Cyprus risks losing €657M EU grant for Interconnector project, says Energy Minister

Energy Minister George Papanastasiou expressed concerns over the potential withdrawal of a €657 million subsidy by the European Commission for the electricity interconnection project between Cyprus and Greece, known as The Great Sea Interconnector (GSI). This comes in response to a decision by the Cyprus Energy Regulatory Authority (CERA) to impose a fee on Cypriot consumers starting January 2025, aimed at helping the project’s implementing body, IPTO, recover construction costs amounting to €1.9 billion.

At the Annual General Meeting of the Electricity Market Association, Papanastasiou revealed that the European Commission reacted negatively to CERA's decision, suggesting it could jeopardize the project's sustainability. He noted that ADMIE, the Greek transmission system operator, also expressed concerns about the project's viability, prompting expectations of a response from the Greek government.

"As Energy Minister, my primary concern is the European Commission's reaction. They are providing the €657 million subsidy as part of their initiative to establish a unified electricity grid across Europe," Papanastasiou said. "If the Commission withdraws this funding, the project is essentially dead."

Papanastasiou plans to discuss the matter in a conference call with the European Commission next week.

Regarding CERA’s decision, Papanastasiou explained that the core issue is the timeline for recovering the capital expenditure. CERA stated it would not transfer any part of the cost to Cypriot consumers from January 1, 2025, without specifying an alternative date, effectively deferring the cost until the interconnection becomes operational at the end of 2029.

While emphasizing CERA’s independence and adherence to European regulations, Papanastasiou stressed the need for the implementing body to provide documentation proving the project’s unsustainability, rather than relying on mere communication.

In response to inquiries about interactions with Greek officials, Papanastasiou confirmed that clarifications were sought from the Greek Energy Minister and Deputy Energy Minister, emphasizing that these were questions, not pressures.

Regarding the consumer fee, Papanastasiou noted that the implementing body proposed a subsidy fee of 0.6 cents per kilowatt hour for Cypriot consumers. While this fee may seem minimal, it requires thorough documentation, especially as it is expected to increase once the interconnection becomes operational by the end of 2029.

Papanastasiou highlighted the potential benefits of the interconnection, stating that the fee's impact on Cypriot consumers would be insignificant compared to the advantages. He also referenced a decision by the Greek Regulatory Authority, RAAEU, to apply a similar fee to Greek consumers, with a cost-sharing arrangement of 50% between Greek and Cypriot consumers.

Looking ahead, Papanastasiou mentioned that the Transmission System Operator of Cyprus will enter a trial period at the end of December 2024, with plans to transition to a competitive electricity market by July 2025.

[Information sourced from CNA]