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Cyprus Electricity Crisis: An Imperative For Strategic Overhaul

Cyprus finds itself at a crucial crossroads in its electricity sector, facing significant challenges from infrastructure delays to market distortions. With major projects such as the natural gas pipeline and the Cyprus-Crete interconnector (GSI) under intense scrutiny by the European Commission, the island nation’s energy policies have come under close examination.

Absence Of Strategic Planning

The current state of the electricity market is a testament to years of uncoordinated and piecemeal policy-making. Critical failures include the delayed arrival of natural gas, prolonged implementation of the electric interconnection with Crete, insufficient capacity for secure supply, and the ineffective integration of renewable energy sources without adequate storage solutions. This disjointed approach is already impacting consumers through rising prices and even power cuts.

Management Under New Leadership

Taking center stage in this crisis is the newly appointed Minister of Energy. With a fresh mandate, he is expected to spearhead a complete strategic restructuring of the power sector—a necessity if Cyprus is to overcome its longstanding challenges.

Persistent Delays And Costly Consequences

The most glaring failure has been the multi-year delay in approving natural gas—a setback that has cost consumers hundreds of millions of euros by forcing reliance on polluting and costly fuels. Two major conventional production units (AHK with 160 MW and PEC with 260 MW) remain inoperative as they are contingent upon a steady gas supply, now postponed beyond 2030.

Great Sea Interconnector: Ambitious Yet Uncertain

The GSI project, designed to integrate Cyprus with Crete and the broader European network, is mired in challenges ranging from geopolitical risks in disputed maritime areas to technical implementation hurdles and uncertain long-term viability. Both Cypriot and Greek governments have recently agreed to revisit the project studies to reassess its feasibility.

Operational Vulnerabilities In A Concentrated System

The delay in natural gas supply, compounded by conventional power units that operate exclusively on gas, significantly heightens the risk of supply shortfalls. With the increased demand for electricity, the impact of extreme weather, and aging infrastructure strained by uncontrolled renewable energy penetration, the system’s reliability was starkly evident during the summer of 2025 when near-daily operational margins led to rolling blackouts.

Risks Of Geographic Concentration

Another critical concern is the heavy concentration of conventional generation in the Vasiliko area. This geographic bias undermines the overall security of the electricity system, rendering it vulnerable to extensive outages triggered by severe technical failures, natural disasters, or even coordinated hostile actions. The planned downgrading of the Dekeleia plant from a strategic supply pillar to a backup facility only deepens this vulnerability.

Renewable Integration Without Adequate Storage

While renewable energy sources are expanding rapidly, their unbridled growth without corresponding storage infrastructure has led to frequent and extensive production curtailments. Forecasts predict renewable output reductions of up to 22% by 2025, further destabilizing the system’s economics and operational safety.

Flaws In The Competitive Market Model

Cyprus launched its competitive electricity market approximately three months ago, with expectations of enhanced competition, more consumer choices, and reduced costs. However, market distortions have emerged, exacerbating electricity prices instead of alleviating them.

An Energy X-Ray: The Sector’s Critical Metrics

A concise review of the sector highlights the following key challenges:

  • Electricity Adequacy: Operating with an unsafe margin of 18% compared to the desired 20-40%, a weakness that contributed to summer blackouts in 2025.
  • Energy Storage: Lack of sufficient storage infrastructure has led to renewable curtailments projected at around 22%.
  • Natural Gas Supply: Continued delays, putting approximately 420 MW of generation at risk.
  • Interconnection Delays: Postponements beyond 2030 that could significantly increase system costs.
  • Electricity Pricing: Rising consumer costs due to inefficiencies and market distortions.

The Imperative For A New Strategic Direction

Cyprus cannot afford to persist with its current fragmented approach. A comprehensive, institutionally anchored, and long-term strategic plan is urgently required. Key proposals include:

  1. Establishing an independent body tasked with strategic planning to evaluate, program, and coordinate critical power generation projects over the long term.
  2. Ensuring geographic diversification of conventional generation to maintain a secure electricity supply, including the preservation of key assets like the Vasiliko and Dekeleia power stations.
  3. Guaranteeing sufficient electricity adequacy to meet both current and future demands.

Regulatory And Policy Responsibilities

At the heart of this crisis is the role of the Cyprus Energy Regulatory Authority (CERA), which is legally mandated to ensure long-term power adequacy, supply security, and affordable electricity prices. Equally, the Ministry of Energy must lead in policy formulation and infrastructure projects to secure supply and reduce costs.

The challenges facing Cyprus’s electricity sector demand decisive action, underpinned by a robust strategic vision. Only with a coordinated response can the nation transition from its current state of vulnerability to a future of reliable, efficient, and sustainable energy.

Cyprus Hits Historic Tourism Peak As Overtourism Risks Mount

Record-Breaking Performance In Tourism

Cyprus’ tourism sector achieved unprecedented success in 2025 with record-breaking arrivals and revenues. According to Eurobank analyst Konstantinos Vrachimis, the island’s performance was underpinned by solid real income growth and enhanced market diversification.

Robust Growth In Arrivals And Revenues

Total tourist arrivals reached 4.5 million in 2025, rising 12.2% from 4 million in 2024, with momentum sustained through the final quarter. Tourism receipts for the January–November period climbed to €3.6 billion, marking a 15.3% year-on-year increase that exceeded inflation. The improvement was not driven by volume alone. Average expenditure per visitor increased by 4.6%, while daily spending rose by 9.2%, indicating stronger purchasing power and higher-value tourism activity.

Economic Impact And Diversification Of Source Markets

The stronger performance translated into tangible gains for the broader services economy, lifting real tourism-related income and overall sector turnover. Demand patterns are also shifting. While the United Kingdom remains Cyprus’ largest source market, its relative share has moderated as arrivals from Israel, Germany, Italy, the Czech Republic, the Netherlands, Austria, and Poland have expanded. This gradual diversification reduces dependency on a single market and strengthens resilience against external shocks.

Enhanced Air Connectivity And Seasonal Dynamics

Air connectivity has improved markedly in 2025, with flight volumes expanding substantially compared to 2019. This expansion is driven by increased airline capacity, enhanced route coverage, and more frequent flights, supporting demand during shoulder seasons and reducing overreliance on peak-month flows. Seasonal patterns remain prominent, with arrivals building through the spring and peaking in summer, thereby bolstering employment, fiscal receipts, and corporate earnings across hospitality, transport, and retail sectors.

Structural Risks And Future Considerations

Despite strong headline figures, structural challenges remain. The European Commission’s EU Tourism Dashboard highlights tourism intensity, seasonality, and market concentration as key risk indicators. Cyprus records a high ratio of overnight stays relative to its resident population, signalling potential overtourism pressures. Continued reliance on a limited group of origin markets also exposes the sector to geopolitical uncertainty and sudden demand swings. Seasonal peaks place additional strain on infrastructure, housing availability, labour supply, and natural resources, particularly water.

Strategic Investment And Market Resilience

Vrachimis concludes that sustained growth will depend on targeted investment, product upgrading, and continued market diversification. Strengthening year-round offerings, improving infrastructure capacity, and promoting higher-value experiences can help balance demand while preserving long-term competitiveness. These measures are essential not only to manage overtourism risks but also to ensure tourism remains a stable pillar of Cyprus’ economic development.

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