02 – BACKGROUND

1. As set out in the European Green Deal and the Sustainable Europe Investment Plan, a JTM should complement the other actions under the next multiannual financial framework for the period from 2021 to 2027. The JTF is one of the pillars of the JTM implemented under cohesion policy. The aim of the JTF is to mitigate the adverse effects of the climate transition by supporting the most affected territories and workers concerned and to promote a balanced socio-economic transition. It is one of the EU financing programmes contributing to the clean energy transition and the European Green Deal objectives, including the goals and objectives of the Paris Agreement, 2030 climate and energy targets, and long-term decarbonisation objectives.
2. As a key country-specific recommendation of the European Semester, it is highly advised that investments from the JTF be directed towards bolstering the energy transmission and distribution system in Cyprus, with a special focus on the implementation of storage technologies. This strategic approach aims to facilitate the further penetration of RES without encountering significant issues of energy curtailment. To support this initiative, MECI, as the beneficiary of the JTF, has committed EUR 40 million of EU funds for the installation, operation, and maintenance of hybrid energy storage systems. The Scheme is dedicated to energy storage projects directly connected to RES facilities, with financing coming from both EU funds and national resources.
3. The Scheme consists of 2 calls and 5 categories for proposals, organised as a technology-neutral grant award procedure. The initial two calls (Part A) will allocate grant funds to both existing and new renewable energy projects in the form of investment aid for the storage component offered by the JTF, in accordance with Regulation 2021/1056 and Commission Regulation (EU) 2023/1315. The subsequent calls (Part B) will focus on supporting new hybrid energy system projects through operating aid funded from national funds, in accordance with Art. 43 of Regulation (EU) 2023/1315^[1] and national legislation.
4. Grants will be awarded through a competitive selection process, using competitive bidding to ensure the most economical allocation of renewable energy and storage solutions. In the case of Part A1 (existing projects) of the Scheme (Investment aid), the successful applicants will receive a grant to cover their bid costs per kW proposed power storage capacity. The grant amount is contingent upon the JTF co-financing rates[2] and is capped at 125 EUR per kW of power storage capacity. The price of the competitive selection process will be used to establish, and possibly adjust, the maximum cap limit for new hybrid RES projects (Part A2).
5. It will be possible for Existing RES projects to repower storage capacities, where repowering involves partial replacement/upgrade of installations and equipment to enhance the efficiency or capacity of the installation. Repowering is restricted to an additional 20% of installed capacity to compensate for energy losses from one daily battery storage cycle, without enhancing peak output and without additional support for the additional capacity. Systems that surpass the anticipated annual production, based on the previous year’s output (maximum output of previous years will be used as a cap), will not qualify for aid, or any compensation on the extra kWh supplied to the grid. This provision is subject to the approval of TSOCy/DSO, considering the network conditions at the point of connection.
6. New projects not covered by feed-in-tariff (FiT) schemes will adopt a one-way CfD approach based on bidding price to define the CfD price per project. Existing facilities receiving a fixed tariff under the FiT scheme may continue to do so unless they choose to transition to the one-way CfD of the new Scheme category. Should they opt for this change, they must adhere to the new regulations and transmission and distribution rules. Additionally, the new schemes allow them to extend their contract period up to 10 years at the new CfD price. Applicants under the one-way CfD will submit half-hour bids based on the annual reference value for the electricity they generate, store, and deliver to the energy system. It should be noted that compensation will be based on a flat monthly price per kWh, derived from the average price of the half-hour bids, till the Electricity Market becomes operational. The shift from monthly tariff payments to half-hourly bids will be announced by the Minister following consultations with CERA one year before the expiry of the 10-year contracts.
7. In the case of Part B of the Scheme (Operating aid), the applicants will submit half-hour bids on the annual reference value for electricity generated, stored and fed into the energy system. Support for beneficiaries will be granted using a two-way CfD model. The two-way CfD compensates RES generators when prices are low while avoiding excessive revenues and providing governments with additional revenues when market prices are high. In the case of EAC supply and in the absence of real (half-hour) market prices, and for the purpose of this scheme, the market price for all RES technologies is defined as per regulatory decision 112/2023 on a fixed price.
8. Without an established market price in Cyprus, the Greek spot market price for electricity should be adopted as the next best alternative once the interconnector becomes operational. However, until the electricity interconnector is completed (or by latest 1.1.2030), regulated prices as determined by the CERA as the primary coordination signal will be used. This method will help market participants prepare to shift to actual market pricing. After the above-mentioned date and in case the electricity market in not fully functioning in Cyprus, the Greek spot market price for electricity will be used[3] as a reference price if it is lower that the Regulated price.
9. It is important to note that the practice of suppliers managing surplus collections is problematic, as it may unduly benefit the suppliers who have control over the disposition of these excess revenues. Consequently, individual suppliers will be excluded from Phase A of the scheme to prevent potential conflicts of interest or unfair advantages. Individual suppliers will be eligible to participate in Part B of the scheme if they meet competitive market conditions and a clearance from DG Competition is obtained.

The selection procedures, the objectives and expected results, and the technical and legal details of the Scheme are explained in Paragraph 15.

[1] Please note that Art. 43 refers only to small scale projects

[2] In accordance with Article 112 of Regulation (EU) 2021/1060, the co-financing rate, applicable to the region where the territory or territories identified in the territorial just transition plans in accordance with Article 11 of this Regulation are located, for the JTF priority or priorities shall not be higher than: (a) 85 % for less developed regions; (b) 70 % for transition regions; (c) 50 % for more developed regions.

[3] Average of half hours market price will be used from Greek spot market if those are lower than the Regulated price in Cyprus.

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