Upstart vs. incumbent

Upstart vs. incumbent

In December 2023, the head of the Cyprus Vitality Regulatory Authority (CERA), Andreas Poullikkas, launched a abstract of the nation’s vitality mixed at a neighborhood conference. The island’s electrical vitality period fleet comprised 1.5 GW of ordinary facilities (primarily diesel and gasoline) and 776 MW of renewable vitality crops. The nation’s state-owned utility, the Electrical Power Authority of Cyprus (EAC), owns all commonplace vitality stations whereas unbiased merchants dominate the renewables period. Picture voltaic initiatives are by far in all probability essentially the most widespread renewable vitality experience inside the nation, with 606 MW of period functionality. Wind and biomass web sites can be found in at 157 MW and 13 MW, respectively.

Cyprus does not have a liberalized vitality market. Inside the retail market, the EAC enjoys an absolute monopoly. The wholesale electrical vitality sector has opened as a lot as unbiased vitality suppliers although they are going to solely promote electrical vitality to massive customers.

So far, there are six unbiased vitality suppliers on the island. All six operate photograph voltaic crops, with portfolios that correspond to about 8% {of electrical} vitality generated inside the nation. Curiously, private suppliers promote electrical vitality to massive customers about 10% cheaper than the EAC does.


Put in photograph voltaic functionality on the island is remunerated by the use of assorted schemes along with net metering (which credit household mills to the retail price of {the electrical} vitality they export to the grid), net billing (which credit on the wholesale electrical vitality cost), and feed-in tariffs (FITs). There’s moreover a fleet of subsidy-free initiatives, first developed in 2017 when the federal authorities allowed 102 MW of the most recent photograph voltaic functionality to operate under an “avoidance value” regime. The avoidance value paid to such mills equals the amount of money the EAC saves by not paying fossil gasoline vitality crops to generate because of {the electrical} vitality that has been coated by renewables.

As we communicate, plenty of the photograph voltaic parks developed under the worth avoidance regime have abandoned these funds and as a substitute promote electrical vitality independently obtainable in the marketplace. That is because of, since Would possibly 2023, CERA has capped the amount of avoidance value funds at €0.11 ($0.12)/kWh. Generators can promote their electrical vitality at elevated prices by the use of private suppliers.

Aside from the avoidance value regime, the federal authorities has moreover allowed an extra number of PV initiatives to be constructed under private vitality purchase agreements (PPAs), leading to a separate portfolio of round 150 MW of put-in photograph voltaic functionality. On the entire, Cyprus has round 250 MW of put-in photograph voltaic working under PPAs.

Picture voltaic plan

In October 2023, CERA issued permission for the EAC to assemble 600 MW of the most recent photograph voltaic functionality by 2032. This allows the incumbent utility to assemble a set amount of PV yearly, starting from 30 MW in 2023 and reaching 600 MW complete in 2032.

CERA has moreover communicated the EAC’s plan to the European Payment for approval. Whereas that has not been granted, the utility has revealed an open title to landowners to counsel land for renewable vitality initiatives until a deadline of June 1, 2024.

Picture voltaic installations in Cyprus by an help mechanism

Assist scheme Functionality in MW, Dec. 2023
Web metering and net billing 244
FIT (set by the federal authorities) 77
FIT (set by the use of tender) 35
Avoidance value 101.5
PPA 148.5

Provide: pv journal/Ilias Tsagas

Fanos Karantonis, chairman of the Affiliation of Renewable Enterprises Cyprus and a primary photograph voltaic investor, suggested that the renewables affiliation opposes CERA’s decision. Karantonis thinks that the EAC’s plan will kill opponents inside the vitality market correctly at a time when the Cypriot wholesale market is making an attempt to liberalize.

Karantonis notes that, in Would possibly 2022, CERA revealed a preliminary decision arguing that it could not allow the EAC to enter renewables because of this the nation’s vitality market was very concentrated. The state of affairs isn’t any fully totally different proper now, said Karantonis and the EAC continues to dominate the vitality market.

The rationale behind CERA’s decision, revealed in October 2023, was that it has granted licenses to round 1.9 GW of renewable vitality crops and there’ll, subsequently, be sufficient opponents obtainable available in the market by the purpose the EAC’s portfolio of 600 MW turns into operational.

Cyprus graph 2Karantonis rejects this argument. “One of the best ways the regulator presents the case is misleading,” he said. “The neighborhood is extraordinarily congested and it is clear to anyone that not even 10% of the 1.9 GW of licensed initiatives will likely be constructed by 2032. Moreover, there is no assurance that every one the initiatives licensed by the regulator will get hold of environmental permits.”

The renewables commerce guide said that unbiased merchants have “fought arduous” over the earlier six years to license initiatives, uncover applicable land, and be a part of their 250 MW of initiatives, each developed under PPA or by the use of the avoidance value mechanism. “It is utter creativeness that Cyprus can add 500 MW to 1,000 MW inside the following 5 years,” he said.

An argument normally circulating in public discourse is that allowing the EAC to personalize a renewable vitality portfolio would reduce wholesale electrical vitality prices. Karantonis counters that among the finest methods to reduce wholesale prices is by boosting opponents and tackling the nation’s pressing curtailment problem.

“The EAC has, already, entry to about 500 MW of renewable vitality period inside the nation, along with photograph voltaic, wind, and biomass initiatives,” he said. That is because of all renewable vitality period web sites, except for the PPA initiatives, selling electrical vitality to the EAC.

“Keep in mind, as an example, the FIT initiatives,” added Karantonis. “Renewable vitality merchants promote electrical vitality to the EAC nevertheless the EAC solely pays one part of the feed-in tariff, which equals the avoidance value. The remaining amount of the tariff is paid by the nation’s renewable energies fund, which is in flip funded by electrical vitality customers.”

Karantonis crunched the numbers. With the avoidance value set at €0.11/kWh, the EAC pays solely that amount. It sells electrical vitality on the wholesale market at €0.21/kWh.

Curtailment catastrophe

Private photograph voltaic mills say that curtailment of renewable electrical vitality stays a major draw back. Cypriot renewable vitality expert Andreas Procopiou well-known for the island’s PV-era functionality grew by a formidable 51% in 2023. Nonetheless, the entire price of that functionality enhancement was not echoed by an enormous rise within the experience’s contribution to the island’s vitality consumption.

Based mostly on Procopiou’s info, PV vitality contributed 16.5% of Cyprus’s complete demand in 2023, solely 4.5% better than inside the earlier yr. “The discrepancy inside the progress cost of put-in functionality versus the rise in PV vitality contribution underscores an important problem: curtailments impacting renewable vitality manufacturing,” said the analyst. “The widespread day-by-day curtailment, which was at 3.3% in 2022, sharply escalated to 13.4% in 2023. Notably concerning was April, which recorded the very best widespread day-by-day curtailment, 32.23%.”

Such a sharp enhancement in vitality curtailment is affecting wholesale prices too, added Karantonis. Generators aren’t compensated for curtailed vitality and are subsequently unwilling to advertise {the electrical} vitality they produce to private vitality suppliers at decreased prices.

Vitality storage

Cyprus is in urgent need of vitality storage. In mid-2023, the nation’s Ministry of Vitality, Commerce, and Enterprise revealed a draft plan presenting insurance coverage insurance policies to help the arrange of household and enterprise, “behind-the-meter” vitality storage facilities.

The draft requires the remuneration of unpolluted vitality and vitality storage web sites – and hybrid initiatives, that embody every – in two foremost strategies. Firstly, present renewables crops shall be provided a capital expenditure (capex) subsidy for the acquisition and arrange of vitality storage gadgets. Secondly, new hybrid crops will likely be able to declaring every capex and contract-for-difference (CfD) help. Beneath CfD regimes, renewable vitality mills get hold of a set vitality export cost minus the day-ahead hourly wholesale price {of electrical} vitality as a bonus on excessive of any funds they get hold of individually from the economic sale of the power they generate. When the wholesale price is elevated than the power export cost, mills refund the excellence.

Every capex help and vitality export cost might be set using aggressive bidding amongst mills. The ministry’s proposal, though, obtained right here with a restricted factor: solely new hybrid crops that is likely to be ready to export vitality to the EAC might be allowed to claim the subsidies. In several phrases, the federal authorities would offer state help solely to initiatives that collaborate with the incumbent utility and would neglect private wholesale electrical vitality suppliers.

Karantonis claims it’s a breach of European state help authorized pointers. He said that the Affiliation of Renewable Enterprises Cyprus launched this opinion to the European Payment’s directorate-general for opponents in November 2023. The federal authorities’s attempt to undermine opponents inside the electrical vitality market, and to exclude unbiased problem householders, does not stop there, he added.

Cyprus graph 1

Completely different measures, in step with Karantonis, embody efforts to allow Cypriot transmission and distribution {of electrical} vitality operators to private grid-side, “front-of-meter” vitality storage belongings, in breach of European Union legal guidelines.

“We think about every the federal authorities’s draft plan for behind-the-meter vitality storage along with the most recent European decision on the Cypriot neighborhood operators proudly proudly owning front-of-meter storage will kill opponents in our nation’s wholesale electrical vitality [market],” said Karantonis.

All European Union member states have devoted to reforming their house electrical vitality markets in keeping with the bloc’s Objective Model to align nationwide marketplaces in preparation for incorporation proper right into a single market. Cyprus has moreover devoted itself to adopting the Objective Model with the Cypriot transmission system operator (TSO) assigned to hold out the operate of the market operator.

However, a decade after its preliminary dedication, Cyprus has not independently staffed its TSO, which is reportedly crammed primarily by EAC personnel. Beneath European regulation, the TSO and the distribution system operator (DSO) should be separate entities, unbiased from the nationwide utility. Critics say that in Cyprus, the highway separating the incumbent vitality agency’s energy-provided enterprise from the DSO is blurred.

Island economies have normally been trailblazers within the adoption of renewable vitality, altering perceptions about how electrical vitality strategies and marketplaces can operate with extreme penetration ranges of unpolluted vitality. Cyprus has so much to appreciate from the accelerated adoption of photograph voltaic, vitality storage, and market liberalization. The reality that incumbents retain considerable vitality, nonetheless, is proving environment friendly in delaying adoption.

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