Why Cyprus electricity prices remain high despite renewables growth and energy reforms

Economy cyprusEACelectricityenergyphotovoltaicsTop News Why Cyprus electricity prices remain high despite renewables growth and energy reforms Diatimiseis Revma 768x512 1 Relevant News Why Cyprus electricity prices remain high despite renewables growth and energy reforms 30 August 2026 Mavropoulos tragedy: Partner remains in hospital as police investigate Cape Greco boat disaster 30 August 2026 Man arrested after lighter allegedly caused petrol station fire in Larnaca 30 August 2026 Charalambos Zakos 30 August 2026 FacebookXWhatsAppEmailPrintViber The price of electricity in Cyprus is not determined by a simple equation. It depends on multiple factors, meaning that no single measure, without a wider strategic plan, can by itself lead to major reductions in electricity bills or cuts that consumers would genuinely feel. Energy experts say the problem is complex, but stress that action must begin somewhere. However, they warn that this does not mean creating “false hopes” of major price reductions, as even energy storage systems in the coming years will not be able to significantly lower electricity prices. At the same time, as the arrival of natural gas continues to be delayed, the extent of any reduction in electricity bills remains uncertain, even if gas replaces heavy fuel oil. Natural gas is considered a transitional fuel by the European Union, while its own prices remain subject to market pressures. Experts argue that Cyprus’s current electricity model cannot be transformed overnight in a way that would deliver the reductions consumers are seeking. They also believe the country followed the wrong path in both renewable energy development and conventional electricity generation. Renewables share too small to make major difference Some energy experts argue that the share of renewables in Cyprus’s energy mix remains too limited for even a significant reduction in the cost of green energy to have a major impact on overall electricity prices. They estimate that renewables account for around 6%-7% of the energy mix, and that even with energy storage their share could reach around 10%. As a result, they argue, the impact on final electricity bills would remain relatively limited. Renewable energy prices should be separated from thermal generation Experts stress, however, that this does not mean existing market distortions should not be corrected. One of these concerns the way electricity from renewable sources is currently compensated, based on the cost of conventional generation by the Electricity Authority of Cyprus (EAC). They argue that the price of green energy should be separated from the so-called “avoided cost”, meaning the cost the EAC would have incurred to produce the same amount of electricity through its conventional units. According to them, these are two different methods of electricity production with different costs, and therefore the price of one should not be determined by the cost of the other. Such a change could lead to lower prices, they say. Although the reduction would likely be small, they consider it a first step towards correcting the market. They also argue that it could reduce the risk of excessive profits for renewable energy companies in the future, particularly as energy storage expands. “Consumers are effectively paying for emissions twice” Experts also highlight another issue linked to emissions costs. They argue that when renewable energy is compensated based on conventional electricity generation costs, the price paid to renewable producers indirectly includes the cost of carbon emission allowances. In simple terms, the cost of EAC’s electricity generation rises because of carbon dioxide emission allowances. Since this increased cost is used as the basis for compensating renewable energy producers, the price paid to them also rises, even though they do not have the same emissions costs. At the same time, consumers also bear the burden of emissions costs through their electricity bills. For this reason, experts argue that under the current system, consumers are effectively charged twice for emissions costs. Storage is not primarily aimed at cutting prices Energy storage, experts say, will not by itself bring major reductions in electricity prices, at least not with the capacity expected to be available over the next few years. The reason is that storage will still cover only a limited share of demand. Instead, its main role is expected to be as a reserve mechanism, helping prevent power cuts and possible blackouts during periods of high demand or failures affecting conventional generating units. Experts say the electricity model was wrong The debate over Cyprus’ energy market is not new and did not end with the opening of the competitive electricity market. Experts point to what they describe as a contradiction: while the opening of the market had been promoted as a way to reduce electricity prices, it is now indirectly acknowledged that the limited contribution of renewables means they cannot significantly lower bills. Renewable energy producers themselves have made a similar argument, responding to comments by MEP Fidias Panayiotou that their share of the market remains too small to reduce consumer prices, even if they lowered their prices and profits. Experts argue that this also contradicts some of the expectations before the opening of the competitive market, when many stakeholders claimed competition would bring lower prices. They return to the issue of avoided cost, arguing that renewable producers should compete on price with other renewable producers rather than with the EAC’s conventional generation. Producers knew about the risk of curtailments Experts also say the argument by renewable producers about reduced profits due to production cuts cannot be ignored. They argue that producers had known for years that, without energy storage, renewable generation curtailments were almost inevitable. Despite this, they continued investing in photovoltaic parks without storage capacity. According to energy specialists, the state should have required new renewable projects to include storage systems as a condition for licensing. Some photovoltaic investors have already recovered costs Another factor affecting the cost of photovoltaic generation is that some businesses operating in the sector for many years have already recovered their initial investment. As a result, experts argue, the cost of producing a kilowatt-hour for these operators depends mainly on administrative expenses, which are considered minimal. They say this factor cannot be ignored when calculating the cost and sale price of renewable electricity. Electricity prices cannot change immediately Electricity prices can be reduced to some extent, experts say, but achieving this requires correcting market distortions, significantly expanding energy storage beyond current plans and improving the entire energy chain. They stress that the problem does not lie solely with the EAC, the electricity grid, fuel costs or renewable energy producers. According to experts, two past decisions also contributed to today’s situation. The first was the exclusion of the EAC from developing renewable energy projects, which deprived the authority for years of the ability to add cheaper green energy to its own generation mix and continue relying on more expensive conventional production. The second was the abandonment of the Single Buyer Model, under which the EAC purchased electricity from renewable producers at a fixed price and incorporated it into its overall energy mix. After producers left the scheme and entered private agreements at higher prices, this cheaper electricity generation was no longer passed on to all consumers. Experts argue that if these decisions had been different, today’s electricity costs in Cyprus might have been lower. 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