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Tuesday, April 23, 2024

And yet there is a way for cheaper electricity

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Although we have written articles in Phileleuteros in relation to the Transitional Regulation in the Electricity Market and the imperative need to substantially modify it, for the benefit of the majority of Cypriot consumers, it is nevertheless deemed appropriate to develop, further, certain aspects and to give clarifying comments on matters concerning the role of Metavatiki regarding the formation of the price of electricity.

The main objective of this analysis is to specify any distortions in the operation of Metavatiki and to suggest improvement measures for the benefit of Cyprus < strong>consumer.

Transition Data and Comments

⦁ The Transitional Regulation of the Electricity Market (term market of the Target Model, which Cyprus will implement for the Competitive Electricity Market) has been operating temporarily since 2017 (for how many more years?) on the basis of bilateral contracts between private suppliers and producers (Regulatory Decision CERA 04/2017).
⦁ It is noted in this regard that the Transitional Regulation, according to CERA/DSMK, is foreseen (if no need for a new extension arises in the meantime) to continue its operation within 2025, as a result of continuous postponements and long-term delays in the start of the operation of the Competition Electricity Market.
⦁ In the context of the Transitional Regulation, suppliers have the obligation to find consumers, with the aim of disposing of the produced energy that is ensured through the bilateral contracts.
⦁ Based on CERA's decision, EAC Supply is not allowed to participate in the Transitional Regulation and therefore its operation should not affect the EAC tariff, which concerns the majority of Cypriot consumers.
⦁ The Transitional Regulation covers approximately 8% of electricity demand and concerns almost exclusively electricity produced by RES, which is offered to a number of large commercial and industrial consumers.
⦁ The failure of the inclusion of large private conventional* generation stations in Metavatiki is basically due to the inability of the competent bodies to set and implement timetables for the binding inclusion of private producers for purposes of sufficiency in the production of the electricity system, regardless of the arrival of natural gas.< br /> ⦁ In essence, the inclusion of new large conventional production units and, by extension, the adequacy of production, was left conditional on the arrival of natural gas, resulting in the need to continue the costly and polluting operation of the Power Producer's steam turbines Decelia Station.
⦁ The account of managed electricity in the context of the Transition is applied every month. The produced energy of the participating producers/suppliers in Metavatiki is offset every month with the consumed energy of the participating consumers.
⦁ In the case of excess energy, it is compensated at the cost of avoidance**, while for deficit energy the wholesale market price is paid. The connection of the compensation of the surplus RES production with the cost of conventional production (avoidance cost), is considered wrong and already causes a distortion in the price of electricity.

  • Conventional is the generation station that works with fossils fuel. ** The avoided cost refers to the calculated cost that EAC Production avoids spending, in the event that it would have produced the same amount of electricity produced by RES, but with the use of conventional production units.

Transitional Distortions

The basic distortion of Transitional Regulation, as mentioned above, concerns the compensation of excess electricity at the cost of avoidance, in combination with the offsetting of the energy produced and consumed each month. It is noted in this regard that this distortion in Metavatiki already burdens the price of electricity, with the result that its operation does not benefit the majority of Cypriot consumers.

Measures to remove the basic distortion

Measures to remove the basic distortion

To remove this basic distortion, the following arrangements could be made, which would have a significant contribution to the reduction of the price of electricity, as currently priced by the EAC for the majority of consumers:

  1. Extension of the ceiling power to the compensation of 11 €s/kWh and for the surpluses of Metavatiki's RES production, just as is the case for the compensation of the RES production contracted with EAC Supply (see CERA Decision 112/2023). It is noted in this regard that the compensation of 11 €σ/kWh, referred to in the aforementioned Regulatory Decision and linked to the contractual avoidance cost, could be set even lower, taking into account that EAC is able to offer its own generated photovoltaic RES production around 6 €p/kWh.
  2. Within the Transition, the netting of produced and consumed energy should be applied on an hourly basis.

Reduction in the price of electricity

Based on the above settings and in combination with the completely different daily variation of the power curve of the systems compared to the demand profile of Metavatiki consumers, significant hourly surpluses and deficits are expected to occur, which do not appear in the case of the monthly statement. The management of the surpluses and deficits that will arise from the implementation of these arrangements will lead to the achievement of the following:

  1. Cheaper electricity on the EAC tariff, as a result of the purchase of the hourly surpluses at the price compensation of €11 p/kWh (perhaps even lower), as well as the sale of electricity by the EAC to cover the hourly deficits of Metavatiki at the wholesale price.
  2. A significant reduction in the skyrocketing profits of RES production which participates in the Transition.

Harmonization with the Regulatory Decision

The proposed amendments for the operation of Metavatiki for the benefit of the majority of consumers become even more imperative, if the following provision of Regulatory Decision 04/2017 for Metavatiki is taken into account, which literally states “-End Consumer Cost: Benefit to the Cypriot consumer and of the national economy. Avoiding an increase in the price of electricity for consumers. Considering that this arrangement is a transitional regulation of the operation of the electricity market before the implementation of the Final Model, it should not entail additional costs to the consumer”.

General conclusion

In view of the data analyzed in this text, it is concluded that there is a feasible way for the Cypriot consumer to have cheaper electricity in the short term, by modifying the way of compensating the RES production of the Transitional Regulation. What needs to be regulated is that the account of the managed electricity is done on an hourly basis and the compensation of the excess energy is set at 11 € s/kWh (perhaps even lower).

With this in the short term, cheaper electricity will come for the majority of Cypriot consumers, accompanied by a significant reduction in the skyrocketing profits of RES production in Metavatiki.

Electrical Engineer, with many years experience in electrical system operation


Source: 24h.com.cy

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