, with frequent occurrences of near-zero Day-Ahead Market prices at midday and significantly higher prices during evening peaks, resulting in a widening intraday price spread; market trackers report dozens of negative hours so far this year (e.g. 89 negative hours in Greece through October 2025).

This is partly due to limited battery capacity, low demand response, and constrained flexibility from conventional plants, meaning the system cannot absorb all the midday solar output.

These challenges are not unique to Greece; as in other European markets – especially in the sunny south – the focus has shifted from building renewable capacity to integrating it effectively into the power system.

As RES penetration increases and system constraints become more apparent, energy policy has shifted focus to integration challenges and market functionality. Key regulatory developments include ongoing reforms to the balancing and redispatch framework (i.e., draft Ministerial Decision on the Curtailment Redistribution Mechanism (Greek)), mechanisms addressing curtailment impacts on RES producers (i.e. RAAEY’s consultation on IPTO’s proposal for amendments to the Balancing Market Code regarding the participation of Electricity Energy Storage Stations in the Balancing Market), and the introduction of a connection framework for standalone BESS projects, particularly in areas linked to industrial demand and lignite transition (i.e. Ministerial Decision on the connection of standalone Electricity Energy Storage Stations).

Flexibility, storage & network investments

In this context, flexibility and network investments are emerging as the main enablers of the next phase of the transition. Policy-supported battery storage projects are progressing towards implementation in early 2026, while more than 10GW of merchant storage projects have applied for favourable grid connection terms, with only 4–5 GW of them expected to be approved.

However, merchant storage revenues remain uncertain; market participation rules have not yet been fully defined and the revenue stack model relies on thinner markets with somewhat unproven depth and higher risks with regard to revenue cannibalisation from uncoordinated deployment. This underscores the need for continued regulatory refinement to ensure that flexibility services are appropriately valued.

On the network side, an upward shift in network investment is underway, supported by revised regulatory incentives and the TSO’s and DNO’s accelerated multi-year investment plans. Major transmission upgrades and projects, such as the Crete-Attica Electrical Interconnection project, are critical for reducing congestion and enabling further RES integration.

Market adaptation and competition landscape

System and regulatory changes are also reshaping the competitive landscape. The increasing maturity of the market has introduced challenges commonly observed across mature power systems, including heightened volume risk due to rising curtailment levels, increased price risk stemming from greater merchant exposure in the absence of CfDs and the growing incidence of negative price hours, as well as persistent constraints in access to the grid.

These factors have contributed to increased complexity in project economics and system risks, leading some international developers, particularly those focused on pure-play merchant renewables, to reduce their presence in the market.

In response, Greece’s larger utilities have expanded their activities across the value chain, further gaining market share in generation, storage, and supply.

Regional integration

Beyond its domestic market, Greece is increasingly integrated with the broader regional energy landscape. Ongoing efforts to expand electricity interconnections and enhance cross-border infrastructure are supporting greater regional trade and system flexibility across Southeast Europe and the Mediterranean.

At the same time, Greece is advancing its role in regional gas networks through new infrastructure, increased LNG capacity, and preparations for future hydrogen infrastructure integration, following the adoption of its first Hydrogen Law in 2025, setting rules for hydrogen production, storage, transport, and market integration. Additionally, Greece is preparing for the next chapter in energy transition through the development of frameworks for offshore wind and CCUS markets, including the adoption of legislation establishing a national legal and licensing framework for CO₂ capture, transport, and geological storage activities.

Collectively, these initiatives reinforce Greece’s position as a key link for diversified energy flows and security between Europe, Asia, and Africa, underscoring its growing importance in both electricity and gas markets.

Outlook

With the Greek power sector transitioning out of its subsidy-supported era and fully embracing merchant market dynamics, the level of complexity and exposure has increased significantly. Investors now face a landscape where thorough due diligence and advanced risk-management practices are no longer optional but fundamental.

Yet the market remains rich in opportunity: strong demand fundamentals, ambitious renewables targets, and ongoing grid and interconnection upgrades continue to create space for well-structured, innovative projects to succeed.

AFRY and China Energy have assessed these challenges and potential opportunities, aiming to provide concise insights for the current and future status of the Greek power market.