Cyprus Mail

CERA: electricity market model is being reviewed

By Poly Pantelides

CYPRUS Energy Regulatory Authority (CERA) chief George Shammas said yesterday he had appointed an advisor to review the electricity market model in order to remove potential barriers to active competition and to ensure security of supply and benefits for the consumer.

Addressing the AGM of the Electricity Authority of Cyprus union SEPAIK, Shammas said that changing the market model would allow renewable energy sources to become more competitive as the system would be based on common rules and regulations.

“It appears that Photovoltaic parks can now offer energy at cheaper levels than the current system,” he said.

Of course whether or not the government is really committed to integrating renewable energy sources (RES) in the island’s overall energy consumption – dropping long-term costs for consumers and doing a little bit for the environment – depends on who you ask.

There are commitments stemming from legal obligations. Cyprus, like all other member states of the European Union – must meet 13 per cent of its overall gross energy consumption from RES by 2020. In the case of electricity the figure stands at 16 per cent.

Cyprus – whose wind farms, even if they do tend to operate at 25 per cent capacity, far outnumber the installed capacity of photovoltaics – is now well on target. It has already nudged a little ahead of its interim 2015-2016 target of 7.45 per cent, closing last year with about 7.5 per cent, according to the commerce ministry and the energy regulator. Part of the reason is a roughly year-on-year 20 per cent reduction in energy consumption observed at the end of last year and beginning of this one.

And with the commerce ministry’s blessing, CERA has announced for this year three “very important steps towards renewable development”.

Some households will be able to install a net metering system that can generate major savings for them, industrial and commercial businesses will have a self-production option for a total of 10MW and a limit of 1MW per business; while people will be able to set up larger parks totalling 50MW following a call for tenders whose results were announced earlier this year. All the schemes relate to photovoltaics that for a long time were considered too expensive, even for small-scale units. CERA’s Shammas said last week that the three schemes would “achieve the binding targets of Cyprus”.

The official line is that the government is committed to continuing to increase the share of photovoltaics and RES in the island’s energy consumption. Commerce minister Giorgos Lakkotrypis has said that development projects, including those that focus on RES, is a top priority for the government as part of moves to give the economy a much needed boost.

Across the board, from homeowners to businesses, the idea of photovoltaics especially is very appealing. Take industries for example. Industrial consumers pay the most for electricity in Cyprus at a cost of €22.60 per 100kWh – almost double that of every other EU 27 member, according to the latest Eurostat data.  In general, between the first half of 2011 and the second half of 2012, electricity prices marked the highest jump within the EU bloc, so it would seem natural for businesses and homeowners to jump at the promise of cheaper electricity.

But the managing director of one of the early adopters of RES schemes warns that the state needs to become much more aggressive and commit to cutting through red tape.

“You can’t have 5,000 households with net metering by the end of the year if you go by the old mentality,” said Angelos Angelis, the managing director of Metartec Cyprus which sells solar power products including photovoltaic panels.

He was speaking from experience of years that taught him the hard way that companies and homeowners would sometimes have to wait for a year or even more between the time parliament approved legislation on RES and the time the state would approve an application. When the legislative framework on RES passed in late 2002, Angelis thought “the sky would be the limit”. Instead, he had to wait for a year and a half before the law was implemented. And though he applied to fit his home with photovoltaic panels in October 2004, it was not until November 2005 that he was given the go-ahead.

“Basically, the state has no policy,” Angelis said. “The country is being run by a moronic system.”  “Everything takes place with ridiculously bureaucratic procedures,” he added.

“So now they’ve announced brave decisions, but we haven’t seen anything yet,” Angelis said. But because years of bureaucracy have eroded trust in the state’s commitment to RES development, the government need to regain trust, he added.

Meanwhile, the European Commission said in March that it would ask the EU Court of Justice to impose a daily penalty of about €11,400 for failing to transpose a 2009 renewable energy directive. For Angelis, this is just one example of the way the government does not take RES investment seriously. Take the devastating naval base blast in July 2011 that wrecked the electricity authority’s main power station and prompted a series of ministers to announce they were simplifying RES procedures and would authorise CERA to process backlogged applications.

Then Commerce Minister Praxoulla Antoniadou said in October 2011 they were opening up auctions for photovoltaic parks to license 50MW in total.  That is the same auction for the same 50MW whose results the current government announced in February 2013. And though parliament was meant this week to discuss and approve the RES fund budget that is also expected to subsidise the net metering scheme, legislators pushed back a vote. However legislators themselves hailed last October the job creation potential of net metering and PV projects via development in design and construction of PV projects.

So where does this leave the private sector that can create those jobs and the development Cyprus is so keen to have?

During a recent public dialogue on the crisis and the environment, a former head of the Technical Chamber of Cyprus and a director at Leptos Estates also made it clear that the private sector would do what makes financial sense.

“If businesses are either legally obliged to implement environmental/energy action or else see a profit, they will pursue that path. Otherwise they won’t,” Linos Chrysostomou said.

“This is where a serious state policy comes in play” Chrysostomou said only to add, in a similar vein to Angelis that he did not think the state had such a serious policy in place.

Or take even net metering that could help with a major cost for many households. The system allows homes to produce electricity via small RES facilities. The facilities feed energy into the grid, while consumers draw electricity as normal from the grid but only have to pay the difference between the outflow and inflow. If their facilities produce as much electricity as the households consume, electricity bills will come to nil. If people consume more electricity than what is fed into the system, homeowners will have to pay the difference. Though they cannot make a profit from the system, net metering has the potential to make a true difference to poverty-stricken households. Some 2,000 financially vulnerable households (the definition of what this means has not yet been set) will be eligible to apply for net metering, for a combined output of up to 6MW.

However, although 2,000 financially vulnerable households are meant to be eligible on income criteria they will only get 50 per cent of their costs subsidised by the RES fund.  To install some 3kW – the maximum output allowed per unit– households will need to pay an estimated €4,500 according to CERA.  Even if they get half of that paid for, asking a struggling family to cough up at least €2,500 might be a stretch. Some other 3,000 families will also be eligible to apply for a combined output of maximum 9MW, again on income criteria, but with no subsidy. Nonetheless, after years of discussion most stakeholders are happy net metering is finally on the table.

But we are still a way off from the vision of the university of Cyprus rector or the Austrian Ambassador to Cyprus even, who believe Cyprus could meet most of its energy needs by harnessing its plentiful sun power. Is it possible? It depends who you ask.

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