Growing concern over Cyprus’s electricity adequacy shortfall, particularly after 2030 should efforts to import natural gas fail, which currently appears the most likely scenario, has prompted a response from the Cyprus Energy Regulatory Authority (CERA) and the Ministry of Energy.
According to information obtained by Phileleftheros, CERA sounded the alarm in a letter to Energy Minister Michalis Damianos, and the Ministry of Energy responded through a letter from Director-General Kyriakos Iordanou to CERA and the Transmission System Operator (TSOC) Cyprus.
CERA warned in its letter that, without natural gas by 2030 at the earliest, Cyprus would face a serious electricity adequacy problem, and that it was urgent to activate the emergency procedure for securing additional conventional generation capacity, meaning oil-fired generators, under Article 34 of the main electricity law, known as the “capacity mechanism.”
The ministry, through its director-general, responded broadly by asking CERA to provide data and enter consultation, so the capacity mechanism process, meaning the tendering of offers for additional capacity from conventional fuels, could move forward as quickly as possible.
Article 34 of the law and the capacity mechanism serve as a safety valve for EU member states, for use when the competent authority, CERA in Cyprus’s case, determines that the country faces a risk of electricity inadequacy based on existing generation units and expected demand.
Under Article 34, CERA must inform the minister in detail of the risk involved, and the minister, following consultation and detailed briefing, presumably in coordination with the EU’s Directorate-General for Energy and the Directorate-General for Competition, issues a decree so that new conventional generation units can be installed and brought online as quickly as possible.
Sounds simple, but it isn’t
Who will install the new units? Whoever wins the tender, whether the EAC, if interested, or a private operator, from Cyprus or abroad. Where will these units be installed is a key parameter, to be determined by CERA and the Ministry of Energy.
Installation in the Vasilikos area is not currently considered by the responsible services and authorities, including the ministry, CERA, the Transmission System Operator and the EAC, to be the most suitable location, due to the risk of short-circuit currents, which threatens the electricity system’s stable operation when generation from the Vasilikos area exceeds 850 megawatts.
Under current conditions and based on all available information, should the Article 34 process proceed, the new generators would likely be required to be installed in the eastern part of the system, broadly the Larnaca area or the free area of Famagusta.
However, CERA’s letter and the Ministry’s response mark only the first steps of a process expected to be long and difficult. The practical activation of Article 34, the tender for new oil-fired generators, whether heavy fuel oil or diesel, since the core problem is the inability to import natural gas before 2030 and renewables cannot close the gap even if storage capacity expands rapidly in the near term, the decision on the process and level of compensation for capital expenditure and for the energy produced, and the direct impact on the competitive electricity market and its private participants, are all issues considered certain to cause delay and pushback.
This is compounded by the fact that the process under the law requires the consent of Brussels, which is itself partly part of the adequacy problem, having committed Cyprus to withdrawing generators from Dhekelia and Vasilikos by the end of 2029, due to serious pollution affecting people in neighbouring communities and the environment in the wider area.
The problem does not lie in the EU’s requirement, which is considered valid and perhaps overdue, but in the state’s delay in ensuring timely compliance among the parties involved in regulation, generation, transmission and distribution.
Phileleftheros has learned that CERA’s letter to the Energy Minister, sent in May 2026, stressed, beyond flagging the seriousness and risk of the situation, the need to speed up decisions, since the process is expected to be very lengthy.
“Tell us, so we can move forward”
The Ministry of Energy responded to CERA that, given the urgency of completing the process on time, it asked CERA to submit the following information as soon as possible:
- The additional generation capacity required under the “No Natural Gas Arrival” scenario, so that the LOLE and EENS reliability indicators return within acceptable limits, 15 hours and 0.010% respectively.
- The start date of the additional generation capacity, and the duration of the measure.
- The type of capacity mechanism CERA considers appropriate, together with the justification for that choice, including the assessment required under paragraph 3 of Article 21 of Regulation (EU) 2019/943.
- The estimated cost of the measure, meaning the funding gap, along with the types of expenditure that would be eligible for subsidy.
- A proposal for how the resulting cost would be recovered.
- Any other requirements relating to the terms and conditions for the supply of this capacity, including, indicatively, network requirements.
The ministry noted that these proposals must comply with the provisions of Regulation (EU) 2019/943 on the internal electricity market, including its Articles 21 and 22, as well as with current European and national competition and electricity market law.
It’s a lot of money
If the capacity mechanism process under Article 34 proceeds and reaches a result, Cyprus may manage to close its electricity adequacy gap after 2029 or 2030, though shortfalls could also emerge earlier.
However, this would come at significant financial cost, which, like the cost of the LNG terminal delays, the Crete interconnector, expensive renewable energy and the competitive market, would ultimately be passed on to household consumers and businesses.
It is impossible to reliably predict the cost of the new units or the resulting cost per kilowatt-hour, but it is considered certain to run into tens or hundreds of millions of euros, over an as yet undetermined operating period.
The Cyfield group and its subsidiary PEC, which argues it can help address the adequacy shortfall through the accelerated operation of the power plant it is building in Vasilikos, with a total capacity of 260 megawatts, or 200 megawatts if diesel is used, are certain to become involved in this debate soon, including through public interventions and not only sponsored media placements.
Due to the state’s inability to import natural gas on time, the operation of PEC’s plant has been delayed, though the company has made arrangements with Siemens to use diesel instead, a move that may put it at a competitive disadvantage against the EAC, which also uses cheaper heavy fuel oil.
PEC’s delay is also attributed, according to Phileleftheros’ information, to problems securing timely legal licensing for parts of its overall infrastructure, particularly its pumping station used to cool its machinery. The pumping station was installed on land that has been leased to the EAC for years, and will remain so for another two to three years, and it appears PEC coordinated the pumping station’s construction with the Ministry of Defence, in exchange for €2 million in compensation according to the private company, rather than with the EAC, the land’s legal leaseholder.
PEC, as Phileleftheros reported previously, sent a new letter to the EAC seeking its consent to use the pumping station, even though it sits on state and Turkish Cypriot-owned land leased to the EAC, in order to help address the adequacy shortfall.
Phileleftheros has learned that on Tuesday, July 7, the EAC’s board of directors decided to reject PEC’s request, citing legality concerns as well as technical issues relating to the pumping station’s operation, which it said could compromise the optimal functioning of the EAC’s own infrastructure in the same maritime area.