Recent warnings from the International Monetary Fund (IMF), concerns raised by the auditor-general and growing criticism from energy experts all point to the same conclusion: Cyprus urgently needs a comprehensive long-term energy strategy.

The IMF’s 2026 Article IV assessment highlighted the country’s continued dependence on imported oil, lack of electricity interconnection and vulnerability to global energy shocks. The auditor-general went further, describing the failure to bring natural gas to Cyprus as one of the biggest policy failures of the last decade, estimating that the economy is losing approximately €300 million annually through continued reliance on petroleum products and the associated cost of carbon emissions allowances.

The savings from lower fuel costs could be of a similar magnitude if electricity generation were converted to natural gas by 2028.

These observations should not be viewed as isolated criticisms. Together they reveal a deeper problem. Cyprus does not simply have an energy challenge. It faces a challenge of strategic planning and implementation.

For years, energy policy has been driven largely by individual projects, regulatory initiatives and reactions to emerging crises. Natural gas infrastructure, renewable energy deployment, electricity market reform, energy storage, electricity interconnection and desalination facilities have often been treated as separate initiatives rather than components of a coherent national strategy. The result is a fragmented approach that struggles to deliver affordable, secure and sustainable energy.

The cost of this fragmentation is becoming increasingly difficult to ignore.

Cyprus remains one of the most oil-dependent electricity systems in Europe. While most European countries have diversified their energy mix through natural gas, renewable energy sources, storage and interconnections, Cyprus continues to rely heavily on imported petroleum products for power generation. This dependence exposes consumers and businesses to volatile international oil prices while also imposing substantial costs through the European Union Emissions Trading System.

This is not simply an energy issue. It affects competitiveness, inflation, household incomes, industry and economic growth.

The IMF recently warned that higher global energy prices could push inflation significantly above previous projections, demonstrating how vulnerable Cyprus remains to external energy shocks. Events in the Middle East have reinforced this reality. Every major disruption in oil markets immediately translates into higher electricity costs because Cyprus has not yet diversified its energy sources sufficiently.

The repeated delays in bringing natural gas to Cyprus have magnified this vulnerability. Natural gas remains an important transitional fuel capable of reducing emissions, lowering generation costs and enhancing system flexibility while renewable energy and storage capacities continue to expand.

The absence of natural gas is therefore more than a technical delay. It is a strategic setback with major economic consequences.

At the same time, Cyprus faces a series of additional energy challenges. Renewable energy penetration has increased, yet large volumes of renewable electricity are often curtailed because of limited storage and insufficient grid flexibility. The competitive electricity market has yet to deliver meaningful reductions in prices. Major infrastructure projects such as the Great Sea Interconnector (GSI) continue to face uncertainty. Long-term energy planning is mostly reactive rather than proactive.

These problems share a common characteristic: They are not primarily technological. They are challenges of governance and implementation.

The auditor-general’s observation that inefficiency may be a greater problem than corruption deserves particular attention. What is missing is not another study or another policy paper. What is missing is strategic planning combined with effective execution.

A comprehensive long-term energy plan is needed

The first objective of such a plan should be to create a clear vision for the country’s energy future. At present, there is no widely accepted answer to several critical questions. What should the electricity generation mix look like in 2040? What role should natural gas play in the transition? How much renewable energy can realistically be integrated into the system? How much storage capacity will be required? What role should electricity interconnection play? How should domestic natural gas resources, if commercially developed, fit into the broader energy system?

Without answers to these questions, energy policy has become a collection of disconnected decisions rather than a coherent national strategy.

The second objective should be to strengthen energy security. Cyprus remains heavily dependent on imported petroleum products and faces increasing exposure to geopolitical instability in the Eastern Mediterranean and the Middle East. The country needs greater diversification of fuels, technologies and supply routes.

The third objective should be affordability. Electricity prices in Cyprus remain among the highest in Europe and directly affect households and undermine the competitiveness of businesses. Lower costs will not be achieved through temporary subsidies or administrative interventions alone. As the IMF has correctly argued, sustainable reductions require structural reforms.

The fourth objective should be climate resilience. The energy transition is happening at the same time as climate pressures intensify. Higher temperatures are driving demand for electricity for cooling. Droughts are becoming more frequent. Extreme weather events are becoming increasingly likely. Energy infrastructure needs to be designed to operate reliably under these changing conditions.

This introduces another strategic dimension that is often overlooked: the growing link between energy security and water security.

Future desalination plants should be increasingly powered by renewables, supported by storage systems, and designed to operate as part of a broader national resilience strategy.

What could a successful Energy Strategy 2040 look like?

Renewables would provide the majority of electricity generation, supported by large-scale battery storage and flexible demand management. Natural gas would serve as a transition fuel, gradually decreasing as green-technologies mature. Electricity interconnection would provide additional security and flexibility. A fully competitive electricity market would encourage investment and innovation. Water production and energy planning would be integrated. Domestic natural gas resources, if economically developed, would contribute to energy security and system flexibility.

Most importantly, the system should be designed as an integrated whole, not as a collection of separate projects.

The IMF has correctly identified the need for energy reform. The auditor-general has correctly identified the cost of delay. Together, they underscore a fundamental reality: Cyprus can no longer afford reactive decision-making and incremental adjustments.

For a country facing increasing geopolitical uncertainty, growing climate risks, and mounting economic pressures, the absence of a comprehensive long-term energy plan is itself a strategic risk. The time for managing isolated energy crises is over. What Cyprus needs now is a clear and comprehensive vision capable of transforming its energy system over the next two decades.

Such a strategy would not only improve energy security and reduce costs. It would strengthen economic competitiveness, support climate resilience and provide the foundation for a more sustainable and prosperous future.