Filenews 7 July 2024 - by Kostas Georgiou
"CERA's refusal to amend decisions on the Cyprus-Crete electricity interconnection project will benefit the Cypriot consumer, but not the project," Energy Minister George Papanastasiou said shortly after CERA's decision.
What the Minister should explain, however, is how a project of questionable viability could have real benefits for the Cypriot consumer? How does a project, for which there are many unanswered questions, including whether it will ever be able to be implemented, be a project in which Cyprus should participate?
How is it possible, when the aim should be to bring natural gas as soon as possible, which will reduce the price of electricity by 60%, to talk about participating in a project in the long term, with hope as a boat?
But let's take things from the beginning.
One project, one idea
The Crete-Cyprus electricity interconnection project started as an ambitious idea under the name EuroAsia Interconnector, aiming to lift Cyprus' energy isolation. And this is where the first question comes in: lifting isolation or energy dependence?
With energy being an issue for every country that touches on national security itself, with the impact we have seen recently on the German economy after Russia cut off gas due to the war in Ukraine, is one country dependent on energy – regardless of any ties – really the best solution?
The idea of interconnection passed at some point from Cypriot hands to the Independent Power Transmission Operator (ADMIE) in Greece, which undertook to proceed with the implementation of this idea.
A few years later, what we are experiencing in Cyprus are new and revised requirements on the already very favorable terms for IPTO included in the agreement and an increase in the estimated cost of the project from €1.5 billion to €1.9 billion before it even starts, with what this entails for the final amount that may end up being the cost of the project.
In addition, IPTO's effort to secure what it asks for is mainly accompanied by data concealment, distortion of data, ultimatums and pressure in every direction and especially towards the Cyprus Energy Regulatory Authority, pressures that reach the limits of blackmail, but also of overt intervention within another country.
CERA's decision
The Cyprus Energy Regulatory Authority (CERA) has taken an important decision. Specifically, CERA decided on the following requests of the project promoter, IPTO:
1. The charging of consumers for the recovery of the cost of the project to start with the commercial operation of the project and not from 1.1.2025.
2. Not to change the methodology for calculating the rate of return on capital, which would mean that from time to time the already privileged -to the extent of scandal- rate of 8.3% return would increase even more.
3. There should be no additional financial guarantees for the project, in case it is interrupted in its course. That is, for IPTO to take the risk of implementing the project.
4. The useful life of the project and repayment should be set at 35 years instead of the 25 years requested by IPTO.
Undoubtedly, CERA's decision is in the right direction. Because the right direction is to protect consumers from further charges and charges. The right direction is to evaluate data and make decisions away from threats and ultimatums. The right direction is, at the end of the day, the one that protects citizens from socializing the damage of projects of questionable viability.
CERA must rise to the occasion, despite the blackmail that arose after the unanimous decision was taken, and protect Cypriot consumers from the immediate imposition of charges for a project that may never materialize.
Driven by uncertainty
The only certainty regarding the Great Sea Interconnector project from the day of conception until today is uncertainty. Uncertainty in every aspect of the project: economic, political, technical.
As far as the financial aspect is concerned, the feasibility study has not yet been submitted, while so far the entry into the project of other investors has not been finalized, nor the securing of a significant loan from a bank or much more from the European Investment Bank. CERA's decision not to accept IPTO's requests is expected to make it even more difficult to find willing investors to invest in such a project.
In the political part of the project, the project strongly proposed by ADMIE supports the energy future of Cyprus on a cable that will pass through Turkey's illegally defined EEZ with Libya. This is at a time when we have recently witnessed Turkey harassing and driving away survey ships in Cyprus' EEZ.
So no one can know how Turkey will react at the critical moment in relation to the cable and what impact any reaction may have on the implementation of the project.
As far as the technical aspects of the project are concerned, there are a number of questions that remain unanswered. Questions regarding the implementation time, the cable corridor, the required length and the difficult points of its laying due to the reefs and ravines that exist at crossing points.
Technical difficulties, which may lead either to skyrocketing project costs beyond the expected cost increase, or to the non-completion of the project.
It's time for serious decisions
CERA's decision and the negative response to IPTO's requests is certainly a turning point in the possible implementation or not of the project.
The second aspect is the participation or not of the state with €100 million in the shareholding structure of IPTO's subsidiary, Great Sea Interconnector. Now the ball is at the feet of the Government, the Minister of Energy and the President of the Republic himself, Nikos Christodoulides.
Will the Government proceed with the participation in a company, with €100 million in the share capital, for a project that essentially all that is on the table is an idea of dubious implementation and benefit?
Will the Government take responsibility for essentially guaranteeing an unviable project, which has been guaranteed a return of 8.3%, a figure that verges on scandal, since it is guaranteed by the state and payable by consumers?;
And what if construction costs skyrocket further and shareholders are asked to add more capital? Will the Government be invited to participate with much more than €100 million?
In the shadow of threats and intimidation?
Instead of focusing on completing the processes for the arrival of natural gas, which will immediately reduce the price of electricity by 60%, as well as installing storage systems, which is the real way to decarbonize energy, will it focus on a project under the shadow of threats and intimidation?
A project which, even if completed, will, according to ADMIE itself, bring about a 30% reduction in electricity costs, clearly less than what can be achieved through the advent of natural gas and the installation of storage systems?
Will the Government take responsibility for burdening taxpayers with extra charges on an electricity bill that is already causing terror to every Cypriot consumer, without clear data for the completion of this project and without anyone being able to guarantee that at the end of the day consumers will benefit?
According to what the competent Minister states, the Government's decision will be taken after ADMIE has submitted and studied at expert level the cost-benefit study for the project.
The Government, following CERA's unanimous decision to reject IPTO's requests, should focus on the issue: the protection of taxpayers from yet another financial burden on the price of electricity without any return, and the arrival as soon as possible of natural gas in Cyprus, the only sure option in the effort to reduce the price of electricity.
