Changing the Face of Cyprus

Natasa Pilides, Minister of Energy, Commerce & Industry, discusses the green ideas that will receive the lion’s share of public funding in Cyprus’ effort to help head off a catastrophic rise in global temperatures, details the efforts being made to remove the bottlenecks in liberalizing the local electricity sector and to incentivize private investments, and looks at three large projects and their role in our burgeoning energy market.

By Adonis Adoni

It is another sunny day and Natasa Pilides, Minister of Energy, Commerce & Industry, appears via video conference from her office. In recent weeks, news about the funds that her Ministry will manage to help find a way out of the impending climate crisis has been doing the rounds. At last count, there will be €547 million available to spend over the next six years, channeled from various EU financial instruments and the Government’s own coffers: 61% of these funds are directly linked to green projects and the rest will strengthen the competitiveness of the country’s economy. “Of course,” Pilides says, “even these have a green spin, in the sense that they encourage the circular economy and technological upgrades in ways that help with efficiency, energy spending and becoming more environmentally friendly.”

The country’s housing and building infrastructure, as one of the biggest emitters of greenhouse gases – 40% of Cyprus households were build prior to 1981 – will receive the lion’s share of public funding in a bid to dramatically improve energy efficiency. This milestone, as with every part of the green transition puzzle, does not exist in a vacuum; all pieces are intrinsically linked, which inevitably means delays. “There are so many moving parts,” Pilides admits with her usual genial disposition, “but, it’s our responsibility to push as much as we can to just bring all these different parts together.” Setting up an energy storage infrastructure is also high on the Ministry’s list of priorities, which will, in turn, increase the share of renewable sources and, naturally, break the near-monopolistic hold of the Electricity Authority of Cyprus (EAC) on the electricity market. “Energy storage is something that we’re really hoping to promote quite quickly in collaboration with the Cyprus Energy Regulatory Authority (CERA),” she notes. “We are also working on a funding programme to supplement the regulation being prepared by CERA in order to attract investor interest.”

Freeing the electricity market could not have come at a more critical juncture. On the more barren side of the village of Skouriotissa, Hellenic Minerals, in one of the most promising investments made in green projects, is using the environmentally friendly method of hydrometallurgy on imported laterite to produce nickel cobalt aluminum oxide, which accounts for a fifth of the material that makes up lithium batteries that power electric vehicles. Pilides fights back a smile at the mention of this project. “This is a great project, because it also ties in with the big discussion going on within the EU about the high dependency for key materials and resources on non-EU countries. So, in addition to doing something very innovative, we are also helping the EU become more sufficient in critical infrastructure.”

Indeed, interest in more investments will doubtless increase with the introduction of certain policies. A key piece of legislature currently awaiting parliamentary approval seeks to create a one-stop centre for licensing commercial renewables projects. There are a few more bills requiring scrutiny, with the new electricity bill cutting the Transmission System Operator’s (TSO) umbilical cord from the EAC at the top of the pile. The complete independence of the TSO, which controls and operates the transmission system and the electricity market, will reassure new entrants in our burgeoning electricity market that it is a level playing field. The Ministry is also in the process of completing a Strategic Environmental Impact Assessment study, to be sent to the Department of Environment, with recommendations as to which types of land are most suitable for photovoltaic parks, as the installation of photovoltaics is currently subject to a diversity of constraints.

Pilides is keen to agree that there is an imperative need to update our outmoded energy grid. Smart grid technology links back to an increased share of renewable sources, as it will open up a two-way channel between producer and consumer. The Ministry has already introduced net metering and net billing to give renewable systems owners, whether residential or commercial, the capability to feed unused electricity back into the grid. “And, we are in continuous communication with the EAC to ensure that 400.000 smart meters are installed the soonest with a view to completing the project by 2025,” Pilides notes. It is worth noting that Cyprus has already entered into a transitional phase as of January 1; the EAC, strictly speaking, is no longer the sole energy supplier. However, the two new entrants cannot supply energy to the general public at present and there is no system yet in place for consumers to evaluate energy suppliers and their prices. “Definitely, the current framework needs to change,” Pilides says. “But, of course, the two new entrants show that there is tangible interest and there are lot of potential new suppliers waiting for natural gas to come in.”

By all accounts, natural gas has opened up a whole slew of new possibilities for Cyprus. The conversion of a floating storage and regasification unit (FSRU) that will be moored alongside a purpose-built jetty at the gas import terminal at Vasilikos will pipe natural gas to the country’s energy grid by the end of 2022, expecting to cut electricity costs, potentially shave off some 20% of our carbon emissions and introduce a new market for transport, shipping and logistics. “This is a crucial project, and the legislative part, which is making DEFA (the supplier) a public company, will be carried out in parallel with other practical steps,” Pilides explains. Other hydrocarbon projects, though, which involve gas exploration activities in the Aphrodite gas field and the rest of the licensed blocks in Cyprus’ Exclusive Economic Zone, have been temporarily placed on hold due to the pandemic. What is more, the proposed EastMed pipeline, an EU Project of Common Interest, is likely to face increased scrutiny due to the Union’s decarbonisation efforts. Having said that, following long negotiations at the last Energy Minister’s Council in Brussels on June 11, Cyprus successfully secured a specific reference with regards to EU Projects of Common Interest (PCI) that such projects should remain eligible in Cyprus’ case until the country’s energy isolation is lifted. Pilides appears confident that the oil & gas companies operating within Cyprus’ Exclusive Economic Zone will go ahead with their scheduled drilling at the end of 2021. Even so, those who study energy patterns say that natural gas will only serve to taper our dependency on heavy fuels. Pilides, who also shares the idea of natural gas being a temporary solution, explains that the FSRU will have the capability to store the much greener solution of hydrogen in the future.

The EuroAsia Interconnector, a highway of electricity that connects Cyprus to Europe and Asia, is another large project set to liberalize the Cyprus electricity market and the country’s energy isolation. With preliminary work finished, the project is ready to start construction, which will require a serious injection of cash. “We should stress that this is not a government project. It’s led by a private entity and it has been included in the EU’s projects of common interest under the Connecting Europe Facility,” she mentions. Securing the funds rests on the shoulders of the project promoter, who will have to compete with similar projects vying for the same money from the Connecting Europe Facility. In fact, with the EuroAsia needing a big chunk of that total to complete, the challenge to submit a successful bid becomes even greater.

At present, the targets set by the Cyprus National Climate and Energy Plan are independent of these projects. However, the estimated 24% reduction in greenhouse gases by 2030 has raised a few eyebrows, as it fails to reach the EU’s ever-rising decarbonisation ceiling, which currently commits to a 55% cut of greenhouse gases by the decade’s end. But, making more grandiose promises doesn’t always translate into actions. In February, in a historic ruling, the French state was found guilty of failing to meet its more ambitious energy commitments and given a €40 million slap on the wrist. Pilides also doesn’t have much patience with the argument that EU politicians have unrealistic expectations. “We have to set and work towards much more ambitious goals. It’s pointless to think,” she says, “‘Oh, the targets are too high, so we are never going to reach them.’ We need to do the best we can and I really think that if we insist on it, and if parliament helps, we can really change the face of Cyprus.”

We are in continuous communication with the EAC to ensure that 400.000 smart meters are installed the soonest