Financial Crisis in Greece, Economical Evaluation of Replacement of Heating Diesel Oil with a Heat Pump System

Abstract

In October 2009 the Greek government realized that the previous governments had been understating their public debt for years. Just two months later Fitch downgraded Greece’s debt to BBB+, the lowest credit rating in Europe. The Greek government tries to resolve this historical “problem“ with a loan from a troika (European Union, European Central Bank and the International Monetary Fund), which requires the country to implement a wide array of austerity measures, from spending cuts and public sector lay-offs to tax rises and the privatization of public assets. But the three-year crisis has left deep scars on the body of society, leaving thousands out of work and plunging them into poverty. According to the official data from the Greek ELSTAT statistic agency reports, unemployment in Greece hit a new record in October 2012 reaching 26,8 %, compared with 2008, when economic decline started in Greece, unemployment has more than tripled. In addition, according to study by ADEDY and GSEE labor unions, approximately one in two Greeks earns less than 4,871 € a year and lives below the poverty line, defined as the minimum income a family of four needs to eat, dress, use transportation, go to school, and pay the rent.

Based on the data from the ministry of environment, energy and climate change the Greek government knows that the greatest problem of the Greek fuels market is fuel smuggling, adulteration and cheating, which lead to distortions in the market. In order to solve this problem the government decides to equalize the price of heating oil with petrol pump prices. However, this decision pushes the price of a litre of heating oil to around 1,3 €, about 45 % higher than one year ago. With petrol out of the question for the many, attention has turned to alternative forms of heating. On the other hand, collusion among producers in Greece and a thorough lack of competition that allows a favored few to extract economically unjustified profits have as a result the price of natural gas, wood and pellet to climb.

The main goal of this work is to estimate the feasibility of a heat pump system as an alternative solution to the common heating diesel which is used in Greece. Based on the long-term meteorological data from 66 stations, the financial feasibility of a heat pump heating system at each site in Greece was estimated. The RETScreen Clean Energy Project Analysis software was used in order to carry out the feasibility analysis and the green house gas (GHG) emissions reductions. Generally Greece has a typical Mediterranean climate which means hot, dry summers and mild rainy winters with snow mainly at higher elevations. The facts that there aren't areas in Greece which are more than 140 kilometers away from water and nearly 80 % of country is mountainous give varying weather patterns across to the country. According to the heating degree-days, Greece can be divided into 4 climatic zones. Sensitivity analysis was realized for four cities, namely Rhodes, Athens/Filadelpeia, Kavala and Kastoria, which are located in the first, second, third and fourth zone respectively. In accordance with the financial results in the first climatic zone where heating demand is really low, the replacement of heating oil systems with heat pump systems is not very profitable investment.

In zone A, based on the results from the RETScreen, the payback period varies between 7–10,5 years, while for the poorest of citizens owing to government subsidy of 0,28€/l the payback period is between 9,8–14,5 years. In the second zone there are several financial benefits from using heat pump system instead of heating oil, the payback period fluctuates from 5,1 up to 6,9 years (without government grant) or from 7,3 up to 9,8 years (with government grant). In the climatic zone C, heat pump system seems provides considerable economic benefits, the relevant results showed that the payback period varies between 4,2–5 or 6–7,1 years without and with government subsidy. In the fourth climatic zone where the climate is similar with that in central Europe, heat pump system is a sound financial investment and the payback period is really short (3,2–4,2 years without government grant or 4,6–6,0 years with government grant). Last but not least, except from financial benefits, there are environmental benefits as well. Based on the RETScreen environmental analysis, the gross annual GHG emissions reduction was estimated to be 1,5 up to 5 tCO2.

DOI: http://dx.doi.org/10.5755/j01.ee.25.2.3442