Fuilenews 5 August 2022
At the stage of examining the possibility of imposing a tax on the super profits that are possibly earned by energy producers from Renewable Energy Sources, there is still the Working Group that was set up for this purpose by officials of the Ministry of Finance, the Ministry of Energy and CERA.
The realization of overprofits have been recognized through the association by the owners of photovoltaic parks built on the basis of the state plan of 2017. That is why the association was in favour of CERA's decision to reduce their remuneration to 11 cents per kilowatt hour instead of the respective fuel costs of EAC, which reached and exceeded 20 cents per kilowatt hour, while the cost of production of many photovoltaic parks is around 6 to 7 cents per kilowatt hour. However, some individual producers had disagreed with that decision of CERA and had warned by taking legal action against it.
According to an announcement by the Ministry of Energy, the working group set up to examine the issue of possible overprofits of Renewable Energy Sources (RES) producers due to the unexpected increase in the price of electricity, has proceeded to the examination and evaluation of all existing RES Plans currently implemented in Cyprus and their pricing. The working group has sent its findings, as well as detailed data, to the Ministry of Finance and is also considering the possibility of imposing a relevant tax or fee.
In particular, the following have been evaluated by the working group:
The Scheme for the subsidy of RES projects from the RES and ES Fund with the Feed in Tariff method. These are photovoltaic and wind farms that operate on the basis of mainly 20-year contracts, with a price well above the current fuel cost of EAC.
The Plan of RES projects for the own consumption of households / businesses with the method of net metering and net billing.
The Plans for res projects for the self-production of enterprises / Public Buildings.
Res project plans for commercial purposes with a final outcome in the competitive electricity market.
Res project plans in the context of the transitional market regulation, with the final outcome of the competitive electricity market.
According to the announcement of the Ministry of Energy, it follows from the conclusions of the working group that, given that the cost of avoiding EAC is directly intertwined with the purchase price of res electricity produced by EAC, its unexpected increase, due to external factors, inevitably led to an increase in the res purchase price. Therefore, it is added, from the preliminary evaluation of the above Schemes and with the possibility of creating excessive profits by RES producers, it follows that for the self-consumption plans (1, 2 and 3 as mentioned above), no over profits are created. On the contrary, the unexpected increase in avoidance costs contributes to the reduction of the costs of the RES and ES Fund, thus allowing for additional funding of the Fund's projects that contribute to energy saving and promoting the use of RES systems by households.
Regarding the commercial RES plans (4 above), due to the fact that the energy produced is priced based on the cost of avoidance, the working group finds that the increased revenues of the projects of this Plan may have led, in some cases, to excessive profits.
Regarding the commercial RES projects that were licensed in the context of the transitional regulation of the market (5 above), it appears from the evaluations to date that any creation of overprofits is limited.
APORIA
How much do they sell and how much do they earn?
It is puzzling to report that photovoltaic parks participating in the transitional competition arrangement (bilateral contracts) had a limited possibility of over-profits. But if they produce at a cost of 6-7 cents per kilowatt hour, how much do they have to sell to licensed private suppliers to be considered as having windfall profits? If we take into account that EAC's fuel cost is 20-21 cents per kilowatt hour, if they sell 13-14 cents is it a legitimate profit or a windfall profit? Should they be taxed on an extraordinary basis or not? Do they sell so much or more yet? At some point the relevant ministries have to give more information to the public. H.M.
