Filenews 22 June 2025 - by Christakis Hadjilaou
Cyprus is facing a serious energy crisis. According to Eurostat data, in the second half of 2024 the country ranked second in Europe in the price of electricity in proportion to the purchasing power of citizens.
At the same time, according to data from the TSO's website, in 2024 the TSO was forced to cut 12.2% of the estimated production of all renewable energy sources (about 188,000 MWh), a loss that translates to around €38 million. The paradox? We throw away clean electricity while we pay dearly for polluting energy.
To deal with this serious crisis, the installation of storage systems is planned - albeit very late.
The use and benefit of storage
Storage systems primarily serve the storage of surplus energy from RES and the provision of ancillary services to the electricity system (reserves, peak coverage, etc.). Those who primarily benefit from storage are:
- RES producers (including household photovoltaics with net metering): They avoid cuts and increase revenues from the management of storage in the context of the electricity market.
- Network operators: Storage, as a market product, can be managed for the provision of ancillary services to the network.
- Consumers: Indirect benefits from a more stable network and long-term potential containment of increases.
Estimation of storage facility by 2030
It is noted that the estimate is based on the following information and data that have recently seen the light of day:
- Central storage: 400 MWh (Funding: European funds and other public resources) -CERA Decision 217/2025-
- Electricity Authority of Cyprus (EAC)/Dhekelia: 160 MWh (Funding: EAC) -CERA Decision 274/2024-
- Private subsidies from the Ministry of Energy: 350 MWh (€35 million from RES & EXE Fund) "https://www.politis.com.cy/politis-news/oikonomia/899694/ti-provlepei-to-schedio-chorigion-35-ekat-gia-apothikefsi-energeias"
- Private investors: 410 MWh (according to statements by the Executive Director of the TSO, preliminary connection terms have been issued for seven "https://inbusinessnews.reporter.com.cy/article/2025/6/1/840158/epta-aiteseis-apo-idiotes-ependutes-gia-egkatastase-autonomon-egkatastaseon-apothekeuses-energeias-apo-ape/" applicants)
Total realistic estimate for storage facility up to 2030 for further analysis purposes: ~1000 MWh
Real performance and contribution
With realistic assumptions (75% annual availability -274 days-, 80% cycle efficiency and 90% depth of discharge -720 MWh-), the annual net efficiency of storage for daily use is estimated at around 197 GWh. Therefore, for a projected demand of 6000 GWh in 2030, storage will cover only 3.3% of Cyprus' annual electricity needs. It is worth noting that even this small percentage can have a significant effect on the stability of the network, although not necessarily on prices.
Effect on the price of electricity
Despite the large investments for the estimated installation of 1000 MWh in storage systems of €150-200 million by 2030, it is estimated that there will be no reduction in electricity bills for the majority of consumers billed by EAC. On the contrary – it is estimated that there will be a very small increase, at least in the short term.
But why will this happen?
First, storage will cover only 3.3% of Cyprus' annual electricity needs for 2030 – too small to bring about a substantial change in prices.
Secondly, the target model applied to the electricity market in Cyprus acts as a cost recovery mechanism that ensures investors the return on their investment regardless of the actual return or the contribution of the storage systems to the reduction of the total electricity costs. Thus, the cost of the investment is automatically passed on to consumers through their accounts.
Thirdly, the electricity market of Cyprus is very small and isolated (only RES production will participate in the market and to a much greater extent conventional production, with two players), without interconnections with other countries. This significantly limits the opportunities to compete with low prices.
Finally, the amortization of the large capital expenditure for the construction of storage systems will burden electricity bills for several years.
With this data, storage seems to follow the same path as renewables – big promises, big investments, zero benefit but burden for the consumer.
The paradox of funding
While RES producers are the main beneficiaries of storage, significant costs of installing storage are passed on to consumers through funding from European funds, government subsidies and bill charges.
It is noted that private individuals invest -without subsidies- in the context of the electricity market with the application of the target model -, hoping that their investment will have the expected return. In order to prevent this burden on the Cypriot consumer, the planned central storage could be financed by imposing a proportionate storage fee on RES producers in combination with the utilization of European or other resources.
Proposals for a Sustainable Solution
The transition to a fair and efficient storage system requires substantial changes.
First, the imposition of a storage fee on RES producers who are the main beneficiaries, with differentiation depending on technology and incentives for private storage.
Secondly, the strategic placement of storage systems at critical points of the network and the acceleration of the interconnection with Greece (Great Sea Interconnector).
Thirdly, the adoption of innovative solutions such as virtual production stations, smart grids.
Finally, a revision of the regulatory framework with a radical reform of the target model and a transition to market mechanisms that link remuneration to the actual performance and supply in the system, while ensuring full transparency in price formation and independent evaluation of all investments.
Only with an integrated approach and abandonment of the distortions of the target model, storage will become a tool of progress and not an additional burden.
Conclusion: Realism without defeatism
Energy storage is an inevitable and necessary step for Cyprus' energy transition. However, with the current design and implementation of the target model, we run the risk of repeating the mistakes of the past and creating yet another costly system that will burden consumers with no corresponding benefits.
International experience shows that success requires:
- Holistic design, combining RES penetration, storage, smart grids and interconnections
- Radical reform of the electricity market regulatory framework for the benefit of the consumer
- Fair distribution of costs among all beneficiaries
- Cultivating realistic expectations
- Continuous evaluation and strategy adaptation
Storage is not a magic solution, but a tool. Its value depends on how we use it. With proper planning, bold decisions, transparency and fair distribution of responsibilities, it can contribute to the solution of the energy problem. Otherwise, it will simply be added to the list of high-paying failures resulting in a further increase in the price of electricity.
* Electrical engineer, with many years of experience in the operation of the Electrical System
