Filenews 22 November 2022 - by Chrysanthos Manolis
With the letter of the Minister of Energy Natasa Pileiou to CERA, dated 24/10/22, presented today by "Phileleftheros", it becomes clear that she and her competent partners in the Ministry have serious reservations about whether the decisions on the transitional regulation of competition in electricity and the expected operation of a competitive electricity market will actually bring about substantially lower prices for consumers.
It is clear through the letter of Mrs. Pilides, but also through her recent statements to the Parliament (where she said that the current situation - energy crisis in the EU - must be exploited in order to discuss changes in the competitive market model that will be applied in Cyprus) that she and the Energy Service in her ministry have reservations about what currently applies to the transitional competition regulation and what will apply in the "normal" competitive market, based on the EU model. Which, as the ministry pointed out yesterday, on another occasion, is under review by the European Commission, due to distortions that have occurred, especially in recent months.
The minister's letter to the senior management of CERA includes the suggestion that "CERA (an independent authority, based on the EU acquis) examines the possibility of taking additional temporary measures, but also permanent arrangements, so that the competitive electricity market operates with a view to maximizing the benefit for the consumer, taking into account the further promotion of renewable energy sources (RES) in the country's energy mix".
Elsewhere in the letter, Ms. Pilides specifically suggests the following, among others:
- Revision of the methodology for calculating the purchase price of energy from RES, so that the price reflects the real cost of energy. We would like to remind you that, today, in the transitional competition arrangement, RES companies sell, according to converging information, their electricity - only to large private companies - about 10% cheaper than the electricity of EAC, even though their cost is 3 and 4 times lower than the fuel cost of the semi-state organization.
- Introduction of regulations aimed at reducing the total cost of compensating energy from RES in the pre-day market (i.e. in the electricity exchange that will operate in conditions of a fully competitive market, to meet the demand of the next day) or by limiting the market revenues for specific categories of market participants, corresponding to the provisions of the recent EU regulation (...) and / or decoupling the price received by RES from the limit price the market defined by conventional power plants. In short, the Minister proposes to find a way not to pay (producing excessive profits) photovoltaic parks at the price of EAC's production costs (oil), as predicted by the EU target model that will also be applied in Cyprus. Several European governments, including the Greek government, are asking the Commission to do the same.
- Introduction of appropriate incentives to electricity market participants, so that the largest share of the energy traded is carried out through bilateral contracts, reducing the volume of transactions in the day-ahead market. That is, the minister submits in essence that without modifications to the model to be applied, the electricity that will be sold for consumption the next day (day-ahead purchase) will be significantly more expensive than the electricity that will be sold through contracts with consumers (forward market). This has been painfully demonstrated for consumers in the ongoing energy crisis in the EU.
LABELLING
The exception
In the letter of Pilides to CERA, reference is made to the recent EU regulation 2022/1854, which sets a maximum sale price limit of electricity from RES (or coal) at 18 cents per kilowatt hour, so that it is not sold at the level of the much higher price of electricity from natural gas. However, Cyprus "achieved" an exemption from the regulation. Therefore, the limit of 18 cents can be bypassed by Cyprus, in terms of the selling price of electricity from RES, in relation to the electricity produced by EAC from oil. The same regulation allows states to impose a lower limit than 18 cents. It must be discussed whether Cyprus was right to request a derogation from the regulation, preventing CERA from setting even this limit, which, however, allows excessive profits to be made by photovoltaic parks.
