Calls mount for independent audit of Cyprus' high electricity costs
"MEP Fidias Panayiotou’s proposal to slash electricity bills by 20 percent has triggered a fierce public dispute over solar park profit margins, with market stakeholders and energy experts pointing out that his calculations heavily overstate commercial photovoltaic revenues—while simultaneously fueling widespread demands for an independent, transparent audit of the entire electricity value chain to uncover why Cyprus maintains some of Europe's highest power costs."
EU Directive 2019/790 Article 15 Attribution • Verified Energy Document
MEP Fidias Panayiotou’s proposal to cut electricity prices by 20 percent has ignited a significant public discussion in Cyprus. While his initial calculations, particularly concerning payments to photovoltaic (solar) parks, faced swift rebuttals from the government, professional bodies, and market stakeholders, the broader debate risks being sidetracked by numerical disagreements. This initiative, however, presents a crucial opportunity to address a more fundamental question: why does Cyprus, despite its abundant solar resources and increasing renewable energy generation, continue to have some of the highest electricity prices in Europe? The core demand emerging from this discussion is a comprehensive, transparent examination of the entire electricity bill: "show us where the money goes."
What is urgently needed is a truly independent regulatory and financial audit of Cyprus’s entire electricity value chain. The guiding principle for this audit must be simple: follow the money. For every €100 paid by Cypriot households or businesses, it must be definitively shown where each euro is allocated across generation, fuel, CO₂ emission allowances, renewables, networks, balancing services, suppliers, regulated charges, taxes, and investor returns. For each of these categories, three critical questions require answers: what are the true and unavoidable costs, what constitutes a reasonable commercial return, and how much of what consumers pay is a result of market distortions, inefficiencies, or excessive profits? Only by answering these questions can the realistic potential for electricity price reductions be determined.
The audit should commence with conventional, oil-fired generation, which remains Cyprus’s primary electricity source. A thorough analysis is essential, covering fuel costs, the actual efficiency of each unit, CO₂ emission costs, operation and maintenance expenses, outage frequencies, availability, and the costs associated with maintaining conventional units for system security. Public debate data suggests that "must-run" units account for approximately 34 percent of traded energy, costing around €264 million in the reviewed period. While these units are vital for stability, the crucial question is how much of this cost could have been avoided through timely investments in energy storage, more flexible generation, natural gas, demand-side management, and a modern electrical grid. This area likely holds the greatest potential for cost reduction.
Renewable energy sources (RES) must also be meticulously audited, but not as a monolithic category. The audit should differentiate between older projects with feed-in tariffs, those under various support schemes, commercial photovoltaic installations operating in the market, and residential net-metering and net-billing systems. For each segment, the audit must scrutinize initial capital expenditure, subsidies received, actual financing costs, operating expenses, real revenues, curtailments, and the true return on invested capital. This will reveal whether any investment categories enjoy reasonable returns or if others have accrued profits far exceeding what was necessary to attract investment, thus identifying potential windfall profits.
Furthermore, the significant curtailments of renewable energy serve as a clear indicator of systemic malfunction. When Cyprus discards vast amounts of nearly zero-marginal-cost solar energy while continuing to burn expensive fuel oil, it incurs a substantial economic cost that consumers ultimately bear. It is imperative to quantify this annual cost in euros, not just percentages, and, more importantly, identify how much of it could be avoided through enhanced storage, grid modernization, flexible generation, and improved demand management strategies.
The electricity supply sector also warrants close examination. For every supplier, including EAC Supply, the audit should ascertain the actual weighted average wholesale purchase price, balancing costs, remaining operating expenses, and the average retail price charged to customers. This will expose the genuine supply margins. The efficacy of the new electricity market in fostering genuine competition must also be evaluated, moving beyond mere labeling to demonstrate active price reduction through market forces, consumer choice, supplier margins, and the ability of participants to influence prices.
Finally, the same level of scrutiny must be applied to transmission and distribution networks and all regulated charges. This involves determining the actual cost of transmitting and distributing each kilowatt-hour, the permitted returns on capital, and how these figures compare to other smaller European systems. The audit should also identify any inefficiencies whose costs are currently passed on to consumers. No aspect of the electricity market should be exempt from this comprehensive review.
The strong reactions to Fidias Panayiotou’s initiative underscore, rather than diminish, the necessity for an independent review. Both renewable energy producers and business stakeholders have rightly demanded that public discourse be based on factual, documented evidence. This principle should apply uniformly across the entire market, encompassing conventional and renewable generation, returns from legacy support schemes, curtailment costs, must-run unit expenses, supplier margins, and regulated charges. When all parties present differing figures, the most constructive approach is not a battle of numbers, but an impartial audit of everyone's data.
For this reason, the audit must be entrusted to an independent international firm with proven expertise in electricity markets and regulation, granted full access to all necessary data, and mandated to publish its findings. Its overarching mission can be encapsulated simply: demonstrate where every €100 paid by Cypriot consumers goes, and realistically and sustainably how much of it can be reduced, along with the necessary steps to achieve this. The outcome should be a clear roadmap outlining how current prices can be lowered through strategies such as increased natural gas use, energy storage, reduced curtailments, lower must-run requirements, more effective competition, and addressing any identified excessive returns. Despite the initial weaknesses in its calculations, Fidias Panayiotou's initiative offers a vital opportunity to move beyond percentage arguments and finally open up the entire electricity bill, revealing the true potential for cheaper electricity in Cyprus and the reforms needed to achieve it.