Auditor slams renewables restrictions for EAC

The auditor-general has slammed the energy regulator for its recent decision to deny the Electricity Authority of Cyprus (EAC) any more licences for photovoltaic projects, noting that this will ultimately be to the detriment of electricity consumers.

In a letter to the Cyprus Energy Regulatory Authority (Cera), excerpts of which were published by daily Phileleftheros, auditor-general Odysseas Michaelides questioned whether the entity had the authority to prevent the EAC from developing renewables projects.

Last Friday Cera published a preliminary decision which called on the EAC to make use of the renewables licenses it already holds – for about 60 megawatts (MW). It also informed the EAC that it would not grant it any more licences before the establishment of the competitive electricity market.

For its part, the EAC says it cannot act on many of those previous licences, mainly because of technical issues relating to the electricity grid.

To date, the state power producer operates just one photovoltaic (PV) park in Tseri with an ouptut of 3MW, and is planning another park in Akrotiri with 12MW.

By comparison, private companies operate PV parks with multiple times the output of the EAC’s.

The matter surfaced when the auditor-general looked into EAC’s role in the transition to ‘green energy’ – a drive intended to switch to renewables and bring down costs for consumers. From his investigation, Michaelides discovered that the EAC had a very small penetration in the renewables market.

Responding to Michaelides’ initial queries, the EAC said it was unable to expand its renewables capacity due to the energy regulator’s refusal to grant it more licenses. The auditor-general then turned his attention to Cera.

It turns out that Cera gives preference to private companies when it comes to renewables, its argument being that it wants to promote competition.

But at the same time, some of these companies sell their energy to the EAC at 19 cents per kilowatt-hour – the same as the cost of production from fuel. However the companies’ own production cost comes to just 5 or 6 cents per kilowatt-hour. Only recently did the energy regulator issue a preliminary decision that renewables should get 11 cents per kilowatt-hour; the final decision is pending a public consultation.

What Michaelides flagged, is that the EAC is being taken advantage of by paying these high rates to the private companies, and as a result the EAC has to transfer these costs onto people’s bills. And at the same time, the EAC itself was being prevented from expanding into the renewables market.

“Your refusal,” Michaelides wrote to the energy regulator, “to allow the EAC to implement its plans on renewables…causes the EAC financial cost which is ultimately transferred to consumers while benefiting, in an unacceptable way, private businesses.”

The auditor-general also rejects Cera’s argument that it wants to promote competition – because whereas the EAC has a dominant market position in electricity production from conventional fuels, it does not have a dominant position when it comes to renewables.

Michaelides also hinted that well-connected interests benefited from the arrangement. In his letter to Cera, he named one private company – Bioland – at which one of the shareholders is a former MP and a former official at Cera itself. He did not name the shareholder.

According to Bioland’s website, they currently have 30 MW of solar PV parks in operation, with another 200MW “under construction over the next three years.”

It’s understood that Cera has yet to respond to the auditor-general’s remarks.