The price of electricity in Cyprus is not the result of a simple equation. It depends on many factors and that is why no piecemeal decision on its own, without a broader strategic planning, can lead to large reductions in the price of electricity, or at least to reductions that will be substantially felt by citizens.
According to technocrats, dealing with the problem is complicated, however, as they point out, the beginning must be made somewhere. However, this does not mean that "false hopes" for a large reduction in prices should be cultivated, since even energy storage in the coming years will not be able to reduce prices to large levels, and while at the same time as the arrival of Natural Gas is delayed, the percentage of reduction in bills remains unknown, even with its use against fuel oil, since on the one hand it is considered by Europe as a transitional fuel and on the other hand it sees pressure in terms of its prices.
As they argue, the model that Cyprus is currently following in the electricity sector cannot be changed overnight in order to bring about the reductions desired by consumers. They estimate, at the same time, that the country followed the wrong course both in terms of the development of Renewable Energy Sources and in terms of conventional electricity production.
The percentage of RES is small to make a big difference
A number of technocrats argue that the share of renewables in Cyprus' energy mix remains so small that even a significant reduction in the price of green energy has a limited effect on the total cost of electricity.
As they report, this percentage is close to 6%-7%, while even with the utilization of energy storage, it is estimated that it could reach about 10%. Thus, as they argue, the effect on final electricity bills would remain relatively small.
The price of RES should be decoupled from heat production
They point out, however, that this does not mean that the distortions that currently exist in the market should not be corrected. One of them concerns the way in which electricity from RES is compensated, based on the cost of the EAC's conventional production.
As they explain, the price of green energy should be decoupled from the so-called "avoidance cost", i.e. from the cost that the EAC would have to produce the same amount of electricity as its conventional units.
In their view, these are two different ways of producing electricity, with different costs, and therefore the price of one should not be determined by the cost of the other.
Such a change, they estimate, could lead to a decrease in prices. They acknowledge that the reduction would likely be small, but consider that it would be a first step in the right direction. At the same time, they argue that it could reduce the risk of creating super profits for RES companies in the future, especially with the development of energy storage.
"We pay twice for pollutants"
In the same context, the technocrats set another important parameter. As they argue, when green energy is compensated based on the cost of electricity production by conventional units, the cost of emission rights is indirectly incorporated into the price received by RES producers.
Simply put, EAC production costs are rising due to carbon emission allowances. Since this increased cost is used as a basis for compensating for green energy, the price paid to RES producers also rises, even though they do not have a corresponding pollutant cost.
At the same time, the cost of pollutants also burdens the electricity bill paid by the consumer. That is why these technocrats argue that, with the existing system, the consumer is essentially burdened twice by the cost of pollutants.
Storage is not primarily aimed at reducing prices
At the same time, energy storage is not capable, at least not with the percentage it covers in the next few years, to bring large reductions in prices, and this is because the percentage of demand coverage will still remain small. What storage will help, as they claim, and this seems to be the primary goal of those in charge is for this storage to be used as a backup to avoid power cuts and possible blackouts on days of high demand or failures in conventional units.
The model is wrong
The debate regarding the energy market in Cyprus is not today, nor yesterday nor did it end with the opening of the competitive electricity market. In this we must note the following paradox. While the opening of the electricity market was "advertised" as an aid to reduce electricity prices, however, today it is indirectly accepted that due to the small coverage offered by renewables, they do not make a substantial contribution to price reductions. It is also the argument of the RES producers themselves who, in response to the statements of Phidias Panagiotou, explained that their share in the market is so small that it cannot reduce prices for consumers, even if they reduced their prices and profits. This, of course, also comes in relative contradiction with what was claimed before the operation of the open market, since several stakeholders claimed at the time that the competitive market would bring a reduction in prices. Here, of course, the issue of avoidance costs comes into play again, since green energy and the RES producer should compete in price with the RES producer and not the EAC.
They knew about the cuts
At the same time, from the public debate, we cannot bypass the argument of RES producers regarding reduced profits due to cuts. According to what has been known for years, the RES producers themselves knew that without energy storage it was almost certain that there would be cuts in their production, however, they themselves continued to invest in the creation of photovoltaic parks without storage.
According to energy experts, the state should have licensed new parks for years on the condition that they install energy storage.
They have already amortized the investment
In addition, another parameter regarding the cost of photovoltaic production is that some of the entrepreneurs who have been active in the sector for years have already recouped their investment, so the cost of the kilowatt hour for their business depends more on the administrative cost they have, which is considered negligible, therefore, as experts note, this part, i.e. that it is produced at a very low cost for those who have depreciated, cannot be overlooked in the equations for the cost and sale of green energy.
Not much can be changed immediately
Electricity prices can be reduced to a certain extent, however, in order to achieve this, distortions must be corrected, energy storage must be put in many times higher than that planned in the coming years and the entire circle and link of the industry must work, since the problem is not found only in the EAC, nor only in the network, nor only in fuel and not only in RES producers.
According to technocrats, two decisions from the past were added to the already difficult equation, which if they had been taken differently, might have kept prices at lower levels today. The first was the exclusion of the EAC from the development of RES projects, as a result of which the Authority was deprived for years of the opportunity to include cheaper green energy in its energy mix and to continue to rely on more expensive conventional production. The second concerns the abandonment of the Single Buyer Model, through which the EAC purchased electricity from RES producers at a fixed price and incorporated it into its own mix. With the withdrawal of producers from the plan and the conclusion of private contracts at higher prices, this cheaper production was not passed on to all consumers. The same technocrats estimate that without these choices, which they characterize as wrong, today's electricity costs would probably have been lower.
