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Cyprus’ energy market is undergoing a period of significant regulatory and commercial transition. As renewable energy sources become increasingly important to the national energy mix, and in the absence of cross-border electricity interconnections, electricity storage has become essential for ensuring that renewable electricity can be utilised more efficiently, reliably and consistently within the electricity system.
Energy storage is no longer merely a technical consideration. It is increasingly a regulatory, commercial and investment issue. Investors, electricity producers, developers and other market participants must therefore assess not only the relevant technologies, but also the applicable licensing regime, market participation rules, regulatory requirements and investment opportunities arising from Cyprus’ energy transition.
The Importance of Energy Storage in Cyprus
Electricity storage systems are a key component of a flexible, secure and reliable electricity system. In practical terms, energy storage allows electricity produced at a particular point in time to be stored and used at a later stage, either directly or following its reconversion into electricity or another energy carrier.
This is particularly important in Cyprus, where the production of electricity from renewable energy sources does not always correspond with electricity demand. In the absence of adequate storage capacity, electricity generated from renewable energy sources may be subject to reduction or limitation, thereby preventing the full utilisation of renewable energy production.
According to the Republic of Cyprus’ final updated National Energy and Climate Plan for the period 2021–2030, the absence of supporting infrastructure, including energy storage facilities, may restrict the further integration of renewable energy sources into the electricity system. Accordingly, energy storage is expected to play an important role in the achievement of Cyprus’ national climate and energy objectives.
Investment Incentives and Future Developments
Energy storage is expected to remain a priority for Cyprus in the coming years. The absence of cross-border electricity interconnections, at least until 2029, further reinforces the need for domestic storage capacity and other supporting infrastructure.
The large-scale electricity storage projects currently expected to be deployed in 2026, including projects involving statutory electricity bodies, are based on electrochemical technology, such as lithium-ion battery storage. Separately, the National Energy and Climate Plan also identifies pumped hydro storage as a potentially cost-effective longer-term solution.
In particular, the National Energy and Climate Plan refers to the possible installation of two pumped hydro units, each with a capacity of 40MW and eight-hour storage capacity, expected during 2033–2034. The implementation of such projects will depend on the completion of the relevant technical studies concerning existing or potential new dams, as well as the necessary legal, regulatory and procedural steps, including any applicable tender procedures.
Investment incentives are also expected to be central to the development of the sector. These may include tax incentives, investment aid, subsidy schemes and other forms of financial support, depending on the nature, structure and eligibility of each project.
In February 2025, the Ministry of Energy, Commerce and Industry launched Phase A.1 of a scheme co-funded by the EU Just Transition Fund. The scheme provided grants amounting to €35 million for the integration of energy storage systems into existing renewable energy units.
The objective of the scheme is to promote energy storage capacity of approximately 150MW and total storage capacity of approximately 350MWh. Its wider purpose is to increase the penetration of renewable energy sources into the electricity system, limit the reduction or restriction of renewable electricity output, and support the decarbonisation of the energy sector.
Although the call for applications for Phase A.1 has closed, further calls are expected. These are likely to concern storage technologies connected to new renewable energy projects and new hybrid energy system projects.
Practical Considerations for Investors
Investors considering energy storage projects in Cyprus should assess the applicable legal and regulatory framework at an early stage.
Key considerations include:
- whether the proposed project requires a licence from the Cyprus Energy Regulatory Authority;
- whether the applicant satisfies the eligibility requirements under the Electricity Market Law;
- the applicable installation and operation fees;
- the ability of the project to participate in the competitive electricity market;
- the specific market segments in which the storage facility may participate;
- access to ancillary services;
- grid connection requirements;
- eligibility for grants, subsidies or other financial incentives;
- interaction with renewable energy projects or hybrid project structures; and
- future regulatory developments affecting the role of storage in the balancing market.
Early legal planning is particularly important, as energy storage projects often involve several parallel legal and commercial considerations, including regulatory approvals, project financing, land rights, grid connection arrangements, construction and supply contracts, market participation documentation and possible state aid or subsidy requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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