Nicosia, Cyprus. The Great Sea Interconnector will not automatically result in higher electricity bills, as its costs are recovered under a detailed European Union regulatory framework, according to energy systems expert and former Cyprus Energy Regulatory Authority chairman Andreas Poullikkas. He said the process includes market revenues, regulated tariffs and cross-border cost allocation mechanisms.
EU regulatory framework
In a recent analysis, Poullikkas said public discussion of the project frequently focuses on headline costs running into billions of euros or assumes that electricity consumers will inevitably bear the full expense.
“The reality is more complex and much more tightly regulated,” Poullikkas said.
As a Project of Common Interest, the GSI is governed by European rules under which cost recovery is neither arbitrary nor one-dimensional, he said.
Cost recovery process
According to Poullikkas, the key issue is not only the project’s total cost, but also who benefits, what share each country assumes, how much is covered by the interconnection’s operation and what amount, if any, remains to be recovered through electricity tariffs.
He said the European regulatory framework requires all European grants and subsidies to be deducted from the total project cost before regulated recovery begins. The remaining net amount is then recovered through a two-stage process.
The first recovery source is the electricity market, through revenues generated by allocating cross-border transmission capacity, commonly known as congestion rents, under EU Regulation 2019/943.
Poullikkas said the cross-border cost allocation mechanism applies only if those market revenues are insufficient.
