Grid link with Cyprus in peril

This week will be crucial to whether the power grid link between Greece and Cyprus via Crete will be implemented.

The €1.9 billion project, which is being partly funded, to the tune of €657 million, is in danger of being scuppered because of Cyprus’ objections to its financing, its desirability and other aspects, such as when the implementation costs will be transferred to consumers.

Last Tuesday, France’s Nexans, which is laying the cable between Cyprus and Crete, in a letter to Greece’s Independent Power Transmission Operator (IPTO), the company implementing the project, threatened to stop its activities on Monday, September 2 if the issues arising from Cyprus’ objections were not lifted by August 30.

A frenzied round of consultations, at the highest diplomatic levels, ensued and succeeded in pushing back Nexans’ ultimatum by a week, without resolving the main issues.

Cyprus’ objections revolve around two issues: whether the entity implementing the project (IPTO) will recover expenses made if geopolitical risks – a euphemism for tensions with Turkey – result in its cancellation and whether consumers will bear a share of the cost of the project dating from the start of construction or from the moment the connection is ready and operating.

The Cyprus Energy Regulatory Authority decided, in 2023, that if conditions outside the project owner’s control made completion impossible, spending “may” be recovered, following a CERA decision. IPTO demanded that the conditional clause be removed so that it could be sure to recover its money.

The timeline for cost recovery is another friction point: CERA insists that consumers cannot be forced to pay before enjoying the benefits of the project. Its Greek counterpart, the Regulatory Energy Authority, had also objected but changed its mind when the Environment and Energy Ministry backed the project. This has not happened in Cyprus, where the government shares CERA’s objections. Cyprus’ energy minister, George Papanastassiou said that the geopolitical risk is wholly on IPTO.

Cyprus’ stance also endangerσ the rest of the project, Israel’s power connection with Cyprus, and, hence, with Europe. A cancellation could also imperil IPTO’s viability, officials say.