By Dr. Andreas Prokopiou
- Former Senior Researcher in the field of Smart Grids at the University of Melbourne and researcher at Électricité de France R&D in France
More than nine out of every ten euros circulating in the Cypriot electricity market come from oil combustion. This explains why electricity bills fluctuate whenever there are developments in regions of geopolitical tension. This refers to the wholesale price, which is determined by supply and demand, but because supply relies almost exclusively on oil, any fluctuation in the international price of oil is almost automatically reflected in it.
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
However, there is also a second price within the same market that is influenced neither by geopolitics nor by fuel costs. It is the price paid to Mandatorily Connected Units (MCUs), units that the Cyprus Transmission System Operator (CTSO) is required to keep in operation through an auction in which, in practice, essentially only one bidder participates. These two prices follow entirely different logic.
The first price, where geopolitics is reflected in the price of oil
The wholesale price is so exposed to oil for two reasons. The first is that most power plants in Cyprus are old and inflexible, so they remain in operation at the minimum technically feasible level rather than being shut down, even when the sun is shining. This limits the scope for renewable energy, and since there is no storage capacity on the island, unused clean energy goes to waste. The second reason is that the island has no interconnection with another grid, so any increase in the price of oil abroad is immediately passed on here, with no alternative.
Data from the past year clearly show how this vulnerability plays out.
- February 28: War breaks out and the Strait of Hormuz is closed
- April 8: A ceasefire holds for a short time, then a double blockade is imposed
- June 20: The strait closes again
- July 8: The ceasefire collapses, and oil tankers come under attack
The wholesale price started at around €150 to €180 in late 2025, reached €250 in March, fell, and then rose again to new highs, €243 in August and €257 in September. The period’s average stood at €203.
The second price, the one set by a single bidder
EMUs account for one-third of all units traded in this market. Their price is supposed to reflect the cost of keeping the units on standby, not supply and demand like the wholesale price. However, when compared to the wholesale price, it exhibits unusual behavior.
- March through April: wholesale €224 to €225; YEM lower, at €191 to €207
- May through June: wholesale prices fell to €194 to €207; spot prices rose above that range, to €228 to €251
- July through August: wholesale prices at €226 to €243; spot prices fall to €154 to €157
- September through October: Wholesale prices hit a historic high of €257; spot prices plummet to €76
This in itself would already be an open question. It becomes harder to ignore if one looks at the specific units, not just the total amounts. The exact same combination of four units appeared on the YEM list in October 2025, again in June 2026, and again in September 2026. In October, it was priced at €189.52 per MWh compared to a wholesale price of €162, representing a premium of approximately 17%. In June, the same four units were priced at €227.37, with the wholesale price at €194—again close to 17%. Up to that point, it appeared that the cost-based mechanism was functioning normally. In September, however, those exact same units were priced at €75.77, even as the wholesale price reached an annual high of €257. The same equipment went from a steady 17% premium to a 70% discount in the very month when the price should logically have risen.
The methodology is based on the reported cost per unit, not on market conditions, which explains why a unit price may differ from the wholesale price. However, it does not explain why the same reported cost, for exactly the same equipment, would change more than three times in eight months, moving in the opposite direction of the fuel cost signal sent by the rest of the market. And there is no external audit of this figure; the DSMC reviews it only in terms of technical requirements, not in terms of actual fuel invoices. This does not prove anything illegal, but it is precisely the kind of loophole that external observers should not have to identify in a spreadsheet.
A question worth asking
If the same units can be invoiced at a 70% discount one month and at a premium the previous month, who verifies the cost data behind these offers, and will this verification ever be made public?
Oversight of this issue falls under the jurisdiction of the Cyprus Energy Regulatory Authority (CERA). The first price reflects what’s happening in the world. Perhaps it’s time to find out what the second one has to say.
*The views expressed are personal.
