Apostolos Tomaras
Early data from the newly liberalized energy market offer cautious optimism for a smooth transition. But energy officials warn it will take time before any firm conclusions can be drawn, according to the Cyprus Transmission System Operator (TSOC).
A slow start for the open market
The first few days of Cyprus’s liberalized electricity market passed without any major price changes. The new model has yet to make a tangible difference, confirming expectations by the Ministry of Energy and market experts that a drop in electricity prices will remain elusive for now.
During the first four days of trading, wholesale prices stayed roughly the same as before liberalization, creating some optimism that the transition has avoided early distortions. Still, TSOC officials note that more time is needed to fully assess the market’s stability.
The good news is that the new market’s infrastructure operated smoothly, which should ease the adaptation process. However, long-standing distortions, particularly between the low cost of renewable energy production and the high selling price of clean energy, remain unresolved. Under the EU’s “Target Model,” that gap persists, preventing the lower production costs from translating into cheaper retail prices.
Prices steady, except for a brief dip
From the first day of operation (starting midnight Tuesday) through Friday, TSOC data show wholesale electricity prices averaged 17.5 cents per kilowatt-hour, with one exception: a brief period on the first day when demand dropped sharply due to Independence Day.
Between 10:30 a.m. and 2:30 p.m., renewable energy sources met 100% of electricity demand, eliminating the need for conventional generation by the Electricity Authority of Cyprus (EAC), and briefly driving wholesale prices down to zero.
For the rest of the day, and in subsequent days, the use of conventional units pushed the price back to 17.5 cents per kWh. Once all fees and charges are added, consumer bills remain unchanged.
New opportunities for consumers
The variations in wholesale prices, depending on the hour and energy source, are expected to shape the next generation of electricity plans. The low production cost of renewable energy will allow suppliers to offer customized packages tied to periods of renewable generation.
This could lead to cheaper daytime rates, especially between 10 a.m. and 4 p.m., when renewables are most active and conventional generation is minimized.
Such flexibility will be enabled by the rollout of smart meters, currently underway. Future packages could feature:
- Variable or fixed kWh pricing
- Fixed monthly bills with annual reconciliations
- Discounts for steady consumption or prompt payments
- Contracts of varying lengths
These options could make the retail market more competitive, even if the overall cost of electricity remains high for now.
Windfall profits for renewables
While consumers may eventually see more options, wholesale market conditions remain unbalanced. According to the Ministry of Energy, the transitional phase of liberalization has produced unexpected profits for low-cost producers such as solar and wind farms.
The profitability of renewables has been a contentious issue for two decades. Despite successive reductions in feed-in tariffs, the gap between production cost and sale price persists, allowing independent producers to reap windfall gains.
In practice, EAC’s conventional generation still sets the market’s closing price, and because EAC’s costs are higher (due to expensive imported fuel), all other producers, including renewables, are paid that same elevated rate.
Under the “Target Model,” all accepted bids receive the highest market price, meaning that as long as conventional generation remains costly, renewables continue to profit.
For comparison, in countries like Germany, the cost of renewable energy production is roughly 6 cents per kWh, far below Cyprus’s current wholesale rate.
What it will take for prices to fall
Government officials admit the energy market opened without key competitive safeguards found in other European systems.
Real stabilization, and eventual price reductions, are expected only when:
- Cyprus connects to the European electricity grid, ending its isolation;
- Energy storage systems are introduced, allowing renewable producers to sell power even when the sun isn’t shining or the wind isn’t blowing; and
- Natural gas replaces costly diesel in power generation, cutting both fuel costs and carbon penalties.
The missing link: Natural gas
The absence of natural gas in electricity generation remains a major obstacle.
A recent study for the Ministry of Energy examined how prices would change if Cyprus had access to natural gas. It found that retail electricity could be 15–20% cheaper, depending on market conditions.
The analysis considered three gas price scenarios ($8, $12, and $19 per MMBtu) based on European LNG prices and likely supply contracts (currently around $11–12).
With the current electricity price at 28.3 cents per kWh (September 2025) and average household use of 1,500 kWh, the study estimates:
- Low gas price: 22.2 cents per kWh
- Medium price: 23.4 cents per kWh
- High price: 25.6 cents per kWh
The projected reduction would benefit roughly 75–80% of households (without rooftop solar systems). Homes with net metering would see only marginal changes.
In short, Cyprus’s energy market has opened, but is not yet transformed. Prices remain stubbornly high, the system still relies on costly fuels, and meaningful relief for consumers will likely come only with natural gas, interconnections, and energy storage, the three missing pieces of the island’s energy puzzle.
This article was translated from its Greek original.
