Electricity Market
Electricity Market
Background and Current Market Status
Until 2004, EAC was responsible for all electricity market activities, namely generation, transmission, distribution, and supply of electricity in Cyprus. The first step towards market liberalization was in May 2004, when the electricity market in Cyprus opened to competition by allowing choice of Electricity Supplier to large consumers (eligible consumers). The electricity market liberalization was subsequently gradually extended until January 2014, when all electricity customers could freely choose their Supplier.
EAC functions in both the competitive and non-competitive (monopolistic) sectors of the electricity market. In the non-competitive sector, EAC is the Transmission System Owner and the Distribution System Owner and Operator. In the competitive sector, EAC operates both the Generation and Supply functions.
With regards to Generation, EAC Generation is currently the sole conventional generator on the island. EAC Generation produces approximately 75% of the island’s electricity generation. The remaining 25% is produced by independent RES producers, small self-producers, and net metering schemes. Although CERA has issued several licenses to Independent Power Producers (IPP) for the construction and operation of conventional power stations, none have so far materialized. In terms of Supply, new suppliers have been licensed by CERA.
EAC Supply holds the dominant position (at present at 90% market share) thus the Retail Tariff Pricing is regulated. EAC Supply is not allowed to contract Power Purchase Agreements with IPPs however, the RES production under National Grant Schemes is purchased at regulated price until the expiry of the contracted period with the RES and Energy Conservation Fund of the Government.
The new Competitive Market Model
Since the harmonization of the Cyprus electricity law with the Directive 2009/72/EC, several significant changes in the electricity market have been decided by CERA and MECI. The current market status has changed, with the introduction and upcoming operation of the new wholesale Electricity Market Model and the accompanying Trading and Settlement Rules that facilitate the new Model. Specifically, with Regulating Decision 01/2015 titled ‘The new electricity market arrangements in Cyprus’, CERA has adopted the Net-Pool energy market architecture as the new Market Model for the electricity market. The new Market Design aims to promote competition in the generation and supply sectors of the market and to increase the Market-based penetration of renewables. By the same decision, CERA appointed the Cyprus Transmission System Operator (TSOC) to be the Market Operator with the responsibility to implement the new Market.
With the new Market Model, the market will now be based on a combination of three wholesale markets, namely the Forward Market {Bilateral and Over the Counter (OTC) contracts}, the Day Ahead market (DAM) and the Real-Time Balancing market (RTBM). The RTBM consists of two processes, the Integrated Scheduling Process (ISP) and the Real-Time market. At a later stage, an Intra-Day Market may be introduced depending on the needs and the evolution of the Market. In the DAM, each committed generating unit receives the System Marginal Price (SMP) of that half-hour, which is defined as the bid of the most expensive generating unit operating during that half-hour. Imbalance charges apply on a half-hourly basis for both Generators and Suppliers. This Market structure is compatible with the EU Target Model, which is the current regulatory concept for achieving wholesale market integration and harmonization in the EU through the establishment of common rules.
In the context of the new Market Model, all generators (EAC Generation, other conventional or RES IPPs), may sell their generation in the Forward Market to Suppliers at predetermined prices set in bilateral contracts. Generation not sold in the Forward Market must be offered in the DAM and in the future, in the Intra-Day Market, if this Market is introduced. The provision of Ancillary services forms a separate market to the three wholesale markets for electricity generation, and it is based on offers for capacity from eligible Generators.
Αs the dominant market participant, EAC Generation is required to sell its generation to all Suppliers and/or Generators (a) in the Forward Market at the regulated wholesale price called the T-W, and/or (b) through the DAM via a bidding process at a regulated offer price range. It is important to note that based on Regulatory Decision 02/2015 and Regulatory Decision 01/2021, concerning the regulated tariff methodology under the new Market model, T-W will be derived such that EAC Generation will recover its required income minus the estimated net revenues from the DAM, the Real-Time Balancing Market and the provision of Ancillary Services. In addition, T-W will form the base for the pricing of the various regulated products for the sale of energy in the Forward Market to be potentially offered by EAC Generation to Suppliers and other Generators. Consequently, the methodology that EAC Generation currently uses for the derivation of T-W will need to be updated to reflect the changes effected by the new Market.
The start of the new Market took place on October 1st, 2025.
