Part II: Natasa Pilides, minister for energy, commerce and industry, has kindly conceded to Dr. Charles Ellinas and Andrew Rosenbaum a major update on energy policy and legislation. The Minister addresses nearly every important issue in the sector. Part I may be found here: https://cyprus-mail.com/2021/04/04/cyprus-minister-of-energy-commerce-and-industry-liberalisation-should-be-completed-by-2022/
This is the second part of two parts, addressing:
- LNG Imports
- Renewables
- Transport
- Deregulation
- Interconnectors
- EU Recovery Funds
LNG imports
Q: How is the LNG import project progressing? Is it still scheduled to start operations by end of 2022? How confident are you that this will lead to much lower electricity prices than now? How soon may Cyprus expect gas from its own gas fields to be available on the island?
A:The “CyprusGas2EU” project should be completed, as scheduled, by the end of 2022, whereby Cyprus will receive first imports of LNG, to be re-gasified and used initially for electricity production.
The project has a number of very important objectives which include, as you mention, the reduction of electricity prices, but also, crucially, a reduction in emissions from electricity production of 26 per cent – 30 per cent. The project is also central to the success of electricity market liberalisation, because it will ensure that all energy producers are provided with natural gas at the same price for 10 years following the operation of the FSRU. The extent to which electricity prices will drop depends, of course, on the prevailing prices of natural gas from 2022 onwards. Generally speaking, natural gas is cheaper and cleaner than the heavy fuels we currently rely on for energy production. Also, since the project is aimed at encouraging healthy competition in the electricity sector, this element in itself is expected to lead to lower electricity prices.
About a week ago I had the chance to visit the construction site at Vasilikos, together with the President of ETYFA (Natural Gas Infrastructure Company), Mr Kassianides. Engineers from the consortium developing the key energy infrastructure updated us on the progress of the project and assured us that work is progressing steadily and within the set time frame. The €289 million project will include a floating unit for storage and re-gasification (FSRU), a pier for the mooring of the floating unit, a pipeline on the pier and other relevant infrastructure.
The future use of natural gas from our own markets is, of course, part of our strategy for the future, which we have been discussing with our EEZ licensees in order to design the best and most cost-efficient way in which this can be achieved.
Renewables
Q:Europe is committing to a 55 per cent cut in emissions by 2030 and net-zero by 2050. Do you expect this to lead to updating Cyprus’ emissions, renewables and efficiency targets upwards in its 2021-2030 NECP and by when? What measures are you taking to achieve the new targets? How confident are you that we can have cheaper and cleaner electricity and upgraded systems that help Cyprus comply with European clean energy targets?
A: Cyprus’s National Energy and Climate Plan (NECP) was prepared according to the previous target set by Europe for 40 per cent emissions cut by 2030. With the new EU target for a 55 per cent reduction in emissions, new EU targets for RES and Energy Efficiency will need to be determined. The EU has been working to revise targets for each member state and, once these have been determined and communicated to us, Cyprus will need to work swiftly and efficiently to update the various underlying targets so that the new overall target can be reached, as well as the action plan for reaching those targets.
The various legislative reforms and actions in progress mentioned under the first question are crucial to meeting our targets. The successful implementation of our various funding programmes, the introduction of natural gas in our energy mix, as well as plans for storage of energy and interconnectors are central to our efforts. There are a number of projects running in parallel and, once these are brought to fruition, Cyprus will enter a completely new era in energy where it can confidently aim not just to meet, but to exceed set targets. For this to happen, each and every one of us has a role to play – from people saving energy and upgrading the energy efficiency of their households, to businesses revising their practices towards a more circular model, to regulators and government services streamlining their processes and Parliament voting through the crucial bills relevant to energy and RES regulation. Naturally, a host of responsibilities falls under the scope of the Energy Ministry, which is why we need to work harder than ever before to achieve our targets and to act as an agent for positive change.
Transport
Q:The biggest carbon dioxide emitter in Cyprus is transport. What measures – such as biofuels, EVs, etc – are being taken to reduce transport emissions and comply with EU clean energy targets, including clean air in cities?
A: The promotion of electromobility in Cyprus is one of the most important factors that will contribute to reducing greenhouse gas emissions in the transport sector and, therefore, to climate neutrality by 2050. For the smooth transition to electromobility, targeted incentives and, of course, the preparation of the appropriate legislative framework, including the location, licensing and operation of electric vehicle recharging points is required. We are working closely with the competent Ministry, which is of course the Ministry of Transport, Communications and Works, as well as the Deputy Ministry of Innovation, in order to prepare a comprehensive strategy for electromobility.
The Ministry of Transport has included a comprehensive proposal in the Recovery and Resilience Fund, to finance actions amounting to €40 million for the promotion of electric vehicles (subsidy for the purchase of an electric vehicle and investment for the installation of public recharging points). In addition, the Ministry of Energy has prepared a €1 million co-funded support programme to promote electric vehicle charging systems with RES for households. Under this funding programme, which is already available, owners of electric or plug-in hybrid vehicles, can receive a grant of as much as €2.250 for the installation of up to 2 kW photovoltaic systems, a charging point and a smart meter. A similar €1 million co-funded support programme aimed at local authorities and public bodies is being prepared.
At the same time, we have already introduced important legislative measures, falling within the competence of the Ministry of Energy, Commerce and Industry, for the promotion of the installation of charging points in new buildings.
Deregulation
Q:How are deregulation and liberalisation of electricity market progressing and by when will they be completed? What measures are you taking to upgrade Cyprus’ electrical system, including the grid, integration of RES, and electricity storage systems? What is the timetable?
A: The hardware and software needed for the full operation of the market by the TSO will be completed by early 2022. This will increase competition between suppliers and producers, as well as the penetration of RES. Until then, a transitional phase is already in effect, allowing bilateral contracts between producers and suppliers, with a number of new entrants already in operation.
As far as the country’s national electricity grid system is concerned, studies by the International Renewables Agency (IRENA) concluded that using the existing system, renewable energy -mostly solar- could provide 25 per cent to 40 per cent of Cyprus’ total electricity supply in 2030 and significantly reduce costs. This can be increased further by implementing RES installations with storage capability, through competitive bidding. As mentioned, we are working together with CERA and EPSA to introduce both a framework (CERA) and funding programmes (Ministry of Energy) for the introduction of large storage systems. It is worth mentioning that our current funding programme for households already funds storage units which can be used in combination with PV systems. As far as smart meters go, we have set a target to install around 400.000 units by 2025. Of course, the EAC’s role is crucial in achieving this objective.
Interconnectors
Q:Recently we had welcomed progress in the interconnector projects. How are these progressing? Are they still expected to be completed by end of 2023, including the Israel and Egypt connections?
A:Indeed, the projects have been progressing well recently with the signature of the relevant MoU between Cyprus, Israel and Greece for the EuroAsia Interconnector and intensified discussions between the Ministry, the European Commission, the European Investment Bank and the Project Promoter regarding the project. A number of technical difficulties have been overcome, which have lifted some significant obstacles, while the licensing process in Cyprus is effectively complete. Based on the latest updates by the project’s operator, the EuroAsia Interconnector is expected to be operational within 2025. However, crucial to this timeline is the successful submission by the Project Promoter of a funding application to the Connecting Europe Facility (CEF) of the EU. The submission will be made in the next few months as part of CEF’s next call and examination by the EU is expected to be completed before the end of the year. This is the most important step in the project’s trajectory, as it will effectively determine its feasibility.
If the project is successful, it will increase energy security, lift Cyprus’s energy isolation and enable a much faster integration of RES into our energy supply mix, allowing us to set far more ambitious RES targets and to even export electricity produced in Cyprus.
As far as the EuroAfrica Interconnector is concerned, which will connect Egypt to Cyprus and Greece, we are now in the final stages of discussion for the signing of an MoU between Cyprus, Egypt and Greece.
EU Recovery funds
Q:How will the €1billion Cyprus is about to receive from EU’s recovery package be used address the issues raised in this interview? What green projects are being developed?
A:As mentioned, the Ministry of Energy, Commerce and Industry has prepared proposals for new Funding Programmes, co-funded by the EU, of around €400 million, for the greening and recovery of the economy.
Around half of these funds will be allocated to promoting the transition to green energy through RES, charging points for electric and plug-in hybrid vehicles, smart meters and energy efficiency measures in households, Small and Medium Sized Enterprises (SMEs) and governmental and municipal buildings.
The majority of the remaining €200 million will go towards promoting greener entrepreneurship, e.g. through targeted programmes for transitioning to a circular economy, the digital upgrade of enterprises, the creation of business clusters and the enhancement of the competitiveness of SMEs in the manufacturing sector. Moreover, a dedicated Business Support Centre, as well as a one-stop centre for licensing commercial RES projects, will be set up. As mentioned previously, a separate funding application is also planned for large energy storage projects.
