By Dr Andreas Procopiou

In recent weeks, public discourse in Cyprus around the future of the electricity market has been flooded with voices suggesting we should “freeze” electricity prices, just like Malta. They argue that Cyprus should abandon the transition to a competitive market and revert to a system of state-controlled pricing and subsidies, claiming this would protect consumers.

But Malta’s case is not an energy market “model”. It is a temporary derogation from EU law, granted under strict conditions and with a clear end date (July 5, 2027).

This narrative is not just misleading, it’s dangerous, economically unsound, and institutionally harmful. And those advocating for it are either ignoring reality or worse, exploiting consumer hardship for political or economic gain.

Yes, Malta has kept retail electricity prices fixed below €0.12/kWh by subsidising the difference with public funds. But this policy has led to severe fiscal pressure and is being openly criticised by the very institutions overseeing the country’s public finances.

According to the IMF’s 2023 Malta Country Report (No. 24/33), the government’s energy policy distorts market signals, discourages energy savings, deters investment in green technology and hinders sustainable development. The IMF clearly calls for a phaseout of universal energy subsidies.

Even more explicitly, Malta’s Fiscal Advisory Council (MFAC) urges the government to outline an exit strategy. It warns that subsidies create major budgetary burdens, discourage efficiency and run counter to Malta’s environmental goals. With an estimated annual cost of €320 million, subsidies are unsustainable and represent a significant portion of the country’s fiscal deficit.

Malta’s own 2024 National Reform Programme confirms that the subsidies continue, without a clear phase-out plan. Rather than implement reform, the government pursues short-term affordability at the cost of long-term sustainability. And ultimately, these subsidies aren’t paid by the state, they come back to citizens through higher taxes, increased public debt, or reduced social spending. The “cheap” electricity is paid for elsewhere.

And yet some want to replicate it?

Those suggesting we implement the same in Cyprus either don’t understand the implications or are pushing simplistic populist ideas that pass today’s cost to tomorrow’s generation. The maths is straightforward:

  • Cyprus annual electricity demand: 5.2 billion kWh
  • Current average retail price: €0.30/kWh
  • Hypothetical Malta-style price: €0.12/kWh
  • Required subsidy: €0.18/kWh
  • Total annual cost: 5.2B × €0.18 = €936 million/year

With Cyprus’ 2024 GDP at €33.57 billion, this subsidy scheme would cost roughly 2.8 per cent of GDP every year, without solving structural issues or driving energy efficiency.

Citing Malta as a model is misleading and, frankly, offensive to a public that is already paying the price for the very distortions that brought us today’s electricity costs. International institutions are sounding the alarm. Pretending this is a viable “alternative” shows how superficial the reform discussion in Cyprus has become.

State paternalism in electricity pricing is not social policy, it’s a mechanism of stagnation, technological delay and environmental harm.

Cyprus cannot blindly copy “ready-made solutions” from other countries, especially when those solutions are based on temporary derogations from European law. Our energy system is fundamentally different. Cyprus has no interconnection, no access to natural gas and faces different structural challenges. Malta relies on LNG imports and grid interconnection with Italy, an entirely different setup.

The real solution

Instead of re-nationalising the market and applying blanket subsidies, Cyprus needs:

  • Transparent energy market competition under strong regulatory oversight
  • Investment in storage, flexibility and balancing technology
  • Targeted social tariffs for vulnerable households
  • A complete transition away from heavy fuel oil dependence
  • Rebuilding trust through credibility and institutional integrity

The competitive electricity market hasn’t failed, it simply hasn’t started yet. Like any new beginning, it will face challenges and imperfections. What matters is allowing it time to take shape, addressing issues constructively, and supporting it along the way. Not dismissing it before it begins or lining up excuses at the first hurdle.

Dr Andreas Procopiou is a former senior research fellow in Smart Grids at the University of Melbourne and research engineer at the Électricité de France R&D. The views expressed are personal