Cyprus-Forum.com

[Oceanside50]

Tsakoue:

The German grid is privately maintained and the Germans pay the highest rate for electricity in Europe, which you are correct in stating. The reason seems to be that these renewables(wind) is being heavily subsidized by the German homeowner, where as you can see in the article below they are paying for electricity that is one and half times more then what they are getting back. Governments should stay out of worthless and inefficient endeavors which cost the consumers money.


http://www.economist.com/news/briefing/ ... lion-euros

Excess supply plus depressed demand equals lower prices. Electricity prices have fallen from over €80 per MWh at peak hours in Germany in 2008 to just €38 per MWh now (see chart 2). (These are wholesale prices; residential prices are €285 per MWh, some of the highest in the world, partly because they include subsidies for renewables that are one-and-a-half times, per unit of energy, the power price itself). As wholesale prices fall, so does the profitability of power plants. Bloomberg New Energy Finance (BNEF), a data-provider, reckons that 30-40% of RWE’s conventional power stations are losing money.

The trouble is that power plants using nuclear fuel or brown coal are designed to run full blast and cannot easily reduce production, whereas the extra energy from solar and wind power is free. So the burden of adjustment fell on gas-fired and hard-coal power plants, whose output plummeted to only about 10% of capacity.
These events were a microcosm of the changes affecting all places where renewable sources of energy are becoming more important—Europe as a whole and Germany in particular. To environmentalists these changes are a story of triumph. Renewable, low-carbon energy accounts for an ever-greater share of production. It is helping push wholesale electricity prices down, and could one day lead to big reductions in greenhouse-gas emissions. For established utilities, though, this is a
disaster. Their gas plants are being shouldered aside by renewable-energy sources. They are losing money on electricity generation. They worry that the growth of solar and wind power is destabilising the grid, and may lead to blackouts or brownouts. And they point out that you cannot run a normal business, in which customers pay for services according to how much they consume, if prices go negative. In short, they argue, the growth of renewable energy is undermining established utilities and replacing them with something less reliable and much more expensive.

These government interferences into the private sector only causes investment and innovation to be allocated out of the industry. In the long run the consumer is faced with an inefficient system and higher prices, as seen with the German model.

[kurupetos]

Cyprus is too small for more than 1 Electric Company. They could just allow competition from private companies... maybe they done it already as there are many small companies that do Wind / Sun power generation... but the truth is that nobody will invest the money required to build an EAC competitor. What they want is to buy EAC for cheap and then get the massive profits. A monopoly is a bad thing but a private monopoly is worst than a public monopoly... and this is what we will end up having if they sell EAC.

There are already some private electric companies in Cyprus and there are plans for more.

As I posted above the government can regulate prices and also make money from taxation. That's how it works in every other civilized country.

[Oceanside50]

Cyprus is too small for more than 1 Electric Company. They could just allow competition from private companies... maybe they done it already as there are many small companies that do Wind / Sun power generation... but the truth is that nobody will invest the money required to build an EAC competitor. What they want is to buy EAC for cheap and then get the massive profits. A monopoly is a bad thing but a private monopoly is worst than a public monopoly... and this is what we will end up having if they sell EAC.

There are already some private electric companies in Cyprus and there are plans for more.

As I posted above the government can regulate prices and also make money from taxation. That's how it works in every other civilized country.

Why not allow private electric companies (EU, or others), to come and manage the electric system in Cyprus. Every 3-5 years have them bid for the right to manage the system(maintain, invest, upgrade), much like the French have been doing with their water infrastructure.

the government can regulate prices and also make money from taxation.

forget about the government regulating anything, the price will be set by the bidder. And why are you so inclined to have taxes and give your money to the government?

[Tim Drayton]

The reason that Cyprus has the most expensive electricity in Europe has to do with basic economics. The economies of scale that exist in large countries are absent here.
It appears that the Cyprus electricity market was liberalised in 2003 and no private company has yet decided to come in and compete with the EAC.
The arguments about private companies having to give a good service or face going out of business only apply where there is real competition; as long as there is only one electricity grid, this is not the case.
Anyway, parliament rejected the privatisation bill yesterday, the main condition for Cyprus receiving the next tranche of Troika aid, so we will have to see how this plays out.

[Oceanside50]

liberated is not enough and it hasn't worked as you see....What private company would bid knowing the government has the right to regulate it or subsidize an artificial competitor? Complete privatization is needed.

[Paphitis]

The reason that Cyprus has the most expensive electricity in Europe has to do with basic economics. The economies of scale that exist in large countries are absent here.
It appears that the Cyprus electricity market was liberalised in 2003 and no private company has yet decided to come in and compete with the EAC.
The arguments about private companies having to give a good service or face going out of business only apply where there is real competition; as long as there is only one electricity grid, this is not the case.
Anyway, parliament rejected the privatisation bill yesterday, the main condition for Cyprus receiving the next tranche of Troika aid, so we will have to see how this plays out.

Kind of difficult getting competitors against a State Run Electricity Service. I don't think private business would take that kind of risk.

Once EAC is privatized, you will see competitors come in. Probably not many because of the size of the market, but there will be at least 1 other competitor.

[Tim Drayton]

The reason that Cyprus has the most expensive electricity in Europe has to do with basic economics. The economies of scale that exist in large countries are absent here.
It appears that the Cyprus electricity market was liberalised in 2003 and no private company has yet decided to come in and compete with the EAC.
The arguments about private companies having to give a good service or face going out of business only apply where there is real competition; as long as there is only one electricity grid, this is not the case.
Anyway, parliament rejected the privatisation bill yesterday, the main condition for Cyprus receiving the next tranche of Troika aid, so we will have to see how this plays out.

Kind of difficult getting competitors against a State Run Electricity Service. I don't think private business would take that kind of risk.

Once EAC is privatized, you will see competitors come in. Probably not many because of the size of the market, but there will be at least 1 other competitor.

Re:
"Kind of difficult getting competitors against a State Run Electricity Service."

Why? According to the free market zealots out there, a state run entity is destined to be inefficient with poor service (although as I keep banging my head against a brick wall to get across to certain people who live on the other side of the planet and speaking as somebody who has actually lived in Cyprus and been a EAC customer for the past nine years - and I have lived in six different countries in my life, so I have something to compare its performance with - I am actually extremely satisfied with the service I have received from them), so it should be a walkover for any private business to compete with them.

[Tim Drayton]

liberated is not enough and it hasn't worked as you see....What private company would bid knowing the government has the right to regulate it or subsidize an artificial competitor? Complete privatization is needed.

Make up your mind, please. One minute we have supposedly artificially inflated electricity prices here (when in fact the economics of generating and supplying electricity for a population of about 800,000 do not equate to those of supplying many millions - the existence of 'economies of scale' is universally accepted in economic theory), then we hear that private companies cannot come in because the EAC is supposedly subisdised (actually it has historically made a profit for the state). If electricity prices here are artificially high, then a private company should be able to come in and clean up by offering lower prices.

[Paphitis]

The reason that Cyprus has the most expensive electricity in Europe has to do with basic economics. The economies of scale that exist in large countries are absent here.
It appears that the Cyprus electricity market was liberalised in 2003 and no private company has yet decided to come in and compete with the EAC.
The arguments about private companies having to give a good service or face going out of business only apply where there is real competition; as long as there is only one electricity grid, this is not the case.
Anyway, parliament rejected the privatisation bill yesterday, the main condition for Cyprus receiving the next tranche of Troika aid, so we will have to see how this plays out.

Kind of difficult getting competitors against a State Run Electricity Service. I don't think private business would take that kind of risk.

Once EAC is privatized, you will see competitors come in. Probably not many because of the size of the market, but there will be at least 1 other competitor.

Re:
"Kind of difficult getting competitors against a State Run Electricity Service."

Why? According to the free market zealots out there, a state run entity is destined to be inefficient with poor service (although as I keep banging my head against a brick wall to get across to certain people who live on the other side of the planet and speaking as somebody who has actually lived in Cyprus and been a EAC customer for the past nine years - and I have lived in six different countries in my life, so I have something to compare its performance with - I am actually extremely satisfied with the service I have received from them), so it should be a walkover for any private business to compete with them.

Come on Tim! Would you open an Energy Company and compete against the EAC with all the Government Subsidies in the world in order to price the competitor out? It would not be a level playing field. We have the EU and many Airlines almost threatening legal action against the RoC and Cyprus Airways for all the unfair subsidies and bail outs.

When it's privatized, you should see many improvements over time. The Energy network should be upgraded and expanded. You can't really predict what will happen with pricing but the Government can regulate it and also tax the industry.

I think times are changing in Cyprus. It's not before time either. I have hope that things will be better and going by what I have seen from mass privatization in other countries, I would say that it should work out quite well for Cyprus as well.

[CBBB]

it has historically made a profit for the state

When you just increase the price to cover your out of controll costs, you are bound to make a profit!