The transmission and distribution systems of Cyprus are disconnected from the rest of Europe and the country generates as much electricity as it needs for consumption. In 2015, Cyprus generated 94 per cent of its electricity from oil, all of which was imported. Renewable energy sources accounted for just over 6 per cent of total power generation, of which about 65 per cent came from wind power, 10 per cent from biomass and 25 per cent from photovoltaic systems.
In line with the EU’s 20-20-20 target, Cyprus aimed to increase the renewables share of total electricity production to 16 per cent and further diversify its energy mix, as it currently (2021) relies on oil for 90 per cent of its energy supply. Cyprus has particularly strong potential for solar power generation, with solar irradiation on the island among the highest in Europe. However, due to the severe credit constraints that followed the global financial crisis, only 6.6 MW of the 50 MW of licensed photovoltaic parks tendered to the private sector in 2012 through a lowest-tariff competitive bid secured financing and became operational.
How we work
The European Bank for Reconstruction and Development (ERBD) stepped in to support renewable energy generation capacity by engaging the private sector and local authorities in efforts to foster a legal and regulatory environment conducive to the private financing of investments in the renewables sector. Meanwhile, it also sought to provide financing for new renewable power production at a time when the local financial sector was undergoing deep restructuring.
In partnership with the European Union, European Investment Bank and Electricity Authority of Cyprus, the Bank also fostered the transition to a low-carbon, diversified energy mix by introducing natural gas to reduce the country's dependence on oil. This project is expected to lead to an overall 10 per cent reduction in Cyprus' CO2 and significantly reduce its carbon footprint.
Achievements and results
In 2016, the EBRD committed to providing financial support for the construction, development and operation of three solar plants totalling 7.4 MW around Frenaros, Nisou and Dhali, complemented by an additional 4.5 MW in the areas of Paliometocho and Malounta. The project included the single largest commercial solar power park on the island, which became operational in 2017 and increased solar power production in Cyprus by more than 10 per cent.
These transactions were also benchmarks for non-recourse financing in the Cypriot renewable energy sector, introducing new sources of finance for local private producers of power.
The projects benefited from EBRD technical assistance to co-finance due diligence. They operate based on a power purchase agreement with the Electricity Authority of Cyprus and benefit from a support scheme special fund, thanks to a competitive tendering process run by the Cyprus Energy Regulatory Authority in 2012.