04 – OBJECTIVES AND EXPECTED RESULTS

4.1    Objectives

1. contributing to the achievement of the national targets for RES by promoting hybrid storage systems to further enhance the penetration of renewables in the energy mix and achieving the overall targets indicated in the NECP of Cyprus;
2. reducing the electricity prices;
3. reducing renewable electricity curtailment by time shifting of energy discharge to the grid; and
4. providing ancillary services to the TSOCy/DSO

4.2    Expected Results

1. Energy storage systems can enhance the electricity grid’s stability, facilitate the integration of RES, and reduce energy curtailments associated with RES. Concurrently, RES and energy storage systems will be able to provide balancing services and contribute to flexibility services as required by the grid operator. Despite the expected full market liberalization before 1st January 2030, which coincides with the operational start of the Cyprus-Crete electricity interconnector, the Scheme continues to uphold a policy of not providing additional compensation for services rendered by RES producers and energy storage systems over a period of 10 years. This steadfast approach is designed to maintain consistency and stability for both existing and new projects.
2. The pricing mechanism, utilizing a one-way CfD, effectively caps selling prices to prevent market distortion. This approach is maintained in recognition that, until Cyprus is interconnected with Greece in 2030, conventional power units will remain essential for meeting demand, resulting in higher electricity supply costs in Cyprus. Operating as a single bidding zone and considering existing congestion at certain nodes (substations), substantial re-dispatching costs are anticipated in the coming years, likely extending beyond 2030. This is due to persistent congestion, which the 10-year development plan of the TSO is unable to fully resolve until the complete rollout of smart meters and smart grids in Cyprus.
3. Based on the previously mentioned assumptions and as detailed in the NECP^[1], RES penetration in Cyprus could increase by up to 66% more once full interconnection is achieved. It is important to note that reaching an equilibrium state, where Cyprus’s energy prices align with those of the EU (such as mainland Greece’s clearing prices), could require an additional 4-5 years. This timeframe is needed to expand RES capacity and to develop the internal grid according to the 10-year development plan of the TSOCy, due to the lengthy process involved in developing RES projects and transmission substations infrastructure.
4. To enhance the planning of RES licensing, MECI and the TSO collaborated with IRENA, JRC and RSE, with additional support from academic institutions such as KTH, CyI, and UCY, to assess the technical feasibility of integrating RES capacity into Cyprus’s grid. These studies, which are included in the appendix of the NECP, suggest that following the completion of the interconnector, Cyprus could support a minimum of 4GW of RES[2]. This capacity could potentially be increased with the addition of storage units.
5. It should also be noted that due to Cyprus’s isolation from EU electricity markets, the Commission has granted the Republic of Cyprus a derogation from various provisions. These include Articles 3, 5 and 6, Article 7(1), points (c) and (g) of Article 7(2), Articles 8 to 17, Article 18(5) and (6), Articles 19 and 20, Article 21(1), (2) and (4) to (8), point (c) of Article 22(1), points (b) and (c) of Article 22(2), the last subparagraph of Article 22 (2), Articles 23 to 27, Article 34(1), (2) and (3), Articles 35 to 47, Article 48(2) and Articles 49 and 51. These provisions will not apply to Cyprus until its transmission system is interconnected with those of other Member States.
6. The Scheme’s design ensures a non-discriminatory approach to hybrid RES and storage systems of different sizes and technology options. This is achieved by implementing separate categories within the Scheme, which are determined by the system’s size and the purpose of the installations. For instance, existing RES power plants developed for self-consumption will compete for storage component investment aid with one another within a dedicated category. Similarly, for systems above 1MW, separate sub-categories (baskets) will be established to allow for competition among similar technologies (e.g., solar competing with solar, wind with wind, etc.). Further details about the subcategories for both existing and new projects can be found in Annex I.

• The expected effect is a reduction of emissions from electricity generation from RET, increase the share of electricity from RES and their integration into the grid, reduction of end-user prices, and stability of the electricity system. The investments under the procedure shall comply with the requirements of the principle of “do not cause significant harm” to the environment and will contribute for the ecological transition of the country.

[1] https://meci.gov.cy/assets/modules/wnp/articles/202101/103/docs/cynecp.pdf

[2] https://www.energy.gov.cy/assets/modules/wnp/articles/202302/33/docs/meletes_pou_sinodevoun_to_esek.zip

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