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