Executive Summary
The Republic of Cyprus (ROC) seeks to expand the share of renewable energy sources (RES) in the country’s energy mix. Meeting EU mandated reductions in carbon emissions will require increased investment in RES power generation, both at the commercial scale and individual building scale, and a major transformation of road transportation. Production from RES currently stands at 157.5 MW from wind, 125 MW from solar, and 12.8 MW from biomass. The ROC anticipates a minimum additional capacity of 360 MW to be installed by 2023 to raise total RES penetration in the electricity sector to 700-750 MW, mostly through solar power. However, storage technologies will be of paramount importance to surpass that number until 2030, as the ROC anticipates that without them, it will face significant costs to the energy system.
Under EU-mandated targets, the ROC was required to increase its total energy consumption drawn from RES to 13 percent by 2020. Cyprus achieved 13.8 percent by the end of 2018. By 2030, the ROC must increase that number to 23 percent. Moreover, it will have to increase transport sector numbers to 14 percent, which will be the ROCs biggest challenge and will require considerable investments to create the necessary infrastructure for RES propelled transport. The ROC has introduced programs for electric vehicles (EV) and has 18 double charging stations throughout the island, which it plans to increase in the near future. The Department of Electromechanical Services is also planning to install 10 fast-charging stations on highways and public roads soon. A pilot scheme, with a budget of 1 million Euro, is in the works to facilitate fast chargers for home charging of EVs with the use of photovoltaics (PV). The scheme will include storage options and will mandate the use of smart meters. Moreover, the ROC is currently developing its offshore RES strategy.
ROC consumer electricity prices are at the upper end of the EU average. ROC efforts to lower energy costs to consumers include upgrading Vasilikos Power Station (VPS) to run on natural gas and the future entry of independent power producers into the market. The ROC has incentivized use of RES in the ROC’s energy mix through government supported programs such as Net Metering and Self-Consumption, initiated in 2013, and Net Billing for industry, introduced in 2018. Since January 2017, the ROC has mandated a minimum percentage of primary energy consumed in new buildings to come from RES; for single family homes it is at least 25 percent, for new multi-apartment residential buildings it is three percent, and for non-residential buildings, the minimum is seven percent. Currently, there are more than 17,000 systems installed (without storage capacity), exceeding 65MW in production (Note: the 65MW is included in the total solar production of 125MW).
In 2014, the Republic of Cyprus ended the state-owned Electricity Authority of Cyprus’s (EAC) legal monopoly on electricity generation and distribution. However, stimulating competition and developing independent commercial power generation projects has been difficult given the small size of the domestic market and challenges with the transmission system. The EuroAsia interconnector, a EU Project of Common Interest (PCI), with an estimated value of 2.5 billion Euro, and the EuroAfrica Interconnector, which is in its early stages, will help the ROC in its efforts for energy security, help interconnect the island to other grids, and offer emerging opportunities for regional energy distribution.
The Cyprus Energy Regulatory Authority (CERA), in cooperation with the Transmission System Operator (TSO) and other energy stakeholders, is working to alleviate competition constraints in the power generation sector. New Market Rules (NMR) should be fully implemented in 2022, at which time a number of key projects that are under tender or construction are expected to come on-line, allowing electricity to trade on competitive terms. The Distribution System Operator’s (DSO) rollout of Advanced Metering Infrastructure (AMI) with 400,000 smart meters will also help in the gradual removal of barriers to enter the electricity market, although the installation process will take seven years to complete. The rollout will commence within 2021.
To increase its RES production while stabilizing the grid, the ROC must acquire electricity storage technologies. The Cypriot market mostly favors solar/photovoltaic parks (PV) and general PV installations, biomass-fueled power plants, and the modernization of residential and commercial solar hot water heaters and heat pumps, while a significant amount of wind parks are already in place.
{Note: Use of the term ROC and references do not include economic activities occurring in the northern part of the Island of Cyprus. The southern part of Cyprus is under the control of the government of the Republic of Cyprus, the only internationally recognized government on the island. Since 1974 the northern part of Cyprus has been administered by Turkish Cypriots. The area proclaimed itself the “Turkish Republic of Northern Cyprus” (“TRNC”) in 1983. The United States does not recognize the “TRNC,” nor does any country other than Turkey. While the unresolved conflict has implications for all potential investment on the island, companies considering investments in the TC-administered area should be aware of complications that arise from the lack of international recognition}.
Current Market Needs
Renewable Energy Sources (RES) Power Storage, PV, and Offshore Wind
The ROC Ministry of Energy, Commerce, and Industry (MECI), and other energy interlocutors are looking into RES storage options. This is a potential opportunity for U.S. companies with storage technology equipment and expertise. Also, U.S. companies with photovoltaic or offshore wind technology and products, smart meters and related technology, could find business opportunities with both the government and the private sector.
Competitive Landscape
Cyprus follows European directives and standards. Additionally, several semi-government organizations, such as the Electricity Authority of Cyprus, generally require companies bidding on tenders to meet applicable International Standards Organization (ISO) standards. Government and semi-government projects are carried out through a tendering process.
Market Entry
To navigate the Cypriot market, companies often work through a local partner. The Embassy’s Political/Economic Section represents the Department of Commerce’s Commercial Service and offers services aimed at assisting U.S. companies wishing to enter the Cyprus market. A detailed description of these services is available here.
Regulations / Registration Process
Domestic and foreign investors may establish any of the following legal entities or businesses in the ROC:
- Companies (private or public)
- General or limited partnerships
- Business/trade name
- European Company (SE), and
- Branches of overseas companies.
The registration process takes approximately two working days and involves completing an application for approval/change of name. The Ministry of Energy, Commerce, and Industry’s (MECI’s) One-Stop-Shop offers assistance with the logistics of registering a business in Cyprus to all investors, regardless of origin and size. In addition to registering a business, foreign investors, like domestic business owners, are required to obtain all permits that may be necessary under Cypriot law. At a minimum, they must obtain residence and employment permits, register for social insurance, and register with the tax authorities for both income tax and Valued Added Tax (VAT). A municipal license is required before using any building or premises for business, including commerce, industry, or any other income-earning activity. Additionally, town planning or building permits are required for building new offices or converting existing buildings. There are also many sector-specific procedures. Information on all of the above procedures is available online. Additionally, foreign investors can take advantage of the services and expertise of the Cyprus Investment Promotion Agency (CIPA or Invest Cyprus), an agency registered under the companies’ law and funded mainly by the state, dedicated to attracting investment. {Email: info@investcyprus.org.cy}
Technical Barriers & Tariffs
Cyprus has fully adopted the EU’s Common Customs Tariff (CCT) for third countries. EU products enjoy zero tariff rates. The Integrated Tariff of the Community, referred to as TARIC (Tarif Intégré de la Communauté), is the integrated Tariff of the EU and it is a multilingual database in which all measures relating to the EU customs tariff, commercial, and agricultural legislation are integrated. Post recommends exporters review the TARIC for their products to determine if a license is required. For more information, please visit the Cyprus Customs and Excise Department and the European Commission on TARIC. A tariff system based on the Harmonized Commodity Description and Coding System regulates Customs duties. Goods are classified according to their composition, description and purpose, and carry various rates of duty. In addition to tariffs, fuel products are subject to steep excise taxes. Notably, excise taxes apply to the above products regardless of origin (i.e. whether they originate from the EU or not, as well as for products made in Cyprus). Additionally, Cyprus imposes a 19 percent value added tax (VAT) on most goods and services, with certain exceptions.
Procurement & Tenders
For most public projects or large-scale purchases, the ROC and other governmental or semi-governmental entities are required to issue a tender or request for proposals following EU procurement regulations. The ROC typically releases tender documents in the Greek language, which is an official EU language. In certain instances, usually for big projects, the ROC issues tender documents in the English language. U.S. companies can bid on any tender either directly or through a local agent. The government posts all tenders on the e-procurement website where prospective bidders can register, acquire tender documents, and submit their proposals. Semi-governmental organizations have their own tender boards and evaluating committees. Under the procurement law, evaluating and awarding tenders is the responsibility of each Ministry’s or state-owned enterprise’s tender board. A Tenders Review Authority (TRA) examines complaints from bidders to ensure the efficiency of procedures in public procurement. Information on upcoming tenders is available through the U.S. Embassy in Nicosia, Political/Economic Section, through Export.Gov, or through the Business Information Database System (BIDS). Ministry technical committees evaluate government tenders. Bids are usually evaluated first on technical merit and then on cost, depending on the value of the project. Bidders on government contracts are advised to offer products/services that meet exact tender specifications. The ROC agreed to abide by the World Trade Organization Government Procurement Agreement by way of its accession to the European Union in 2004.
Getting Paid / Trade Finance
The usual method of payment for business transactions is by letter of credit, with 90-days credit. Credit rating reports are available through various local firms (please reach out to the Political/Economic section for details). Companies like InfoCredit Group Cyprus Ltd. and Rime Information Bureau Ltd. also offer debt collection services. Visa, Mastercard, and American Express credit cards are widely used and accepted. The Cypriot banking system is small and moderately healthy, following significant consolidation after the 2013 financial crisis. Despite the strain on cash flows because of COVID-19’s economic impacts, banks still have sizable cash reserves and are open to sound lending opportunities. Standard banking services in the ROC compare well with other European countries and the United States. The deposit insurance scheme covers up to EUR 100,000 per depositor. The Central Bank of Cyprus supervises private banks and requires them to meet Bank for International Settlements (BIS) standards as well as corresponding directives by the European Union. Bank financial statements are in compliance with international standards and audited by internationally recognized auditors. U.S. Development Finance Corporation (DFC) funding may be available for energy projects in Cyprus.
U.S. Commercial Service Information
The Political/Economic Section of the U.S. Embassy in Cyprus cooperates closely with all energy sector related interlocutors. Please contact to learn more about the sector:
Ephie-Yvonnie Charalambidou
Commercial Specialist
charalambidouey@state.gov
