Filenews 15 May 2025 - by Chrysanthos Manoli
It is widely known that governments of EU countries and to a certain extent the European Commission are concerned about the need to substantially modify the Target Model, i.e. the basis on which the competitive energy market in most Member States is based.
On Tuesday, the Minister of Energy of Cyprus, George Papanastasiou, officially expressed reservations about the correctness and effectiveness of the Target Model in Warsaw.The minister took the floor at the informal meeting of the Council of Energy Ministers and at a meeting of the group "Friends of Renewable Energy Sources", which took place on the sidelines of the informal Council.
According to a statement by the Ministry of Energy, Mr. Papanastasiou referred to the role of electricity interconnections in lifting Cyprus' energy isolation and the creation of a competitive electricity market.
He focused "on the need to ensure affordable energy prices for end consumers and expressed his concern about how the price of electricity from renewable sources is determined, on the basis of the price of conventional electricity production".
According to the Target Model, during the day-ahead electricity market (energy exchange) energy producers submit bids for electricity supply every half hour of the next day, but -regardless of the initial offer- the final sale price by each producer is very often "locked" at the price of the most expensive producer. That is, the companies that produce electricity from natural gas or oil. This institutionalized practice leads to expensive electricity for consumers but also to very large profits for producers from RES systems.
Changes to the Target Model
The European Commission is concerned about substantial changes to the Target Model, something that the Republic of Cyprus also favors, as concluded by the statement of the Minister of Energy in Warsaw.
The promotion of changes to the Target Model of the competitive market was proposed in 2024 by the former president of the European Central Bank, Mario Draghi, who pointed out that a large part of the electricity (about 65%) produced in the EU is sold at the price of natural gas, even though the cost of producing it from photovoltaics and other RES systems is much lower and in many cases does not exceed 5 cents per kilowatt hour.
The issue concerns the Republic of Cyprus urgently, since the third and probably last trial operation of the competitive electricity market is currently underway, by the Transmission Operator, applying the Target Model. Based on the -revised- government planning, the official operation of the competitive market in Cyprus will start in September 2025.
Already, many technocrats in the public and private energy sectors are expressing serious reservations as to whether this model of competition will actually lead to lower electricity prices for all consumers, especially households.
He also said it to the Spikes
George Papanastasiou did not only express reservations about aspects of the Target Model at the informal Council of Ministers in Warsaw. Just last Monday, intervening on Omega's Peaks show, in which the accuracy of electricity was discussed, the minister had mentioned that from the first stages of his assumption of office, he was informed and understood the problems in the costing of electricity within the framework of the Target Model and ways of managing the problems were studied by the Government.
However, in his previous public interventions, Mr. Papanastasiou had expressed reservations as to whether the operation of the competitive market, as planned about ten years ago, would bring substantially lower prices.
On the Omega show, in particular, the minister referred to the example of Malta, a small country like Cyprus, which has secured a derogation and does not apply the Target Model, but the Single Buyer model, based on which there is an electricity supplier, which buys electricity on the basis of offers or tenders, ensuring as much as possible cost-orientation and lower prices from private producers.
However, as the completion of the third trial period is nearing and investments have already been made in photovoltaic and wind farms, as well as in electronic equipment and software, the review of the implementation of the Target Model in favour of the Single Buyer is a very remote scenario at this stage.
Protection on the Great Sea Interconnector
Speaking during a meeting of the Friends of Renewable Energy Group, which took place on the sidelines of the informal Council in Warsaw, in the framework of the Polish Presidency of the Council of the EU, Mr. Papanastasiou called on EU member states and the Commission to work together to protect vital energy infrastructure from interventions, both those in operation and under construction. with special reference to the Greece-Cyprus-Israel electrical interconnection "Great Sea Interconnector".
What caused the minister's reference to the Cyprus-Crete electricity interconnection is the prolonged delay in conducting marine surveys for the laying of the cable, which is attributed to Turkey's reactions. For these reactions, there has so far been no public intervention by the EU to support its two affected member states.
"In his interventions, Mr. Papanastasiou underlined the need to strengthen the European energy system and its resilience, emphasizing the crucial role played by electricity interconnections," the statement added.
Regarding the policy discussion to strengthen the EU's energy security, it is noted, "Mr. Papanastasiou referred to the regulations for the production of zero-net emission technologies, critical raw materials and projects of common European interest, as key instruments for achieving the Union's energy and climate goals".
During the meeting of the group "Friends of Renewable Energy Sources", Mr. Papanastasiou also referred to the role of RES systems in combination with storage systems, as well as the need for further investments in transmission and distribution networks.
