What a long-term strategic energy plan should include

Diversification should become a guiding principle of all energy decisionsThe question is no longer whether Cyprus needs a long-term energy plan. The question is what such a plan should include. A successful energy strategy must provide a coherent framework that links energy security, affordability, competitiveness, decarbonisation, water security and economic growth. It must also address a problem that has undermined many previous initiatives: implementation. The most important feature of a strategic energy plan is that it must be integrated. Too often, energy policy has evolved through separate discussions about natural gas, renewable energy sources (RES), electricity storage, desalination, interconnection and market reform. These are not independent issues. Decisions in one area affect all the others. The plan must therefore start with a clear vision of the energy system that Cyprus wants to build by 2040. The first pillar should be energy security Cyprus remains one of the most isolated energy systems in Europe. It remains vulnerable to disruptions in regional and global energy markets. Events in recent years, from the global energy crisis following Russia’s invasion of Ukraine to tensions in the Middle East, have shown how quickly energy markets can be destabilised. A long-term strategy should therefore focus on diversification. No country can eliminate all risks, but risks can be reduced by avoiding over-reliance on a single fuel, technology or supply route. This means accelerating the introduction of natural gas as a transitional fuel, expanding renewables, developing storage systems, pursuing electricity interconnection and maintaining adequate backup generation. Diversification should become a guiding principle of all energy decisions. The second pillar should be affordability and competitiveness High electricity prices affect every household and business in Cyprus. They contribute to inflation, reduce disposable incomes and undermine economic competitiveness. The IMF has rightly argued that sustainable reductions in electricity prices cannot be achieved through subsidies alone. Structural reforms are required. The strategy should therefore set clear targets for reducing electricity costs and CO2 emissions over time. This will require increased competition, improved efficiency, lower carbon costs, better integration of renewables and more effective use of energy storage. The introduction of a fully functioning competitive electricity market, suitable to Cyprus’ small market, should be treated as a strategic priority and not simply as a regulatory obligation. Competition encourages innovation, attracts investment and improves efficiency throughout the system. The third pillar should be renewable energy and storage Cyprus has some of the best solar resources in Europe. This natural advantage must become the foundation of the country’s future energy system. However, expanding solar production alone is not enough. The growing problem of renewable energy curtailments demonstrates that their development must be accompanied by storage and flexibility measures. Large amounts of clean electricity are already wasted because the system cannot absorb it. A long-term strategy should set specific goals for battery storage, grid modernisation and flexible demand management. Storage should be recognised as a key infrastructure. At the same time, the strategy should explore new approaches to flexibility and the use of desalination as a flexible electricity consumer capable of absorbing excess renewable energy production. The fourth pillar should be the role of natural gas and domestic gas resources The prolonged delays in introducing natural gas have highlighted the importance of realistic transition planning. While RES represent the long-term future, Cyprus still requires flexible generation capable of supporting the electricity system when RES generation fluctuates. Natural gas can play this role during the transition. It can reduce emissions, fuel costs and improve system flexibility. A long-term strategy should clearly define the expected role and duration of natural gas rather than treating it as an open-ended solution. The strategy should also address the potential role of domestic offshore gas resources. If commercially viable discoveries are developed, decisions will be needed on exports, domestic exploitation and their contribution to energy security. The fifth pillar should be electricity interconnection The IMF has rightly identified interconnection as one of the most important reforms needed to strengthen Cyprus’ energy system. Interconnection can enhance security of supply, facilitate the integration of renewables, reduce reserve requirements and improve market efficiency. But it should not be seen as a substitute for domestic energy development. Instead, it should be one element of a diversified energy strategy that combines domestic generation, storage and external connectivity. The strategy should therefore set clear objectives on the role of interconnection, the level of import dependence that is considered acceptable and the relationship between domestic generation and imported electricity. The sixth pillar should be resilience and adaptation to climate change Energy systems are increasingly affected by climate change that places increasing demand on electricity. Adaptation to climate change should become an integral part of energy planning, not a separate policy area. Infrastructure should be designed to operate reliably under future climate conditions, not historical ones. This leads directly to the integration of energy and water planning. Historically, energy and water have been treated as separate sectors. This is becoming increasingly unsustainable. Cyprus is increasingly dependent on desalination to ensure water security. However, desalination is heavily dependent on electricity. If the cost of electricity increases, so does the cost of producing water. If energy supplies are disrupted, water security can be affected. A long-term strategy should therefore integrate energy and water planning. Water infrastructure should be designed to contribute to the overall flexibility of the system and not simply consume electricity. Finally, and perhaps most importantly: The strategy should address governance and implementation The auditor-general’s observation that state inefficiency is one of Cyprus’ biggest challenges must be taken very seriously. The country lacks effective implementation. A strategic energy plan should therefore set-out clear responsibilities, measurable milestones and transparent monitoring mechanisms. A National Energy Council could coordinate policy across ministries, regulators and public agencies. Annual progress reports should track performance against specific targets. Without accountability, even the best strategy will remain a document, not a roadmap. Ultimately, a successful ‘Energy Strategy 2040’ is not just about technology or infrastructure. It is about creating a framework capable of delivering secure, affordable and sustainable energy, while strengthening economic competitiveness and national resilience. The IMF has highlighted the risks of continuing on the current path. The auditor-general has quantified the costs of delay. The challenge now is to move from a set of projects and policies to a coherent national strategy. The future of Cyprus’ energy system will not be determined by any single project. It will be determined by whether the country can develop and implement a long-term plan that aligns energy sources and security, affordability, decarbonisation, water security and economic growth within a single strategic vision.