RENEWABLE SOURCES OF ENERGY IN CYPRUS: A SECTOR WITH GREAT

UNCLAS NICOSIA 000718 SIPDIS SIPDIS E.O. 12958: N/A TAGS: EPET ETRD PREL EINV ECON CY SUBJECT: RENEWABLE SOURCES OF ENERGY IN CYPRUS: A SECTOR WITH GREAT POTENTIAL FOR U.S. COMPANIES ¶1. Summary: By 2010 the Government of Cyprus (GOC) must fulfill its European Union (EU) obligation and produce six (6) percent of total power consumption from Renewable Sources of Energy (RSE). Currently, power generation from RSE is effectively non-existent, although there is widespread use of solar hot-water heaters. The GOC will be offering incentives for domestic and industrial use of RSE, especially for photovoltaics. All guidance and licenses for RSE development comes from the Cyprus Energy Regulatory Authority (CERA),which has already issued licenses for the construction of wind energy parks for a total of 450 MW. Given the imperative for Cyprus to bring production of RSE on-line quickly, the RSE sector has considerable potential for U.S. companies. End Summary. ¶2. According to information received from senior officials of the CERA, increasing electricity consumption and commitments to the EU to increased use of RSE, is compelling the GOC to urgently give a boost to the use of photovoltaics for generating electricity. Part of the GOC's incentive package will encourage electricity from RSE by providing RSE producers with priority access to the grid - all RSE energy produced will go directly to the operators of the grid and will be paid a premium of CYP 0.26 cents/kwh over the price of CYP 0.04 cents paid for carbon-based generation. The difference will be paid by the GOC from a special subsidy fund. The Electricity Authority of Cyprus (EAC) owns the transmission grid (which is not interconnected with any other grid) but the operation of the grid was recently transferred to a newly created organization called the Transmission System Operator. This is to prevent the EAC from giving dispatch preference to its own generating sources. ¶3. In addition to industrial level RSE generation, CERA is planning to encourage homeowners to install photovoltaic systems on their rooftops. Costs of installing a household photovoltaic unit are considered high (approximately USD 2,000 per KW). However, CERA intends to require all excess power produced to be taken by the grid with credits to the homeowner/generator paid at the above-mentioned subsidized rate. CERA estimates payback for system installation in 7 - 10 years and a 20-year home system life-span. ¶4. In addition, commercial banks have reportedly agreed to make loans for home solar installation to be repaid from the borrower's sale of power into the grid. Once the loan is repaid, all generation rights are transferred to the system homeowner. The GOC is hopeful that 50,000 houses will use photovoltaics for energy generation by ¶2020. ¶5. The Church of Cyprus (through the Archbishop) has told CERA (and the press) it intends to invest CYP 100 million (USD 235 million) in photovoltaic installations. The Church has already identified land it owns that could be used for this purpose. CERA has advised the Church to appoint consultants to carry out a feasibility study before proceeding with any installations. Moreover, the Church will likely issue a tender for the purchase of the photovoltaics. ¶6. Comment. The GOC is caught between rapidly increasing energy consumption and commitments it has as an EU member to utilize renewable energy sources. It is willing to think creatively about ways to accomplish these objectives. Post will work with the U.S. DOC to publicize this opportunity to U.S. firms that can provide solutions to Cyprus' RSE needs. SCHLICHER