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Expert Urges Structural Reform In Cyprus’ Electricity Pricing Model

by THEFUTURE.TEAM

June 30, 2025

Urgency For A Pricing Overhaul

Energy systems expert and former Cyprus Energy Regulatory Authority chairman, Andreas Poullikkas, has underscored the imperative need to decouple renewable energy prices from the volatile fossil fuel market. As Cyprus positions itself to implement the European Target Model, this transformative step is poised to harmonize the nation’s energy policies with broader EU directives.

Unique Market Challenges

Cyprus faces distinct hurdles given its small market size, energy isolation, limited interconnection with the European grid, and heavy dependence on imported fossil fuels. Poullikkas emphasizes that these structural peculiarities can facilitate market power abuse and artificially drive up electricity prices, thereby undermining the stability and fairness of the market.

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Decoupling Prices: A Strategic Imperative

Highlighting vulnerabilities exposed during the dry-run phase of recent market reforms, Poullikkas advocates for segregating renewable pricing from conventional unit fluctuations. This adjustment is essential to foster transparency, mitigate systemic risks, and ultimately stabilize the electricity market.

Proven Mechanisms To Mitigate Volatility

Poullikkas proposes the introduction of two well-established mechanisms: the ex-ante market power mitigation and the price shock absorber. The ex-ante measure, widely applied in US markets such as PJM, NYISO, CAISO, and ERCOT, leverages default energy bids based on short-run marginal cost. Any deviation beyond set thresholds automatically triggers corrective actions.

Conversely, the price shock absorber mechanism, a response to the 2022 energy crisis, continuously monitors renewable energy sources. When the accumulated inframarginal rent exceeds predefined multiples of the levelised fixed cost, the system imposes a temporary cap on conventional generation pricing, thereby decoupling the impact of soaring fossil fuel prices while allowing for adequate cost recovery.

Safeguarding Long-Term Investments

These corrective mechanisms are strictly confined to the day-ahead market, preserving the integrity of long-term contracts and forward market operations. This selective intervention ensures that renewable energy producers continue to secure stable revenues through forward contracts while benefiting from improved spot market pricing.

Implementation And Regulatory Adaptations

Transitioning to these new pricing strategies in Cyprus will involve technical adaptations, including software modifications and the development of algorithms for automatic bid monitoring. Moreover, the overhaul requires regulatory amendments, aligning the national framework with Directive 2019/944 and ensuring transparent, market-driven price controls.

Economic Impact And Future Outlook

The anticipated benefits of this reform are substantial. Lower electricity costs are expected to boost business competitiveness and alleviate household expenses, a critical advancement for an energy-isolated economy reliant on imported fuels. A phased pilot approach will allow stakeholders to address potential challenges, ensuring that these mechanisms remain adaptable to evolving market conditions.

In essence, Poullikkas’ strategic recommendations aim to craft a more predictable and robust electricity market in Cyprus, setting a benchmark for effective regulatory practices and long-term economic stability.

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Cyprus Emerges As A Leading Household Consumer In The European Union

by THEFUTURE.TEAM

June 30, 2025

Overview Of Eurostat Findings

A recent Eurostat survey, which adjusts real consumption per capita using purchasing power standards (PPS), has positioned Cyprus among the highest household consumers in the European Union. In 2024, Cyprus recorded a per capita expenditure of 21,879 PPS, a figure that underscores the country’s robust material well-being relative to other member states.

Comparative Consumption Analysis

Luxembourg claimed the top spot with an impressive 28,731 PPS per inhabitant. Trailing closely were Ireland (23,534 PPS), Belgium (23,437 PPS), Germany (23,333 PPS), Austria (23,094 PPS), the Netherlands (22,805 PPS), Denmark (22,078 PPS), and Italy (21,986 PPS), with Cyprus rounding out this elite group at 21,879 PPS. These figures not only highlight the high expenditure across these nations but also reflect differences in purchasing power and living standards across the region.

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Contrasting Trends In Household Spending

The survey also shed light on countries with lower household spending levels. Hungary and Bulgaria reported the smallest average expenditures, at 14,621 PPS and 15,025 PPS respectively. Meanwhile, Greece and Portugal recorded 18,752 PPS and 19,328 PPS, respectively. Noteworthy figures from France (20,462 PPS), Finland (20,158 PPS), Lithuania (19,261 PPS), Malta (19,622 PPS), Slovenia (18,269 PPS), Slovakia (17,233 PPS), Latvia (16,461 PPS), Estonia (16,209 PPS), and the Czech Republic (16,757 PPS) further illustrate the disparate economic landscapes within the EU. Spain’s figure, however, was an outlier at 10,899 PPS, suggesting the need for further data clarification.

Growth Trends And Economic Implications

Eurostat’s longitudinal analysis from 2019 to 2024 revealed that Croatia, Bulgaria, and Romania experienced the fastest annual increases in real consumer spending, each growing by at least 3.8%. In contrast, five member states, with the Czech Republic experiencing the largest drop at an average annual decline of 1.3%, indicate a varied economic recovery narrative across the continent.

This comprehensive survey not only provides valuable insights into current household consumption patterns but also offers a robust framework for policymakers and business leaders to understand economic shifts across the EU. Such data is integral for strategic decision-making in markets that are increasingly defined by evolving consumer behavior and regional economic resilience.