Cyprus launched its Competitive Electricity Market on 1 October 2025 after years of delays and structural distortions. The reform promised greater competition, more supplier choice and lower electricity costs. One year later, however, rising wholesale prices and limited alternatives for households raise questions about whether the market is delivering the expected benefits.

The market’s trading mechanisms are operating, with offers submitted, generation scheduled, settlements completed and prices published. Yet these are necessary steps, not proof that the reform has achieved its main objective. For households, the key question is whether they can choose a supplier on better terms and pay less. For the wider economy, the issue is whether the overall cost of electricity is falling.

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Wholesale Electricity Prices Rise 61%

Data from the Cyprus Grid platform show that the monthly weighted average day-ahead electricity price increased from €162.7/MWh in October 2025 to €224.6/MWh in April 2026 and €262.2/MWh in September 2026.

The difference between the first and last months of the market’s first year was €99.5/MWh, representing an increase of approximately 61%. The average across all 12 monthly prices was €203.85/MWh, around 25% above the October 2025 level.

The increase indicates that wholesale price trends have not matched expectations of cheaper electricity. However, it would be inaccurate to attribute the entire rise to market liberalisation. Fuel prices, emissions allowances, demand and power plant availability also influence wholesale prices. Moreover, wholesale prices do not translate automatically or uniformly into every household’s retail bill.

These distinctions matter when assessing the reform, but they do not remove the need to address the burden on consumers. The review must separately examine generation costs, trading mechanisms and the final prices paid by households. The market’s operation cannot substitute for measurable results.

Households Still Have Few Supplier Options

One year after the market opened, private suppliers have focused largely on large consumers, reportedly offering prices around 3–4% below those of the Electricity Authority of Cyprus (EAC). Households, meanwhile, still have little meaningful choice and continue to rely almost entirely on EAC.

The Cyprus Energy Regulatory Authority (CERA) should publish a transparent assessment covering five areas: how many households have switched suppliers; which residential products are available and on what terms; what savings, if any, consumers achieve compared with the previous system; the share of household consumption supplied by private providers; and the costs of market operation, balancing and ancillary services.

The rise in wholesale prices signals an unfavourable trend, but these additional figures are necessary to establish the extent of competition and its net effect on households. Consumers should be able to see what has changed and what they are paying for it.

A Trading Platform Cannot Replace Infrastructure

A trading market does not create new generation capacity, energy storage or electricity interconnections. It organises the sale of available electricity, but the physical characteristics of the power system continue to shape prices.

When demand requires expensive conventional generators to operate, their offers can determine the marginal market price. Concentrated generation and limited alternatives can also constrain effective competition. The central challenge is ensuring that the lower cost of some forms of generation translates into lower prices for consumers.

A high market price does not, by itself, prove abuse or market manipulation. CERA should systematically examine offers, substantiated costs and participant behaviour. The Transmission System Operator of Cyprus (TSOC) should provide the operational data needed for effective oversight within its responsibilities, while the government must address delays in infrastructure development and energy planning.

Five Measures To Improve Competition And Affordability

1. Publish A Quarterly Market Scorecard

CERA should issue a public quarterly report covering wholesale prices, balancing costs, market shares, supplier switching and actual consumer savings. Comparisons should use equivalent consumption profiles and contractual terms so that households can assess the benefits of switching on a like-for-like basis.

2. Consider A Temporary Wholesale Price Cap

Given limited competition and insufficient storage, Cyprus could consider a temporary wholesale price cap based on verified variable generation costs, subject to independent oversight and a predetermined review date.

Any withdrawal of the cap should be tied to measurable conditions, including more active suppliers, additional competitive generation, adequate storage and evidence that lower renewable generation costs are being passed on to consumers. Such a measure would serve only as a temporary bridge. The lasting objective must be a market with effective competition.

3. Use Contracts For Difference To Pass On Renewable Energy Benefits

For new renewable energy projects receiving public support, Cyprus should consider competitive tenders using two-way Contracts for Difference (CfDs), where permitted and required under the applicable framework.

Under this model, the producer receives a payment when the market price falls below an agreed strike price and returns the difference when the market price rises above it. The contract design should ensure that the resulting financial benefits reach consumers rather than remaining solely with producers.

4. Develop A Separate Framework For Energy Storage

Energy storage requires a support framework designed around its specific function, rather than the automatic application of renewable energy CfD arrangements. Batteries shift electricity from one period to another; they do not create an unlimited new source of generation.

Competitive tenders should therefore link compensation to clearly defined obligations covering capacity, discharge duration, availability and the provision of services to the electricity system.

For hybrid renewable energy and storage projects, contracts should specify when and how much electricity must be delivered, the required availability guarantees and the applicable prices. The aim should not simply be to subsidise battery installations, but to secure reliable capacity when the system needs it and ensure that the resulting benefits reach consumers.

5. Address Carbon Costs And Delays In Natural Gas Infrastructure

Delays in introducing natural gas into the electricity system prolong Cyprus’s dependence on liquid fuels. The government should account for these delays and explain how it intends to reduce the resulting exposure to costs that households cannot control.

Cyprus should also seek targeted, temporary relief from carbon costs within the debate on reforming the European Union Emissions Trading System (EU ETS). Any request should reflect the particular circumstances of the island’s isolated electricity system and be accompanied by a credible emissions-reduction plan.

This would be a proposal for transitional protection, not an established exemption or an abandonment of climate policy. Any relief should have a defined duration and be passed through to consumers’ electricity bills.

In parallel, the government should ask the EU to consider whether a specific derogation allowing zero value-added tax (VAT) on the portion of electricity bills attributable to carbon costs could be introduced. The legal feasibility and implementation of such a measure would need to be assessed; it should not be presented as an existing entitlement.

Authorities should also examine how carbon costs borne by conventional generators influence the market prices received by renewable energy producers and identify measures to correct distortions where justified.

Measure Success By The Bills Consumers Pay

One year is not enough for a market to reach full maturity, but it is enough to require public accountability and corrective action. Recognising the pressure on consumers should be the starting point for a solution, not a reason to postpone it.

The government should accelerate infrastructure development and pursue evidence-based transitional protection. CERA should measure competition, scrutinise pricing mechanisms and recommend practical adjustments. Every intervention should be assessed against a clear outcome: whether it reduces electricity bills without compromising security of supply.

Cyprus needs more than competition in market rules. It needs meaningful consumer choice and electricity that households and businesses can afford.