Cypriot utility aims to add 400 MWh of battery storage 

Several documents published by the Electricity Authority of Cyprus (EAC) have noted that the utility firm is planning to build an 160 MWh battery storage system next to its existing diesel and gas power station in Dekeleia. 

A press release published specifically in the summer said the EAC has applied for a licence with the Cypriot energy regulator and that it also prepares the tender document concerning the engineering, procurement and construction (EPC) of the battery project.

To date, the EAC hasn’t published such a tender document, however ESS News has learned that the regulator has licensed it and that the project received a separate environmental approval recently too. The EPC is now pursuing the rest of the permits needed to build the project. 

Separately, the EAC said it had completed a preliminary study for another three battery systems totalling 240 MWh of capacity, planned to be built along existing electricity network substations. The three battery systems are expected to cost about €60 million ($62 million) for which the EAC seeks European Union funding. 

Neither on this front there has been any progress though and various electricity market stakeholders oppose the EAC’s plans fiercely. 

Perhaps the most vocal of the EAC opponents is the local Electricity Market Association (EMA). EMA has written to Cyprus’ president Nikos Christodoulides asking him to not allow the network operator to own the three battery systems aimed to be installed along the network substations.

European Union network operators cannot normally own such systems, however Cyprus’ government has been granted an exception to allow the transmission network, which is part of the vertically integrated EAC, to do so. The rationale is that Cyprus’ electricity system is not currently connected to any other country, therefore energy storage in front of the meter is needed to help the electricity network.

Regarding the battery storage in Dekeleia, the EMA hasn’t voiced opposition but it argues the energy storage market should open to private investors and competition. The EAC says that private investors can build battery systems next to other power plants but this argument is not so straightforward as it sounds. 

Cyprus’ government has published a draft plan for the support of “behind-the-meter” energy storage facilities. The draft plan calls for the remuneration of clean energy and energy storage sites – and hybrid projects, featuring both – in two main ways. Firstly, existing renewables plants will be offered a capital expenditure (capex) subsidy for the purchase and installation of energy storage units. Secondly, new hybrid plants will be able to claim both capex and contract-for-difference (CfD) support. 

The draft plan comes with a pivotal detail though. Only hybrid plants that are willing to export power to the EAC would be allowed to claim the subsidies. So, the government will offer state aid only to projects that collaborate with the EAC, sidelining the private wholesale electricity suppliers that are active in the electricity market.

The EMA, as well as other stakeholders, argue these policies will kill off competition in the Cypriot electricity market, which has only started to open up recently with the entry of independent renewable energy operators and electricity suppliers in the wholesale market. The government has listened to this critique and is preparing to launch a new draft plan. 

The future of energy storage and the energy market competition in Cyprus depends on politics. The EAC is a state institution and the government is willing to protect it. Private investors feel sidelined by the government and from the European Commission too, which appears willing to exempt the country from long-standing European regulations and sacrifice competition.