Cyprus electricity prices have yet to fall significantly despite the launch of the competitive electricity market, with Energy Minister Michael Damianos saying the system needs more time to develop and that a substantial reduction will depend largely on the arrival of natural gas.
Speaking to Chrysanthos Tsouroullis on Uncensored, Damianos addressed one of the main questions facing consumers since the competitive electricity market began operating on 1 October 2025: when will competition translate into cheaper electricity bills?The minister said the competitive market needs at least 18 months to develop fully. Eleven months into the process, he argued that the continued reliance on expensive heavy fuel oil remains one of the main factors keeping electricity costs high.
Heavy fuel oil keeps costs high
Cyprus operates under the European target model used by other EU member states for competitive electricity markets.Damianos explained that the system effectively uses the most expensive fuel as a reference point, while other producers compete by selling electricity at lower prices.At present, that expensive fuel in Cyprus is heavy fuel oil.”This is currently heavy fuel oil. When natural gas arrives and the price of natural gas is lower, the price will therefore also be lower than heavy fuel oil, and the others will inevitably have to sell at a lower price,” he said.”For this competitive market to develop, it needs at least 18 months. We are currently at 11 months.”The introduction of natural gas would therefore change one of the fundamental factors determining Cyprus electricity prices, rather than relying solely on competition between producers using the existing energy mix.
Storage could bring some relief sooner
Consumers could see some reduction before natural gas arrives, according to Damianos, as energy storage allows more renewable electricity to enter the energy mix.Battery storage would allow renewable energy producers to store electricity when production is high and sell it at other times, reducing the amount of heavy fuel oil that needs to be burned.”Renewable energy producers will be able to put more energy into the mix, so we will burn less heavy fuel oil because we will be selling renewable energy through the battery, and normally we should see some reduction there as well,” he said.However, the minister cautioned that storage alone would not produce a dramatic fall in prices because the underlying structure of electricity generation would remain largely unchanged.”The reduction cannot be enormous because not all the circumstances will change,” he said.Natural gas, by contrast, would replace the main fuel used for conventional electricity generation, which Damianos said should gradually translate into lower costs for consumers.
Natural gas expected to have greater impact
Damianos said the eventual switch to natural gas should have a more noticeable effect because it would change the principal fuel underpinning electricity generation.Once cheaper natural gas replaces heavy fuel oil, the minister expects competitive pressure on other producers to increase as well.Under that scenario, Cyprus electricity prices should gradually begin reflecting the lower cost of the main conventional fuel alongside a larger contribution from renewable energy.The minister did not suggest that prices would fall immediately upon the arrival of natural gas, instead describing a gradual process through which consumers should begin to see reductions.
Damianos questions earlier energy decisions
The Energy Minister also addressed decisions taken around a decade ago, particularly during the 2014-2016 period, and questioned aspects of the planning that led to the current market structure.Asked by Tsouroullis whether decisions made during that period resulted from a lack of knowledge or foresight, Damianos replied: “It could be any of those, it could be all of them together.”However, he stressed that changing direction now would not be straightforward.A specific market structure has already been selected and established, meaning Cyprus would face another lengthy process if it attempted to replace it with a different model.In Damianos’s assessment, changing the existing system could take more years than addressing its current shortcomings and allowing the competitive market already in place to develop.For consumers waiting for cheaper electricity, the government’s expectation is therefore that storage can provide some relief in the shorter term, while the larger change to Cyprus electricity prices is expected to come with natural gas and the resulting shift away from heavy fuel oil.
Also read: Wizz Air launches Cyprus–Madrid flight: Andras Szabo on tourism, expansion and future plans
For more videos and updates, check out our YouTube channel
