Cyprus’s decision to potentially acquire a stake in the Great Sea Interconnector project using a €100 million European Recovery Fund loan has ignited funding concerns for the Greece-Cyprus electricity grid link.
Initially planned as a direct grant for construction, the €100 million could now give Cyprus a say in project management and future revenue streams. This shift raises potential issues.
Firstly, a €100 million funding gap emerges as the EU maintains its initial grant contribution. Secondly, Cyprus may shoulder cost overruns exceeding the €2 billion estimate, a risk acknowledged by the Finance Ministry.
Bridging the gap might necessitate revising the cost-benefit allocation agreement with Greece. Currently, the agreement allocates €750 million in grants, with consumers in both countries covering the remainder.
Cyprus’s energy regulator, the Cyprus Energy Regulatory Authority (CERA), emphasises the need for a comprehensive project data evaluation before consumer-impacting decisions, including an independent assessment of the cost-benefit analysis by the project’s current promoter, the Independent Power Transmission Operator (IPTO).
IPTO is lobbying CERA for consumer cost recovery starting from January 2024, aligning with the European Commission’s stance. However, CERA prioritises a thorough project data review before approving measures impacting consumers.
Cyprus’s final decision hinges on IPTO’s cost-benefit analysis.
If it proceeds with the equity stake, pressure may be exerted on CERA and its Greek counterpart to amend the cost-benefit allocations agreement, effectively reducing the grant portion to €657 million. This would shift the €100 million gap and remaining project costs onto electricity consumers.
