Cyprus's ambitious plans to modernise its energy infrastructure and secure its future power supply have been significantly hampered, with major projects grinding to a halt due to a confluence of legal disputes, regulatory investigations, and global supply chain disruptions. The stalled Vasilikos LNG terminal and the delayed commissioning of new power generation units at Dhekelia are casting a shadow over the island nation's energy security and its commitment to cleaner energy sources.
At the heart of the current predicament is the Vasilikos LNG terminal project, a cornerstone of Cyprus's strategy to diversify its energy mix and reduce reliance on fossil fuels. The project has been ensnared in a complex web of legal challenges and an ongoing investigation by the European Public Prosecutor’s Office (EPPO) concerning the management of European Union funds. This scrutiny has effectively frozen progress, leaving the state natural gas company, ETYFA, scrambling to navigate the labyrinthine legal landscape. Efforts are underway to reclaim €67 million in EU funding, with Cyprus exploring avenues for both financial offsets and direct repayment to mitigate the financial fallout. Preliminary discussions have also been initiated with entities from the United Arab Emirates, signalling a proactive search for potential partners to salvage and complete the critical infrastructure.
Adding to the mounting concerns is a significant delay in the delivery of three new generation units for the Dhekelia power station, contracted to German industrial giant Siemens. Originally slated for installation within two and a half years, Siemens has now revised its timeline, indicating a delivery date pushed back to 2030, a four-year extension. This protracted delay is attributed to unprecedented global demand for power generation equipment, exacerbated by the substantial manufacturing capacity being absorbed by the burgeoning data centre industry in the United States. The Electricity Authority of Cyprus (EAC) is consequently forced to re-evaluate its strategic planning, particularly as the existing fuel-oil units at Dhekelia are scheduled for decommissioning in 2029. This creates a potential capacity deficit that could jeopardise the island's electricity supply.
Further compounding the energy sector's woes is the impasse surrounding the proposed Greece-Cyprus electrical interconnector, a project aimed at enhancing energy security and facilitating the integration of renewable energy sources across the region. Disagreements between the involved parties have brought this crucial project to a standstill, its future trajectory uncertain.
The implications of these setbacks are far-reaching. The potential for an electricity generation shortfall by the end of the decade looms large, raising concerns about the stability and affordability of power for Cypriot consumers. The anticipated decrease in electricity costs, a key benefit envisioned from these infrastructure upgrades, now appears increasingly remote. Energy Minister Michalis Damianos acknowledged the gravity of the situation, stating to lawmakers, "The government’s priority is to complete the project from where it was halted." However, he conceded, "We must finish the project, but I cannot provide a schedule today. When we can, we will," underscoring the prevailing uncertainty. The EAC is actively deploying specialists to expedite the Vasilikos terminal's progress and is undertaking tender processes to identify alternative contractors, reflecting a determined, albeit challenging, effort to steer Cyprus's energy future back onto a more stable course.