How Cyprus’ Wholesale Electricity Market Has Performed So Far
Chatzilaou calls for a price cap and CfDs to correct the system.
A recent opinion analysis by Christakis Chatzilaou, published in Brief, argues that the first two months of Cyprus’ Competitive Electricity Market (ΑΑΗ) have not delivered the expected benefits of competition and lower prices. Instead, he claims the system creates structural distortions that increase costs for consumers.
According to the commentary, the wholesale clearing price is typically determined by the most expensive unit of the Electricity Authority of Cyprus (EAC). Since this price guides retail tariffs, consumers end up paying more than the real average cost of production.
Chatzilaou notes that the market’s small size, lack of interconnections and EAC’s dominant control of over 90% of generation mean the target model—effective in large interconnected systems—does not function properly in Cyprus.
Using figures from the “Cyprus Grid” platform, the commentary states that for 22 out of 24 hours, the wholesale price was set by EAC’s costliest unit. Renewables supplied only 3.4% of demand, too little to influence pricing meaningfully. Most RES output was also compensated at the highest marginal price.
The opinion piece concludes that the new wholesale market mechanism passes higher-than-justified costs to consumers.
1. Temporary price cap for 2026: A cap based on actual production costs, with excess amounts refunded to consumers. Similar measures were used under the “Iberian Exception” in Spain and Portugal.
2. Long-term fix through Contracts for Difference (CfDs): Widely used in Europe, CfDs provide stable prices for RES producers and return excess revenues to consumers when wholesale prices rise.
Suggested timeline:
-
2026: Pilot CfDs for 100 MW
-
2027–2028: CfDs required for all new RES, storage and hybrid projects
Chatzilaou stresses that the target model is not wrong but unsuitable in its current form for Cyprus’ market conditions. With a temporary price cap and a long-term CfD framework, he argues Cyprus can achieve lower bills, attract investment in renewables and build a fairer electricity system.
