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The Renewable Energy Sources (RES) Fund, financed by consumers through electricity bills, will post this year a deficit because of the power utility’s reduced revenues due to lower fuel prices.
The government is considering plugging the hole by spreading the cost among consumers and RES operators. One scenario mulled by the Energy Ministry, would see the special RES fee, currently EUR 0.005 per kWh, jacked up to 0.006 or 0.007. Officials estimate that for the RES fund to be solvent, the production cost – known also as the avoidance cost – must be 11 cents per kWh. The Electricity Authority of Cyprus’ production cost is currently around 8.5 cents. The fund has financing obligations for RES projects, and as the cost of production drops, the burden shifts to the RES fund.
As things stand, the difference has to be paid by consumers, because the other side of the equation – RES producers and operators – is inflexible. The government – and ultimately consumers – are stuck with the old contracts awarded to wind farms and photovoltaic parks.
George Georgiou, head of the Cyprus Renewable Energy Sources Association, warned that taxing the companies would discourage planned future investments. If any tax were introduced, he added, this should be based on the profits. For his part, energy regulator Costas Shammas noted that even if the entire RES deficit were covered by consumers, “this extra charge would not be painful.”
