Cyprus Mail

New tax to hamper ‘green’ energy production

Renewable energy producers, such as the windfarms seen here, say the green tax will be too costly for them

By Evie Andreou

IMPOSING a green tax on renewable energy sources (RES) damages the government’s credibility, threatens to close down businesses and discourages further development of the field, renewable energy producers said yesterday.

They oppose the cabinet’s law amendment, currently in parliament, which allows the Energy minister to issue decrees on the introduction of extraordinary ‘green tax’ on consumers and producers according to the RES fund’s obligations.

The fund covers the difference between the per kilowatt-hour (kWh) price with which the Electricity Authority of Cyprus (EAC) buys energy from producers according to avoidance costs and the producers’ overall production costs, which is a stable tariff set in their contracts.

So far, the RES fund is being solely funded through a green fee on electricity utility bills, which is set on the fixed amount of half a cent per kWh. The amendment provides that the energy ministry will have the right to increase the amount according to the fund’s needs.

The amendment was deemed necessary since the RES fund cannot fulfil its obligations to producers and remain viable. It is expected that due to the drastic decrease of electricity consumption in the last two years, negatively affecting proceeds, and the decrease of the EAC’s avoidance costs caused by the ongoing decrease of fuel prices, the fund will have a deficit by the end of the year.

Currently, the EAC’s production cost is 7.4 cents per kWh, whereas overall production costs for RES are 16.6c for wind energy and range from 13.8 to 33c for photovoltaics. The difference will have to be paid out of the RES fund, which also has prior financing obligations for RES projects.

According to Kyriacos Angelides of the employers and industrialists federation (OEV), the proposal provides that producers will be taxed between 11 and 13.5 per cent on their signed contracts.

He added that the association of renewable energy enterprises, SEPAEK, made counterproposals but they have not been heard.

“With this proposal, the state basically will be taking money from us to give them back to us,” the head of the small photovoltaic-energy producers’ association, SMIAFOS, Christos Pharconides told the Cyprus Mail.

He added that the majority of renewable energy producers still have not been able to repay their loans and mortgages made to install photovoltaics domestically or for larger scale projects and if the amendment is passed, they will have trouble paying off their bank loans.

“We were supposed to break away from our dependence on petrol and now with this proposal, they are linking RES with petrol prices, this is tragic,” Pharconides said.

If the government insists on this amendment, he said, then they will have to seriously consider if they really want to promote RES, because they really are not.

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