Cyprus has no choice but to look for energy alternatives and renewable energy resources, but at competitive rates so that there is no repeat of the bad experience of the Electricity Authority of Cyprus (EAC), which in 2012 will need to buy carbon credits or pay EUR 170 mln to cover its carbon emission deficit.
Solon Kassinis, Director of the government’s Energy Service, told the Financial Mirror in an exclusive interview that he prefers the imposition of a carbon tax based on consumption instead of an emission trading mechanism, but more importantly, he and the Energy Service prefer a policy framework to promote clean technologies with economically viable and long term solutions.
“I would appreciate if our politicians would listen to us before rushing to Brussels to sign protocols on carbon reductions without giving thought to its implications on a small island nation like ours,” Kassinis said bluntly, having for years spearheaded a campaign to introduce alternative energy resources but keeping the costs at reasonable levels.
“If the EAC had listened to the Energy Service, it would not be in the current mess with the prospect that in the 2008-2012 period, its total emission deficit will amount to the countervalue of about EUR 170 mln, which they need to buy through the derivatives market.”
“Obviously, the cost will be passed on to the Cypriot consumer,” which is not really fair, said Kassinis.
CO2 EMISSION QUOTAS
In an effort to reduce carbon emissions, the EU allocated credits to all energy producers, including the EAC, which were provided free of charge for the 2008-2012 period, but which intentionally were below the production estimates of each producer.
The rationale for allocating less credits than production was to oblige every energy producer to intensify efforts to reduce emissions, either by investing in better and advanced technology or shift to renewable energy resources (RES).
The EAC did not improve its production or shift to alternative RES, with the result that for the 2008-2012 period, its deficit will amount to the counter value of EUR 170 mln, which it now needs to buy through the derivatives market where carbon is traded on a daily basis in the form of a financial product.
The other main polluters in Cyprus are Vassiliko Cement and a number of brick factories, but the problem with Vassiliko is not serious, since its new cement production facility due to come into operation will not only embrace the latest technology, but as the Financial Mirror had previously reported, will also absorb a lot of waste, thus helping offset its carbon emissions.
According to Kassinis, Cyprus is one of the few countries in the EU that will have a carbon deficit by 2020 where there is a commitment to reduce emissions by 5% below 2005 levels with most of the blame for emissions resting with the EAC.
RES
Kassinis insists that Cyprus should remain outside the Kyoto compulsory emissions reduction targets, citing the small size of the country, the fact that it is an island and lacks interconnectivity to alternative EU energy sources, such as natural gas pipelines.
“That is why Cyprus has and will continue to have one of the most expensive energy production costs in the EU,” he said, adding that this does not mean Cyprus cannot look for renewable energy resources, provided the cost of production is not prohibitive.
Wind, solar (photovoltaic), biomass (waste management, disposal units) are some of the preferred alternatives for the production of electricity as opposed to the current norm of 100% of our electricity generated by burning crude oil.
WIND ENERGY
The average wind speed in some areas best suitable for installation of wind farms is about 5-6 m/s, meaning limited potential for wind energy generation, Kassinis said.
Nevertheless, Cyprus commissioned its first wind farm in the Paphos area which will come on line in 2010 producing 82MW and contribute by 2-3% to total energy needs.
In the event that other production units planned gain approval, then total production from wind energy may reach 124MW.
SOLAR
Cyprus enjoys more than 300 days with 75% of sunshine and even though more than 2.9MW of PV systems have been installed and Cyprus holds the unofficial world record in solar water heating with 750,000 sq.m. of solar collectors installed, there has been no major breakthrough in having a solar power plant.
Kassinis brushed aside claims that his office has blocked the entry of major players and insisted that there has been no application submitted to his office for such solar plants. In any event, he said the subsidy for solar electricity is prohibitively expensive and would lead to a massive increase in electricity bills.
“It costs the EAC about 8 cents to produce 1KB of electricity, which they sell for 12c, but the subsidy to purchase solar electricity is 34-38c. Does the public have the stomach to pay for the difference,” asked Kassinis, flanked by his assistant Yiannis Economides who insist that RES is good, but provided that the costs are not prohibitively expensive.
AUCTION
An ardent believer in transparency, Kassinis said instead of fixing artificially high subsidy prices at which the EAC would be obliged to buy RES from private producers whether from wind, solar or biomass, which in the end will be paid for by the public, the best way is to auction off the rights.
“Why should a private concern have a guaranteed internal rate of return (IRR) of 15-18% for the next 20 years for producing RES and then sell it to the government at a guaranteed price, which is a higher cost for the public. The best thing would be to auction off those rights, and you can rest assured that the cost would tumble very quickly. This way we would have more RES and a cleaner athmosphere, more jobs and lower emissions. If only they (did not specify) would listen to me,” said a frustrated Kassinis.
BIOMASS
In the meantime, until there are more transparent methods in place, Kassinis favours the development of biomass and biofuel production units. The process is the exploitation of agricultural residues and landfill gas from the waste disposal plants.
There is one company registered for production of biofuel, two new biogas plants with total 1MW capacity expected to begin operations in 2010 and eight waste management and disposal plants. The plan is to have 9.5MW of electricity from biomass units produced in 2010.
FINANCING
A special fund has been created to support RES and Energy Savings investments in Cyprus. The revenue, almost EUR 10 mln is derived from the imposition of a 0.22 cents/kWh tax on electricity bills.
The fund has proved very popular, having received 20,191 applications for grants for RES for a total of EUR 17.8 mln during the 2004-October 2009 period of which EUR 5 mln have been allocated in 2009.
“We have tabled a proposal asking for House approval to increase the subsidy levy to 0.53 cents/kWh, which would still be among the lowest in the EU, but this is still in the preliminary stage,” said Kassinis.
Incentives for RES
– Grant subsidy 15-55%
– Large Scale RES Installations: Feed in tariff policy for 20 years
– wind systems: EUR 0.166/kWh
– solar thermal: EUR 0.26/kWh
– PV systems (21-150MW): EUR 0.34/kWh (limitation 2MW/year)
– Biomass exploitation systems: EUR 0.135/kWh
– Biogas exploitation systems: EUR 0.1145/kWh
Main Categories
– Wind energy
– Solar thermal
– Photovoltaic
– Biomass and Biogas
– Goethermal pumps
