By Sotiris Kyprianou
*Energy Consultant
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
In order for Cyprus to have electricity by 2030, it will need to spend hundreds of millions of euros in the coming years on new power plants, storage, and other infrastructure for its electricity system. So there’s a very simple question that, in my opinion, we’re not discussing enough: “Who should decide what we’re going to build?”
This should be at the heart of the discussion among those who insist on bringing the Single Buyer Model back into the spotlight as opposed to the Target Model , on which the operation of the Competitive Electricity Market (CEM) is based.
In the Single Buyer model, there is a central electricity buyer. This organization determines the system’s needs and can then hold competitive bidding processes so that companies can compete to see which one will offer it at the lowest price.
In contrast, in the Target Model, there are various producers and suppliers who buy and sell electricity among themselves while competing to see who can offer it at the lowest price. The prices resulting from this competition indicate where there is a shortage and where there is a surplus of electricity, thereby influencing where new investments are worthwhile. In the first model, essentially, someone decides first what needs to be done, and then the bidding process takes place. In the second model, much more room is given for different solutions to compete with one another within the market.
It makes sense to have an organization that runs tenders. And indeed, a well-run tender can secure a low price. But there’s a problem. A tender can tell us who will build something more cheaply. It can’t tell us whether we decided from the outset to build the right thing. So we might get an excellent price through the tender and yet still have chosen the wrong investment. Herein lies, in my view, the major difference between the Single Buyer Model versus the Target Model and a competitive market.
In a properly designed market, when there is a shortage of electricity at certain times, prices rise. When there is an excess of generation, prices fall. These fluctuations signal to investors where there is genuine demand. For example, if electricity is very cheap at noon but expensive at night, an investor might see an opportunity for storage. Someone else might come up with a different—or even better—solution. Because it’s not just companies that compete; solutions compete, too. This does not mean that the government should leave the electric grid to fend for itself. The government and the relevant agencies must set the standards for the system’s safety and adequacy, as well as the needs of the grids. However, it is not necessary for them to decide each time which specific technology will prevail.
The recent decision regarding Dekeleia illustrates why this discussion is not merely theoretical. The EAC has invested approximately €140 million in three new gas-fired turbines. These are units that can start up quickly and are particularly useful when demand is very high. Personally, I have examined this specific investment through various economic scenarios. Based on the scenarios I have modeled—and assuming they will operate primarily as peak-load units—I estimate that the production cost could range from approximately €0.55 to €0.60 per kWh. In some of the scenarios, the operation of these units could lead to an increase in the country’s total electricity costs of up to approximately 16%, compared to the corresponding scenario without this effect. This does not mean that electricity prices will necessarily rise by 16%. It does mean, however, that under specific operating conditions, an investment decision of this magnitude could substantially affect the total cost of electricity, which ultimately is borne by the country and its consumers.
Precisely because no one can know for certain which technology will be the most economical and suitable over the next 10 or 20 years, why not let different solutions compete? There’s something else that doesn’t make sense in the debate over adopting the Single Buyer model. We hear that a central agency can purchase cheaper electricity through competitive bidding. Fine. The current competitive market doesn’t prevent the EAC or any other electricity authority from buying cheap energy, striking deals, and offering better prices. If it can secure electricity at 8, 7, or 6 cents, it can do so to compete with the rest. Why does the market need to be closed off for this to happen? So what does the Single Buyer system actually add?
Not the ability to hold competitive bidding processes. That already exists. Not the ability to purchase cheap energy. That already exists, too. What it adds is that, ultimately, there is only one buyer. And this raises an even more fundamental question: if everything presented as an advantage of the Single Buyer system can already be achieved within a competitive market, might what really bothers some people not be the way energy is purchased, but competition itself?
It has also been said recently that we currently have an oligopoly because there are only a few large companies in the market. This concern is legitimate. We must bear in mind, however, that the competitive market has been in operation since October 2025. Until then, for decades, we had a market where the EAC held almost complete dominance. You cannot transform a monopoly into a mature competitive market in just a few months. If there are few competitors today, the solution is to increase their number—not to revert to a single provider.
The market is not perfect. Nor can any organization accurately predict the future. The government must decide what the system needs. Where there are different ways to meet that need, we must let competition show us who can do it better and more cheaply. Only in this way will we achieve substantial reductions in the overall cost of electricity, which is what we all want.
