Cyprus Mail

Audit office says state could stop subsidies for wind farms

THE AUDIT service has said the state could disengage from agreements to subsidise windfarms, which burden the renewable energy sources special fund, and ultimately taxpayers.

According to an announcement, the audit service had identified serious weaknesses in the procedure and the decisions concerning the subsidies to promote wind energy and photovoltaic facilities in Cyprus, especially for licensing wind systems between July 2009 and December 2010.

The findings followed an administrative audit on RES, requested by AKEL leader Andros Kyprianou in July 2015.

According to the audit’s report “some of the investments on wind systems appear to have an internal rate of return (metric measuring the profitability of potential investments) that is significantly higher than the acceptable limits set by the European Commission (12 per cent to 13 per cent), which it had in mind when it gave its approval on July 2, 2009.”

This, the audit service said, “could constitute a possible way for the state to disengage from subsidy agreements that unfairly burden the special fund and Cypriot consumers, and permit profiteering by investors.”

The audit service proposed bringing the attorney-general and the state aid commissioner on board to look into the matter.

On Tuesday the House commerce and energy committee was briefed by government officials on their proposal for increasing the green charge from €0.005 per kWh currently to €0.0135 per kWh, to help keep the RES fund afloat.

To date, the RES fund has been solely funded through a special fee on all electricity bills, fixed at €0.005 per kWh. The power utility pays RES producers the total amount owed and subsequently files for compensation from the fund.

But the fund is currently in the red to the tune of around €25 million, due to reduced electricity consumption and falling fuel prices which led to lower production costs. The new rate would apply for the period September 2016 to December 2017.

The problem lies in the fact that the energy ministry had signed contracts with RES producers – owners of wind farms and photovoltaic parks – when the production cost was much higher and did not include a tariff renegotiation clause, thus the government still has to pay the agreed price despite electricity production costs going down since.

The overwhelming majority of wind farm operators are paid 16.6 cents/kWh while photovoltaics in some instances get double that.

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