CYPRUS: EuroAsia Interconnector vital for a competitive energy market

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The EU-backed EuroAsia Interconnector project, connecting Cyprus’ isolated electricity grid with those of Israel, Greece and consequently the rest of Europe, is vital for establishing a competitive energy market and exchange. 

This was one of the conclusions drawn from a press conference to present the Cyprus Stock Exchange’s proposal for taking on the role of Electricity Market Regulator.

The proposal was prepared in cooperation with the Athens Stock Exchange (ATHEX) and the Hellenic Energy Exchange (HEnEx) and entails the creation of a Cypriot energy exchange market.

A competitive electricity market cannot be set up in Cyprus without the island being interconnected with the electricity grids of neighbouring countries and the EU said officials of the Cyprus and Athens stock exchanges.

“A small isolated market cannot be competitive, as there is no basis for competition,” said CSE chairman Marinos Christodoulides.

The CSE, ATHEX and the HEnEx presented a tripartite contract for the operation of a Competitive Electricity Market in Cyprus, thus contributing substantially to the opening of the Liberated Electricity Market.

The agreed initiative envisages Cyprus’ energy products sold on a platform handled by the CSE, from which local and foreign buyers can purchase or sell electricity.

As electricity is not a commodity which can switch hands in a matter of seconds such as stocks which can be wired over the internet, physical connections such as the EuroAsia Interconnector, connecting Cyprus with Israel, Greece and consequently with the rest of the European Union is a must.

“As one can comprehend there will be a connection with Israel and Greece and the EU with the specific cable through which Cypriot producers will be able to sell their electricity in a larger market, and for distributors to buy from producers in Cyprus or from any other country. This is the essence of a competitive market,” said Christodoulides.

Michalis Philippou, HEnEx’ CEO said that markets “cannot work in isolation. The markets must have regional characteristics, so we have to resort to synergies with neighbouring countries and move forward with the implementation of electrical interconnections”.

Power Cuts

He said electrical interconnections, such as the EuroAsia Interconnection, help to sustain the security of energy supply such as bad weather causing power cuts recently.

Philippou said that the anomaly in the Cyprus power grid could have caused further damage if not for interconnection with the Turkish Cypriot community re-established recently.

In order to prevent the outage and possible damage to the grid, the Electricity Authority of Cyprus (EAC) took electricity from the north, within the context of an agreement between Cypriot leaders. The agreement, part of the latest Confidence Building Measures package adopted, foresees that any side can take electricity from the other during an emergency.

In the aftermath, however, the Turkish Cypriot hospital in Nicosia experienced a 10-minute power cut, while blackouts were recorded in north Nicosia, Kyrenia and Karavas. Social Media reflected Turkish Cypriot ire over the incident with some noting that they have got the thin end of the wedge, as this is not the first time outages were caused after the Greek Cypriots were in need of electricity.

Philippou said that interconnections help keep national grids stable as they become part of a broader grid.

“What happened the other day at the Vassiliko power plant is indicative for the importance of interconnections,” said Philippou, essentially explaining the importance of interconnectors for the security of supply.

Interconnectors, such as EuroAsia increase the available amount of energy supply and provide stability to the system, as Cyprus’ small and isolated grid will be part of a much larger grid when connected to Israel, Greece – via Crete – and the rest of the EU.

Philippou argued that Cyprus’ interconnection with neighbouring countries and ultimately the EU will bring down prices for Cypriot consumers who are paying a hefty price to turn on their lights.

“We can understand what it means to pay a high price for electricity as it is the case for Greek citizens living on the country’s many islands. Connecting an area with expensive electricity to a cheaper area will bring down prices significantly,” said Philippou.

The HEnEx CEO said that interconnections are vital for integrating energy produced from Renewable Energy Sources, as RES carry the risk of being unpredictable as to how much energy they can produce and at which time.

“As they are unpredictable, bringing RES online could cause serious problems regarding the stability of the system.”

It’s no big secret that small, isolated electrical systems cannot accommodate significant RES generation due to the peak load volatility exhibited by the most adequacy developed technologies.

Energy Mix

Talking to the Financial Mirror, Dimitris Antoniou, the Project Finance Director for EuroAsia Interconnector, said it was vital for creating an energy market in Cyprus, as without it newcomers producing energy with conventional but also with RES will have difficulties connecting to an isolated transmission system with limited capacity.

“With the Cypriot energy market in its early development stages, a stable and robust regulatory framework and reliable routes to larger electricity markets are imperative to Cyprus meeting its energy mix targets,” said Antoniou.

He said, RES non-uniform generation curves are highly unlikely to match local electricity demand and can easily destabilise entire systems such as the ones of Cyprus and Crete.

He added that electricity demand on the island is rather seasonal, which paired with the TSO’s monopsony relationship with the incumbent EAC, leaves little space for a truly competitive market. “Quite in resemblance to the stock market, market makers in the highly anticipated Cyprus energy exchange will be faced with unseen (almost literally) trading volumes. An abundance of electricity supply can be built, but one cannot control the demand side. The market is simply too small,” said Antoniou.

Similarly, “with Crete’s fossil fuel power generation units expected to shut down as of January 2020, existing and underdevelopment RES projects cannot reliably form part of the Greek and EU electricity markets”.

He said that temporary generation solution can safeguard the island’s energy security in the interim, but for the island’s full RES potential to be realised, a generous capacity electrical interconnection is urgently needed now more than ever.

Antoniou said the interconnection with Cyprus and Israel will benefit Greece which is already interconnected with the rest of Europe.

“Greece is currently one of the fastest growing European economies and ambitious energy infrastructure projects such as the EuroAsia Interconnector allow Athens to dream big, announcing plans of Greece becoming a regional energy hub and an energy gateway to Europe”.