By Andreas Poullikkas
- Professor of Energy Systems
- Vice President, Frederick University
For years, Cyprus has been trying to import natural gas for its electricity generation, while in other electricity markets, the development of renewable energy sources and storage systems is already limiting its use. This development does not eliminate the role of natural gas, but it does require a reevaluation of the economic assumptions on which related investments are based. The critical question is not only when natural gas will be phased out, but also how much our electric grid will need it once its infrastructure becomes fully operational.
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
The recent example of California is telling. According to the U.S. Energy Information Administration (EIA), in May and June 2025, storage systems (batteries) in the California Independent System Operator’s (California Independent System Operator, CAISO) delivered an average of 4.9 gigawatts between 5:00 p.m. and 9:00 p.m., compared to less than one gigawatt during the corresponding months of 2022. This increased contribution replaced natural gas-fired power generation during the evening peak hours.
The mechanism is simple. The batteries store electricity mainly during periods of high generation from renewable sources, when energy is abundant, and release it back into the grid during periods of high demand or reduced generation from renewable sources. They do not generate new energy, but they allow available generation to be utilized at a different time. Thus, more solar energy can meet demand after sunset, reducing the need to operate conventional power plants.
This shift is also reflected in the overall data. In the first five months of 2026, natural gas-fired electricity generation in California’s CAISO system was down 60% compared to the same period in 2024, while the amount of electricity supplied by batteries had tripled. The decline was not solely due to storage, as solar generation and electricity imports also increased. It is noteworthy that the installed capacity of natural gas plants remained virtually unchanged, even though their output was significantly reduced.
A similar trend was observed in Australia. According to the Australian Energy Market Operator (Australian Energy Market Operator, AEMO), in the third quarter of 2026, large-scale batteries accounted for 8% of electricity during the evening peak, between 4:00 p.m. and 9:00 p.m., compared to 5.1% from natural gas plants. This was the first time batteries surpassed natural gas during this time period on a quarterly basis.
For Cyprus, these examples are particularly significant, as efforts to complete the natural gas import infrastructure are proceeding in parallel with the development of storage facilities. The Cyprus Transmission System Operator is developing three central systems with a total capacity of 120 megawatts and an energy storage capacity of 400 megawatt-hours. At the same time, the Cyprus Electricity Authority is developing an 80-megawatt system with an energy storage capacity of 160 megawatt-hours in Dekelia. At the same time, there is interest from private initiatives in installing batteries, both standalone and in combination with photovoltaic projects. For example, five private projects with a total capacity of 60 megawatts have already received bids and grid connection terms. Securing grid connection terms does not mean that the projects have already been implemented, but they do demonstrate the potential for private investors to contribute to future storage capacity.
Of course, Cyprus does not share the characteristics of large markets. Therefore, the percentages seen in California or Australia cannot be directly applied to Cypriot planning. The main conclusion is that more renewable sources and storage can reduce the amount of natural gas that would otherwise be required, even if conventional power is still needed to ensure security of supply.
This raises a critical economic issue. The infrastructure for importing and regasifying liquefied natural gas involves significant fixed costs. Since these costs are recovered based on the volumes handled, a decrease in consumption means that the same costs are spread across fewer units of fuel. With all other factors held constant, the cost per unit increases. The extent of the risk for Cyprus depends on the level of costs, the contractual terms, and the method of cost recovery. For this reason, a specific techno-economic assessment is required. This risk is consistent with European observations regarding the impact of lower infrastructure utilization on natural gas prices, though it does not constitute a specific forecast for Cyprus.
This does not mean that storage necessarily increases the international market price of natural gas or the overall cost of electricity. The price of the fuel is one thing; the infrastructure usage charge per unit of gas is another. A higher per-unit infrastructure fee can coexist with lower total fuel costs, provided that smaller quantities are purchased. The key consideration, therefore, is the total cost of the electricity system, not the isolated examination of a single charge.
At the same time, the arrival of natural gas should not be confused with its immediate and full utilization by all units, as technical adjustments and operational testing of the power generation units with the new fuelfuel. If consumption increases gradually after the infrastructure becomes operational, while fixed costs have already begun to be incurred, the initial unit cost may be higher. If, at the same time, solar power and battery storage are expanded, future demand may turn out to be lower than initially forecast. This is why combined scenarios are needed for natural gas consumption, storage development, and the phased commissioning of facilities, along with natural gas supply contracts that offer the necessary flexibility.
The choice for Cyprus is not “natural gas or storage,” but rather the appropriate combination of technologies that ensures sufficient power capacity, security of supply, and the lowest possible cost of electricity. The development of storage can reduce natural gas consumption without eliminating the need to maintain sufficient conventional power capacity. For this reason, energy planning must take a comprehensive approach that considers the utilization of natural gas infrastructure, the penetration of renewable energy sources, and the development of energy storage. The success of the energy transition will be judged not only by the completion of infrastructure, but also by the power system’s ability to provide reliable and affordable electricity to consumers.
