By Constantinos Psillides
HOUSE Energy committee chairman Zacharias Zachariou has written to the Electricity Authority of Cyprus (EAC) urging it to keep on paying producers of renewable energy sources (RES) for another month, that would allow the government enough time to resolve the issue over subsidies from the renewable energy fund.
The fund covers the difference between the per kilowatt-hour (kWh) price with which the EAC buys energy from producers according to avoidance costs and the producers’ overall production costs, which is a stable tariff set out in their contracts. So far, the RES fund is being solely funded through a green fee on all electricity bills, which is set on the fixed amount of half a cent per kWh.
Due to the worldwide drop in crude prices, the increase in RES producers and a drop in energy consumption, the fund is no longer viable.
EAC pays producers the total amount owed and subsequently files for compensation from the fund. As of January this year, EAC was owed €6.5, with an estimated €1.5m added each month since then.
On June 2, the EAC decided to pay producers only the avoidance cost – which essentially is the cost of fuel – that has dropped to 7.44c per kWh from 11c when the agreements with RES producers were signed, and not cover the additional cost.
“I fully understand why EAC decided not to pay RES producers the additional subsidy, but they are faced with a serious problem that is not of their own making,” said Zachariou, adding that the House needs more time to come up with a solution.
The EAC board will meet on Tuesday to decide on the matter.
While the EAC might give in to the committee’s request, the only solution to the problem appears to be a tax increase on electricity bills.
The Energy ministry is currently in talks with the producers, suggesting a 70-30 split of the additional subsidy required.
Giorgos Georgiou of the Cyprus Association of Renewable Energy Enterprises (CAREE) told the Cyprus Mail that producers will not consent even to the slightest taxation on business, explaining that the government has an obligation to honour its previous agreements.
“When the government came to the private sector looking to push RES, they made certain promises. We took those assurances to possible investors and banks to secure funding and loans, so we could set up our businesses. We can’t go back now and tell them that things have changed,” said Georgiou, noting that a 0.16c increase on the renewable energy tax on electricity bills will solve the problem.
“The tax now stands at 0.5c. We are asking that EAC increases that tax to 0.66c which will be more than enough to cover the cost of rendering the fund viable. Cyprus benefits in a multitude of ways from RES production, including honouring its EU obligation.”
As an EU member state, Cyprus is required to have 20 per cent of energy production generated by RES by 2020.