Cyprus power puzzle: call for audit to unravel high electricity costs amidst solar boom
"Despite exceeding 1,055 MW of installed solar capacity, Cyprus consumers continue to face steep electricity bills as low-cost renewable generation fails to lower retail rates. Structural distortions—chiefly confidential bilateral contracts pegged just below EAC tariffs, captive supplier margins, and severe grid curtailment (surpassing 306 GWh in 2025)—leave the island locked into expensive oil-fired generation. Addressing the paradox requires an independent regulatory and economic audit across the entire value chain to trace actual producer returns, corporate profits, and the barriers preventing solar savings from reaching end-users. "
EU Directive 2019/790 Article 15 Attribution • Verified Energy Document
Cyprus's soaring electricity prices have sparked a debate, with attention increasingly turning to renewable energy producers, particularly whether commercial solar parks are generating excessive profits. While this is a valid concern, focusing solely on solar park returns might obscure a larger systemic issue.
Cyprus currently boasts over 1,055MW of photovoltaic capacity, with 450MW attributed to rooftop installations. Energy Service data from April 2026 indicates that nearly 60% of this installed solar capacity operates under schemes primarily designed for self-consumption, even if not all electricity is consumed directly on-site. The remaining 326MW is allocated to projects for the competitive electricity market.
This highlights that understanding the beneficiaries of solar power necessitates a comprehensive examination of the entire electricity value chain, not just commercial producers.
There is no singular price for solar electricity per kilowatt-hour in Cyprus. Rooftop solar offers immediate consumption benefits, reducing reliance on grid purchases, a similar advantage enjoyed by commercial or industrial consumers with their own PV systems. Other renewable installations are sold under regulated agreements, sometimes at around 11 cents per kilowatt-hour.
Commercial solar parks operate under more complex pricing mechanisms, selling electricity through bilateral contracts, forward contracts, or the day-ahead market, with deviations settled through the market. Recent figures from the Electricity Market Association show commercial solar accounting for about 6.4% of traded electricity since the competitive market's inception, with an average day-ahead price of approximately 14.5 cents per kilowatt-hour. However, this does not represent the price for all electricity generated by the 326MW commercial solar fleet.
A significant portion of this electricity is supplied through confidential bilateral arrangements between renewable producers and independent suppliers, primarily serving commercial and industrial clients. Before the competitive market opened, an estimated 400GWh – roughly 30% of the 2025 total – was supplied via such contracts. These agreements are commercially sensitive, with prices generally not disclosed.
Reports suggest that independent suppliers offer commercial and industrial customers electricity at about 10% below the Electricity Authority of Cyprus (EAC) tariff. When renewable producers and suppliers are part of the same economic group, merely looking at the notional price paid to the generating company can be misleading. A more pertinent inquiry involves the consolidated economic return received by the integrated producer-supplier group from the final customer, after accounting for genuine generation, network, balancing, supply, and other operational costs.
Indeed, some older solar projects with lower capital costs might be yielding excessive returns, underscoring the importance of an independent review of these returns.
Another critical factor affecting commercial solar parks is increasingly severe curtailment. In 2025, about 306GWh of renewable electricity from grid-connected systems was curtailed, an 83% increase from 2024, with residential PV accounting for about 10% of this. This trend has worsened in 2026. Curtailment means that investors are prevented from delivering their full potential output to the system, making the actual revenue earned post-curtailment the true economic metric, rather than theoretical production multiplied by market price. This simultaneous installation of cheap solar and prevention of its use to replace expensive conventional generation is economically inefficient.
Cyprus's greatest potential for savings lies in maximizing the use of low-cost renewable electricity to displace expensive oil-fired generation. Every additional usable renewable kilowatt-hour can reduce fuel, carbon allowance, and variable thermal generation costs.
However, completely eliminating conventional generation is not feasible due to the variability of solar and wind power. While batteries can shift solar electricity from day to evening and provide system services, standard four-hour batteries cannot assure supply during extended periods of low renewable production. Thus, Cyprus must differentiate between reducing thermal energy production and eliminating firm generating capacity.
Over time, thermal generation could be significantly reduced, potentially by 40-60% from current levels, as renewable penetration, storage, grid infrastructure, and demand management improve. Nevertheless, substantial dispatchable capacity will remain necessary for nights, prolonged renewable shortfalls, peak demand, and emergencies. This strengthens the argument for replacing aging oil-fired power plants with efficient, flexible gas-fired capacity, rather than assuming renewables and batteries alone can ensure 24/7 reliable electricity. With adequate storage, flexible gas generation, stronger grids, and eventually an electricity interconnector, renewables could meet a much larger share of annual demand.
The debate over renewable profits, while legitimate, demands a broader investigation: Cyprus requires an independent regulatory and economic audit of its entire electricity value chain. This audit should transparently ascertain:
- Actual returns of renewable producers.
- Benefits accrued by self-consumers.
- Costs and efficiency of conventional generation.
- Fuel and carbon expenditures.
- Losses due to curtailment.
- Network and system costs, along with supplier margins.
Crucially, the audit must also scrutinize bilateral renewable contracts, including electricity volumes, producer prices, final prices to commercial and industrial customers, network and balancing costs, curtailment allocation, and supplier margins. For vertically integrated producer-supplier groups, the audit should assess their consolidated economic return, rather than just internal transfer prices.
This is vital because cheap solar generation does not automatically translate to cheaper electricity for consumers. If renewable electricity, produced at a substantially lower cost, is ultimately priced to customers primarily by referencing the EAC tariff, a significant portion of the economic benefit may be retained within the electricity value chain rather than being passed on to consumers. The extent of this potential issue should be determined through data analysis, not assumptions.
Therefore, commercial solar returns warrant close examination, but so do bilateral contracts, vertically integrated entities, self-consumption schemes, network operations, EAC costs, and overall market behavior. The ultimate goal is to achieve a much larger prize: substantially reducing fuel and carbon expenditure by utilizing more of Cyprus's existing renewable electricity, while maintaining sufficient firm generation for continuous reliable power.
The fundamental question for Cyprus is: "Why, with over 1GW of solar already installed, do consumers still face such high electricity costs, and what measures will ensure the benefits of affordable solar power genuinely reach them?" This is the question an independent electricity sector audit should definitively answer.