Cyprus households, who already pay some of the highest electricity prices in the EU, face bills rising as much as 20% by August, as the Iran war drives up energy costs across Europe, the island’s dominant power provider has warned.
The warning comes as price data from across the continent shows a big divide emerging between countries that rely heavily on fossil fuels and those with higher renewable or nuclear output.
For Marios Georgiou, a machine operator at a printing works in Limassol, the impact is already being felt. When the Iran war erupted, his fuel costs soared as much as 20%, forcing him to quit one of his jobs and find work closer to home. His electricity bills already run to €200 a month.
“I’ve got two jobs and I can barely break even. Everything is just going up,” the father of two said.
A divided Europe
The United States and Israel attacked Iran on February 28, disrupting global flows of oil and gas and sending energy prices higher across Europe. But the impact has not fallen evenly.
Italy, which generates more than 40% of its electricity from gas, has seen its benchmark wholesale electricity contract rise more than 20% since the war began. In Germany, which is also heavily gas-dependent, the benchmark has risen over 15%.
France, which relies on nuclear energy for 70% of its electricity output, has seen its benchmark rise by less than half of Italy’s over the same period. Spain, which has rapidly increased renewable output to nearly 60% of total generation, has seen prices fall.
“The crisis is raising the regional price floor for everyone, but the countries with the least flexibility and the greatest marginal dependence on imported fuels are seeing the strongest impact in volatility and peak pricing,” said Satyam Singh, analyst at energy research firm Rystad.
Gas-dependent countries including Italy, Germany and Greece have some solar power production, but over-reliance on solar creates what analysts call the duck curve, where prices are low in the middle of the day but spike in the early morning and late afternoon. Cyprus faces a similar dynamic.
“The goal for most of these countries like Italy and Germany is to build a huge stack of renewables and long-term storage that offsets gas. It’s going to be a big challenge,” said Alessandro Armenia, a power analyst at commodities data and analytics firm Kpler.
Coal-producing countries such as Poland and Serbia have also fared relatively well, analysts said. In Greece, which has strong solar generation, the power grid operator wants a lignite-fired plant earmarked for closure to remain open for at least another year amid the conflict.
Households brace for more pain
Power price shocks for households are expected to be more muted than the jumps seen in wholesale oil and gas costs, as it can take months for increases to work through the system, analysts say. The European Commission has developed plans to cut electricity taxes to cushion the fallout, though officials warn that state costs could balloon as a result.
The strain is also being felt beyond Cyprus. In Castiglion Fiorentino, Italy, Nico Vanni, 47, runs the La Nave bakery, which uses around 2,000 litres of diesel a month on deliveries and runs its ovens on natural gas. Suppliers have already announced price increases on yeast, paper and plastic — before any electricity price rises feed through.
“We can hold out for a few months, but not for long: the real risk is that we will have to intervene on staffing,” he said.
Albania’s hydropower buffer
Not all countries are struggling. Albania, which generates more than 90% of its electricity from hydroelectric dams built during communist times, has seen average power prices fall compared to last year. The country still imports power at peak demand and shields consumers through government subsidies, but its renewable base has provided significant insulation.
“Albania’s heavy reliance on renewable energy, particularly hydropower, has played a crucial role in cushioning the country from the worst effects of the crisis,” the country’s energy ministry said, adding that pressure on public finances was nonetheless building behind the scenes.
(With information from Reuters)
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