By Charles Ellinas

Following a joint-letter by the Distribution System Operator (DSO) and Transmission System Operator (TSO) on January 20 requesting suspension of licensing of new residential photovoltaic (PV) installations until the risks that threaten the electrical system are addressed, the minister of energy reacted angrily, calling it “unacceptable, unbelievable and disappointing.”

I agree that it is a shame, worrying and disappointing that we have come to this. We have known for years that our electricity system is outdated and in need of serious upgrading. As is the urgency for electricity storage with batteries.

These are the root causes of the problem. Other than talking about them, so far we have done nothing to solve them and yet again we find ourselves in trouble.

In 2020 I wrote: “In order to achieve [our RES] targets, there will be a need for major improvements in electricity systems, operations, market design, business models and regulations so that adoption of RES receives the priority and support it deserves. A starting point is Cyprus’ electricity grid, often cited as the bottleneck limiting the amount of RES that can be integrated at any one time due to the variable nature of renewable electricity.” Sadly, these are still to be done. Only the EuroAsia Interconnector project is progressing, and that because it is promoted and developed by a private company.

The problem is real. Rapid changes in the electricity supplied to the grid by RES can cause instabilities. The DSO and TSO are right that without upgrading the electricity system and without battery storage, and with ever-increasing RES capacity, the risk of major power cuts is increasing.

But instead of concentrating on the root causes and solution of the problems we got lost in arguing about the consequences. One side blames the other, including EAC, without anybody taking responsibility, without addressing the fundamental issues.

EAC is state owned. The state appoints its board of directors and chairperson. As such, its direction remains squarely the responsibility of the state.

Now that Cypriot consumers have come to realise the benefits of RES, let’s not miss the opportunity, but take advantage of it to achieve a more rapid transition to RES with their active participation. The minister was right when she insisted she will continue support of residential PV. It is also in line with EU priorities.

But it is also necessary and urgent to focus on the root causes, while continuing with residential PV, even at the expense of more stringent control of commercial PV installation and operation.

 

Used as an excuse

The electricity system remains outdated and cannot support a large increase in RES, and this is presented as an excuse for the low adoption of RES! We have been aware of this problem for ten years. We are still talking about conducting studies to define what needs to be done. At this rate we will be lucky to even start upgrading work in 2025.

We have not yet moved forward with installing batteries to store electricity, or smart meters, although we have been discussing these for some time. Why the delay? This is still presented as an excuse for the low implementation of RES.

 

Funding

Revenues from the sale of emission allowances go to government coffers creating a budget surplus, instead of being invested in green energy and in supporting vulnerable households, as provided in the EU Emissions Trading System Handbook. In 2022 it was more than €250million. The same is true of massively increased tax revenues as a result of excessively high energy prices.

Despite this, in 2021, instead of providing state subsidies, the government asked EAC to subsidise the price of electricity. The money that EAC had put aside for future investments went to subsidies!

Cyprus needs investments in the energy system and not in creating fiscal cushions. Creating a problem due to inaction and then presenting it as an excuse for not progressing RES faster is completely indefensible.

 

Challenges

Cyprus is near the bottom of Europe in the use of RES for electricity production. In its latest report, Eurostat states that the EU average in 2021 was 37.5 per cent. Cyprus achieved only 14.8 per cent, in 23rd place. And even then, over one-sixth of total RES consumption came from burning biomass, ie wood. Greece achieved 35.9 per cent and its revised target is to increase this to 80 per cent by 2030. Cyprus’ target is still 23 per cent and may rise to 32 per cent. But, without change, achieving even that will be a tall order.

Cyprus also has the second-highest carbon emission intensity of electricity in Europe, and it pays the cost. More RES will help bring it down.

I wrote in 2020: “Instead of being a laggard, Cyprus has the potential to become a solar power leader in Europe.” Sadly, Cyprus is still a laggard. In 2022 the Netherlands, with about one-fifth of Cyprus’ average daily solar radiation, led Europe with 14.2 per cent of its electricity generated by solar power. Cyprus achieved 11.3 per cent.

We have a long way to go and suspending RES licensing or resorting to frequent disconnections of RES plants as a means of protecting the electricity system will not get us there.

In the last 10 years, Cyprus abandoned competitive tenders for RES and now Cypriot energy consumers are paying the price. In Greece, competitive bidding led to the award of RES projects late last year at less than 6 cents/kWh, including profit.

We have not yet taxed companies’ windfall profits from RES, even though the government committed in mid-2022 to do so by early 2023. We are still “looking into it”. This will now be left to the next government to deal with. In Greece, laws on the taxation of windfall profits were introduced at the end of 2021. For the period from October 2021 to June 2022, this tax is expected to amount to €375 million.

After 10 years the liberalisation of the electricity market is still not complete despite many promises and it is not yet certain when it will be fully operational. The whole thing remains a paper exercise.

Given these problems, it is no wonder that Cyprus is near the bottom of the EU list in terms of the share of RES in electricity generation, with no visible pathway out of it. Given that energy prices are expected to remain high for a while yet, these problems must be tackled as a matter of urgency. We know what these are, we know what needs to be done to solve them, there are technical solutions, we have the expertise and funding. It is surprising that we are still talking about it instead of doing it. That is what the next government must do – ASAP.

 

Dr Charles Ellinas, @CharlesEllinas, Senior Fellow, Global Energy Center, Atlantic Council