MEP Fidias Panayiotou’s initiative to reduce electricity prices by 20 per cent has sparked intense public debate. The government, professional bodies, and market stakeholders quickly disputed his calculations, particularly regarding the prices received by photovoltaic (solar) parks. 

The initial proposal does contain points that require correction and more thorough documentation. However, the discussion risks getting lost in a dispute over numbers and overlooking the most important issue. 

Fidias’ initiative creates an opportunity to pose a much broader question: why does Cyprus—with abundant solar energy and growing renewable energy (RES) generation—continue to have some of the highest electricity prices in Europe? Instead of narrowing the debate to who is right about photovoltaics, it is time to open the entire electricity bill: “show us where the money goes.” We do not need to decide in advance who is right. We need the data out in the open. 

Follow the Money 

What is needed is a genuinely independent regulatory and financial audit of the entire electricity value chain in Cyprus. 

The core principle should be simple: follow the money. 

For every €100 paid by a household or business, we must know exactly where each euro ends up: in generation, fuel, CO₂ emission allowances, renewables, networks, balancing, suppliers, regulated charges, taxes, and investor returns. 

And for each category, three fundamental questions must be answered: What is the real and unavoidable cost? What is a reasonable commercial return? How much of what we pay is due to distortions, inefficiencies, or excessive returns? Only then can we know how much the price of electricity can genuinely be reduced. 

Examine Conventional Generation First 

The largest source of electricity in Cyprus remains conventional, oil-fired generation. Therefore, the examination must start there. Fuel costs, the actual efficiency of each unit, CO₂ costs, operation and maintenance, outages, availability, and the cost of keeping conventional units running continuously for system security reasons must all be analysed. 

Data presented in the public debate indicates that must-run units account for approximately 34 per cent of traded energy and cost around €264 million during the period under review. This does not mean the total cost is high. These units are currently essential for system stability. 

The question is different: how much of this cost could have been avoided with timely energy storage, more flexible generation, natural gas, demand-side management, and a modern electrical grid? 

This may be where the greatest room for cost reduction lies. 

Examine Renewables Too — But Properly 

Renewables must certainly be included in the audit, but not as a single, uniform category. 

Older projects with feed-in tariffs, projects integrated into different support schemes, commercial photovoltaics participating in the market, and residential net-metering and net-billing systems all exist. 

For each category, the initial capital expenditure, subsidies, actual cost of financing, operating expenses, actual revenues, curtailments, and the real return on invested capital must be examined. 

If an investment category enjoys a reasonable return, this must be acknowledged. If another has enjoyed returns for years that were far higher than necessary to attract investment, this must also be made known—along with identifying where any windfall profits exist. 

How Much Are Curtailments Costing Us? 

Massive renewable energy curtailments are the clearest indicator that something is not functioning properly. When Cyprus rejects large volumes of near-zero marginal cost solar energy while continuing to burn expensive fuel oil, it generates an economic cost. 

Ultimately, consumers pay for this. We need to calculate, in euros and not merely in percentages, how much renewable curtailments cost the Cypriot economy annually. 

More importantly, we must determine how much of this cost could be avoided through storage, grid modernisation, flexible generation, and better demand management. 

What Is Happening in Electricity Supply? 

Equally important is examining the electricity supply sector. For every supplier, including EAC Supply, the actual weighted average wholesale purchase price, balancing costs, remaining operating expenses, and the actual average retail price charged to customers must be determined. 

This will reveal the true supply margin. The new electricity market must also be evaluated on whether it creates genuine competition. It is not enough to label it “competitive.” It must be proven that competition is actively driving prices down. 

This requires examining market concentration, the real choices available to consumers, supplier margins, and the ability of specific participants to influence prices. 

Open Up Regulated Charges as Well 

The same scrutiny must extend to the transmission and distribution networks and to all regulated charges. How much do the transmission and distribution of each kWh actually cost? What returns on capital are permitted? How do these compare to other small European systems? Are there costs of inefficiency being passed on to the consumer? 

There should be no protected domains. 

The reactions to Fidias’ initiative strengthen, rather than weaken, the case for an independent review. Renewable producers and business stakeholders involved in the debate reject claims of super-profits and demand that public discourse be grounded in factual, documented evidence. Quite rightly so. 

Yet the same principle must apply across the entire market: not just to Fidias’ claims, but also to conventional and renewable generation, returns from legacy support schemes, curtailments, the cost of must-run units, supplier margins, and regulated charges. When all sides cite numbers, the best answer is not another war of figures—it is an independent audit of everyone’s numbers. 

A Truly Independent Audit 

Precisely for this reason, the audit must not be assigned to any market participant. 

CERA, the DSO/TSO, the EAC, RES producers, conventional generators, and suppliers must be obligated to provide all necessary data. However, neither they nor their consultants should evaluate the outcome. 

What is required is an independent international firm with proven expertise in electricity markets and regulation, full access to data, and a mandate to publish its findings. 

Its mission can be summarised in a single sentence: Show us where every €100 paid by the Cypriot consumer goes, and how much of it can realistically and sustainably be reduced, and how. 

The result must be a roadmap outlining how today’s price can be lowered through natural gas, storage, curtailment reduction, lower must-run requirements, more effective competition, and addressing any excessive returns. 

Fidias’ initiative, despite the weaknesses in the initial calculations, provides an opportunity to do something far more important than arguing over a percentage. 

It allows us to finally open up the entire electricity bill and see where the money goes. Only then will we know how much cheaper electricity in Cyprus can genuinely become—and what needs to change to achieve it. 

Charles Ellinas is an Advisory Board Member at the Atlantic Council. The article is reposted from the Blog of the Cyprus Economic Society https://cypruseconomicsociety.org/blog/blog-posts/