Replies to EAC, the Electricity Market Association – “Urgent Need for a Genuine Competitive Electricity Market in Cyprus”, emphasizes – SAH meeting with EAC next Monday
The Electricity Market Association (SAH) never had the intention of engaging in a public dialoguewith the trade unions or the management of the EAC, as the proposals made to the President of the Republic were purely for the benefit of the consumer and the economy to reduce the cost of electricity through operation of a genuine Competitive Electricity Market (AAH), he says in his announcement.
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“Understanding the weight of SAH's responsibility towards the state and society of Cyprus for reducing the cost of electricity, SAHarranged a meeting with EAC on Monday 26/08, for a constructive discussion of synergies for the benefit of consumers” , the announcement continues.
“Ahead of the meeting, we would like to respond to some of the issues raised by the EAC announcement and to provide some clarifications. Essentially, the AAH is the answer to all the distortions created by the continuation and extension of the Transitional Regulation of the Market, distortions that favor the EAC at the expense of private participants in the Market”.
The same announcement:
Review of the Functional and Legal Separation of EAC
Contrary to what the EAC officially mentions in its announcement, SAH insists that the conversion of the Functional Separation of the Network Division into a Legal Separation, as applied in the case of the Cyprus Transmission System Operator (TSMO), must be reconsidered. The Legal separation of the networks with the state utility company was implemented in almost all European countries with success. Only in this way will the independence and thus the impartiality of the process of making any decisions regarding the activity of the networks be ensured. The fact that the networks in the case of Cyprus remain the property of the state is not a convincing justification for keeping them within the EAC, which holds a dominant position in the competitive parts of the Electricity Market.
With the long-term actions of the EAC it has become clear that the functional separation of the EAC cannot bring about the electricity market under formation:
- the necessary transparency,
- the prevention of any manipulation by the dominant EAC,
- preventing the flow of information from EAC's monopolistic activities to EAC's competitive activities and vice versa,
- preventing the flow of all information within the EAC common guild.
It is now clear that the State needs to move towards the legal separation of the EAC in order to ensure all of the above for the benefit of consumers, who through competitive procedures in the electricity market will be able to choose their supplier.
Licensing of Energy Storage Systems
SAH also points out in its announcement, the urgent need to accelerate the installation of energy storage systems, which is now inevitable and directly linked to the sustainability of several investments. The installation of such systems can help reduce fluctuations and increase flexibility in the management of renewable energy production, while ensuring the reliability and stability of the electricity grid.
SAH clarifies that it has never supported the licensing of projects without following the legal procedures according to the Regulations and Legislation of the State. What we are asking is for the relevant agencies to cooperate immediately and establish the minimum requirements and conditions on the basis of which the required licensing for the installation of energy storage systems will be considered granted, with the aim of reducing the delay in the approval of these projects in operating licensed photovoltaic parks.
Grant Scheme for Hybrid Systems
Regarding the Grant Scheme for hybrid energy storage systems combined with RES, the position of SAH is that the condition of the Scheme for Phase A to enter into bilateral contracts with EAC Supply is discriminatory, disproportionate, unnecessary and distorts competition, offering undue advantages to EAC Supply. In view of EAC's strong monopoly position in the market, the need to create a level playing field, which will bring significant benefits to consumers, is even more urgent.
Even more paradoxical is the assignment to DSMK of the management of the central storage systems, which may create a conflict of interest, considering that based on Article 71 of Law 130(I)/2021, DSMK has been designated as the Electricity Market Operator with specific responsibilities. At the same time, the ownership of the central storage units by the EAC (Networks Business Unit) will strengthen the dominant position of the EAC, which makes it even more difficult to achieve the goal of establishing a genuinely competitive electricity market with real and meaningful competition.
The monopoly and monopoly of the EAC has led us to the current situation with one of the highest electricity prices in Europe. Given that there is interest, licensed projects and readiness from the private sector to develop energy storage projects, the request for a derogation was unnecessary while the process followed to secure the derogation remains unknown. Since the TSO is the Market Operator, the question arises as to how it is possible for the Market Operator to be a participant at the same time.
Electricity cuts
SAH points out that one of the reasons why the problem of cuts is getting worse is the wrong planning and serious delay in the development of networks and infrastructure.
The non-implementation of projects to adapt, modernize and upgrade the networks is the reason that led to the increase in cuts and by extension to the current situation where more than 28% of green energy from RES ends up in the wastebasket. The electric grid must have the required capacity and capacity, but also integrate Renewable Energy Sources (RES) into its operation, maintaining its safety and reliability.
SAH emphasizes that the delay in the installation smart meters, so that Independent Suppliers can also reach residential consumers and consumers have the option of choosing an alternative electricity supplier, is a further reason that residential consumers cannot benefit from lower electricity prices.
Decelia Power Station
SAH agrees that the power station of Dekelia is of strategic importance for the State and recognizes the need to operate as a second point of power generation for the orderly operation of the electrical system and the security of supply of the country, especially with the latest events taking place in our neighbors countries. On the other hand, this does not negate the fact that the upgrading of the power plant in Dekelia by EAC will further increase the position of power of the already dominant EAC. The upgrading of the station can be done by the EAC for geographical dispersion of the production, but at the same time the power of the EAC must not be increased, removing from its dynamics older and labor-intensive units in Vassiliko.
The Association points out that the private sector has already proceeded with investments in conventional power generation units without burdening the final consumer more. On the contrary, its goal is the stability of the electricity system and the reduction of energy costs for the benefit of all.
Finally, SAH emphasizes once again the immediate opening of the Competitive Electricity Market and the creation of a regulatory framework that will promote competition, so as to ensure a more stable, healthy and sustainable future for the energy sector in Cyprus.
It is important to point out that empirical studies lead to the conclusion that companies with a dominant position faced positively the opening of the electricity market managed to become more flexible and efficient. In this case, SAH believes that with the smooth start-up of AAH, EAC will be forced to operate more customer-centric and more rationally, in order to cope with the new competitive environment that will be created. This will be for the benefit of consumers (households and businesses) but also more broadly for the competitiveness of the economy.
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