High energy prices here to stay

1 min read

Cypriot consumers will have to get used to living with high energy costs for the foreseeable future as failure to decarbonise the economy has authorities paying tens of millions of euros for emission rights.

Energy analysts fear that consumers will continue to pay for the state’s shortcomings in the runup to decarbonising the economy.

Heavy reliance on fossil fuels for producing electricity has cost Cyprus heavily.

In comments to the Financial Mirror, Energy analyst Sotiris Kyprianou said bills had been inflated by charges to make up for ‘fines’ the electricity authority must pay for polluting.

The EAC is, in essence, buying CO2 emission rights from the state, the cost of which has more than doubled in recent years.

“Charges on our electricity bill, to pay off ‘emission fines’ have more than doubled from 13 cents€/kWh pre-pandemic prices (2019) to 28.6 cents€/kWh today,” said Kyprianou.

As he explained, at a time of high inflation, with fuel prices also rising, adding this additional charge has made things difficult for households, pushing up the cost of living even further.

“Back in 2019, the pre-pandemic era, EAC paid €67mln in CO2 allowances or 8.6% of the company’s total operational cost.

“ In 2022, this is estimated at €180 mln, making it the second highest cost EAC has after fuel.”

In 2019, a household would pay 1.6 cents€/kWh for CO2 emissions, which has increased to 7 cents€/kWh.

“This simply means that 21.5 % of our current electricity bill goes to pay off CO2 allowances and 34% of our bill being increases in fuel cost.”

With inflation hiking and the war in Ukraine raging, nobody should expect these fuel and CO2 prices to drop substantially in the next few years, he argued.

“Therefore, we should develop alternative solutions to reduce these prices ourselves.

“The most effective ways to reduce these prices are energy efficiency, by reducing the peak demand of our country, especially in the summer”.

“That way, we can reduce the necessity of dirty old power plants the EAC is still running.

“We need to invest heavily in Renewable Energy resources.

“Cyprus is expected to reach in 2022, 20% Renewable penetration heavily driven by Solar; however, that is not enough to make a difference on its own”.

Kyprianou said Cyprus would need to improve and expand its electricity grid while finding ways to handle additional energy from RES projects coming online.

Cyprus is expected to see 20% of its energy produced by RES, increasing by 4.5% compared to 2021.

However, as he noted, this growth will be limited due to technical issues, namely Cyprus’ isolated electricity grid.

“Many substations have reached full capacity and require upgrades, and excess solar energy has started increasing.

“And an undersea electricity connection should provide salvation, such as the EuroAsia Interconnector project.

“We have paid enough for failures of the past.

“It is time to catch up and get on board with the rest of the world”.