Between Decarbonization and Dependency: Evidence from Greece

Historically, the electricity sector in Greece was based on local lignite, which provided a stable and affordable base for electricity production. However, current European policy directions, including decarbonization and climate neutrality by 2050, have accelerated the transformation of traditional energy models, resulting in a gradual phasing-out of fossil fuels and an increasing integration of Renewable Energy Sources (RES). In line with EU policy priorities and in light of the new dynamics shaped by the EU Emissions Trading System (EU ETS), lignite gradually became unprofitable for the national economy, leading the Greek government to announce an accelerated lignite phase-out plan. However, the phase-out of domestic lignite, although consistent with climate objectives, rapidly increased the country’s energy dependency on natural gas and its exposure to natural gas price volatility. At the same time, increased investment in solar and wind technologies has reshaped the electricity mix; yet market design, limited system flexibility and inadequate infrastructure and storage capacity have not allowed the full utilization of RES benefits. This structural gap, in turn, raises critical questions about resilience and affordability. The paper provides evidence on these issues and offers a critical evaluation of the decarbonization pathway that has reshaped the country’s energy dependency.