2026 and Cyprus’ great energy challenge

The loose ends left in the energy sector this year will inevitably get rolled into 2026, experts tell the Cyprus Mail. In practice, this means that persistent high electricity prices and rolling power cuts are more likely than not. Some of the policy decisions that need to be taken are in Cyprus’ hands, others less so.

“Many challenges will need to be addressed during 2026,” said Constantinos Hadjistassou, a professor at the University of Nicosia specialising on energy.

“The leeway for errors is critically low. This leaves us little room for experimentation and necessitates more coordination from decision-makers and our brightest minds alike – if summoned to help.”

Energy expert Charles Ellinas shared the sentiment.

“The energy sector continues to remain one of the most problematic in Cyprus. In 2025 we had some successes and some failures, but there were not many tangible results,” Ellinas told us.

We asked the two experts to summarise the stakes lying ahead in 2026. These are easy to identify – but whether progress is made, is a different question altogether.

Ellinas, councilor at the Atlantic Council, sums it up: the price of electricity remains extremely high, something that requires urgent consideration in early 2026. The transition to a competitive electricity market has not brought a reduction in the price and the situation is not likely to change in 2026.

Cyprus also leads per capita carbon dioxide emissions in Europe, which will continue into the new year. One reason is that the penetration of renewables remains low and we continue to generate electricity largely from diesel/heavy fuel oil.

“It was and remains urgent to switch to natural gas.”

The beleaguered LNG import project at Vasiliko looks set to continue to be problematic, the expert said.

“And this despite the fact that what remains to be completed is mainly the construction of the pier, which from an engineering point of view is relatively simple.”

There is no clear plan yet, nor is there a timetable. Were Cyprus to complete the project it could benefit from the low prices that are coming in 2026 due to the increasing quantities of LNG entering the market.

Energean has also reiterated its offer to bring natural gas by submarine pipeline from its fields in Israel. But this requires the opening of the natural gas market in Cyprus.

“On the plus side, the energy ministry has options available to it to make the appropriate decisions, early in 2026. The longer the transition from diesel/HFO to natural gas for electricity generation is delayed, the more Cypriots will be burdened by unjustified and outrageously high prices.”

As far as offshore gas exploration goes, Ellinas anticipates that the development of the Kronos gas field will proceed at a rapid pace in 2026, with exports to Egypt expected in early 2028.

“But it will not make us rich,” he hastened to add.

“Cyprus’ profit share will come after 2030 and will be less than 0.7 per cent of the annual budget. With Egypt facing serious gas supply problems, the provision of Cypriot gas to the country will undoubtedly bring political benefits.”

The situation with the development of the Aphrodite gas-field is less clear. Despite the resolution of the Ishai disputes with Israel, expected early next year, Chevron needs to make an investment decision in 2026 to proceed.

But according to its new business plan, Chevron has set its capital expenditure for the next five years at a low level, focusing on high-yield projects and profitable growth. With the Aphrodite project cost estimated at $4 billion, this is difficult without a significant increase in the price of natural gas that Egypt would be willing to pay.

As to the EEZ delimitation agreement with Lebanon, despite its political success, Ellinas does not expect it to yield any tangible and direct benefits.

Rather, opined Ellinas, the benefits will be indirect and political.

Hadjistassou was in agreement – he noted that Chevron has yet to take a final investment decision (FID) on Aphrodite. The energy giant meantime is pursuing other priorities. Chief among them are the oil fields offshore Guyana and the recently announced gas agreement with Egypt, estimated at $35 billion, over the course of 15 years, which will deliver 130 billion cubic metres of natural gas from the Leviathan gas field to the neighbouring country.

In the professor’s view, the Kronos gas field in Block 6 has a better chance of being monetised in a shorter time frame than Aphrodite – owing to its proximity to the Zohr subsea installations.

Tapping the 2.5 trillion cubic feet (tcf) gas field to Egypt will require a 100km pipeline and a smaller investment from ENI which discovered the gas.

On the saga of the Great Sea Interconnector – the mooted subsea cable linking the electricity grids of Cyprus and Greece – Ellinas says that if it’s to become operational by 2030-2031 as planned, not only a clear decision to proceed with the project must be made, but the route survey must start before mid-2026.

“Unfortunately,” said Ellinas, “the persisting ambivalence within the Cypriot government will continue, at least during the early part of 2026, causing further confusion and delays.

“But given the strong support by the European Commission and Greece, the project is likely to overcome these difficulties and move to the next stage.”

Support may also come from Israel formally joining the project in 2026, especially after its joint decision with Greece and Cyprus on December 22 confirming the determination to promote the GSI, linking it with the India-Middle East-Europe Economic Corridor (IMEC).

IMEC’s importance was highlighted in Jerusalem during the recent trilateral meeting of the heads of state of Cyprus, Greece and Israel.

At the joint press conference after the talks, Israeli Prime Minister Benjamin Netanyahu stated:

“We will advance IMEC. This is an idea that has been brought forward before, but we think we have to put it into reality.”

Netanyahu went on: “It’s a maritime, rail, pipeline, energy pipeline and cable connectivity between Asia and Europe going through Israel, Cyprus and Greece. And as part of this effort, we are advancing the Great Sea Interconnector that will enable electric energy cooperation our three countries and Europe and the Arabian Peninsula, and ultimately you can connect it to Asia as well.”

The Israeli leader stressed: “So this is a big thing. And in many ways it’s the skeleton of the IMEC corridor. We discussed practically how to move this forward and we intend to advance it. I’ll also discuss it in my upcoming meeting with President Trump in the United States.”

Hadjistassou meanwhile dubbed it the “not-so-Great Sea Interconnector”.

He pointed out that the project’s viability is still in question – as reflected from the lack of interest from investors. And it remains unclear whether Cyprus will be able to import green energy from Greece, via Crete, from wind energy farms.

Discounting the €657 million that the EU has committed to the project, Cyprus taxpayers will shoulder some €800 million for the GSI without much control over the operation of the subsea cables.

To boost the project’s viability, Hadjistassou suggested that one of the two cables (500MW) could be laid. In the meantime, as the clock is ticking, the project promoter – Greece’s Admie – is claiming some €250 million for GSI expenses even though marine surveys “have not progressed an inch during the past 10 months”.

Hopefully, the updated feasibility study currently underway will shed some light into these questions.

On the home front, pressing problems persist – how to properly integrate renewables into the grid.

Hadjistassou forecasted that power cuts will become more pronounced in 2026.

“Particularly during spring and autumn when electricity demand drops and the relatively low ambient temperature enhances PV electricity production, power cuts are poised to grow to around 10 per cent of the total generation,” he cautioned.

“Unless integrated with battery storage, a sizeable percentage of RES-produced electricity will simply be lost. Not only will these power cuts prolong the repayment period for photovoltaics panel investments, they will also make it more difficult for Cyprus to meet its energy and climate targets. If only (a fraction) of this surplus electricity were used to generate desalinated water, it would have helped mitigate water scarcity.

“Hence, the challenge here is to source the excess electricity to desalination plants and not merely to shed it at the push of a button.”

Last but not least, said Hadjistassou, are two other urgent matters that will dominate headlines during 2026.

One being the sufficient (operational) supply of electricity on the island. With the widespread adoption of renewable energy sources, the Dhekelia power plant gas increasingly becomes even more important to the stability of the electrical grid of Cyprus.

Even though the EAC has taken the decision to install two gas turbines of 80MW collective capacity at Dhekelia, they will not be commissioned until 2028.

“Therefore, during peak demand hours – between 6pm and 9pm – of the winter and summer of 2026 spare electricity capacity from conventional power generation will be razor-thin.”

The good news, said the expert, is that the 160MWh battery bank that the EAC will install at Dhekelia is expected to be operational in the summer of 2026, unless unexpected delays occur. If all goes well, the battery unit will partly alleviate the problem of power cuts.

In parallel, the Transmission System Operator (TSO) is expected to install by mid-2026 another 400MWh of battery energy storage systems at Athalassa, Larnaca and Paphos.

Although the EAC and the TSO projects would ensure sufficient power for the island, the cost of the stored electricity will be significantly higher than that from conventional power generation and renewables.

Back to Ellinas, who gave us his bottom line:

“Like 2025, 2026 will continue to face serious challenges in terms of energy. My choice, in order of priority, would be to first complete the import of LNG project at Vasiliko, then install electricity storage batteries, upgrade the grid, increase RES and rooftop photovoltaic installations, and make a decision on the GSI interconnection.

“But don’t hold your breath.”