We are pleased to share our latest article, “Energy storage: The Legal Framework and Opportunity for Investments”, written by our associate Christina Charalambidou. The article explores Cyprus’ evolving regulatory framework for energy storage, recent licensing developments, market participation rules, and the growing investment opportunities driven by the energy transition and national climate targets.
Our team at Georgiades & Pelides LLC monitors the rapid developments in the electricity storage sector and can provide the necessary legal guidance and assistance to clients who consider investing in energy storage technologies in Cyprus.
Energy storage: The Legal Framework and Opportunity for Investments
The increasing need for energy storage technologies
The development of electricity storage systems in Cyprus is imperative for a flexible, reliable and clean electricity system. The absence of cross-border interconnectors, the curtailment of energy from renewable energy sources (“RES”), estimated to have reached 12.2% in 2024, and the need for greater RES integration into Cyprus’s energy mix, have shifted attention to energy storage systems. Energy storage is the conversion of part or the entirety of the electricity produced into a form of energy that can be stored for the purpose of its subsequent direct use or its re-conversion into electricity or a different energy carrier for use at a subsequent time than its initial production.
In response to the need for energy storage deployment in Cyprus, the Cyprus Energy Regulatory Authority (“CERA”) has authorised the installation of three large-scale energy storage systems by the Cyprus Transmission System Operator (“CTSO”). Pursuant to section 82 (2A) of the Electricity Market Law of 2021, Law no. 130(I)/2021 (the “EML”), this authorisation is granted by derogation to the general rule prohibiting CTSO from owning, developing, managing or operating energy storage facilities. The operation of these projects, of a total output power of 120MW and total storage capacity of 400MWh, is expected in June 2026.
The Electricity Authority of Cyprus (“EAC”) has also been granted a license by CERA in accordance with section 26 of the EML, for the implementation of an energy storage facility at the Dhekelia power station, consisting of output power of 80MW and storage capacity of 160MWh, the operation of which is also expected in 2026. Additionally, CERA has recently issued Decision no. 398/2025 granting a license to EAC for another project in the Limassol district of output power of 100MW and storage capacity of 200MWh.
These projects, once implemented, will provide the system flexibility required when electricity consumption does not meet the high levels of electricity generation. The findings in Cyprus’s final updated National Energy and Climate Plan for the period 2021-2030 (“NECP”) indicate that in the absence of the necessary supporting infrastructure, inter alia, energy storage facilities, the integration of RES will only reach 22% by 2030.
Private energy storage projects
The installation and operation of energy storage facilities is however not reserved for the aforementioned statutory bodies. CERA has highlighted the substantial opportunity for investors to deploy further energy storage facilities for commercial use. Participation in the competitive electricity market, which officially launched on 1 October 2025 following a prolonged transitory period, is available to all duly licensed (or exempted, where applicable) entities, including electricity storage facility operators. Except for electricity storage facilities for own use, the instalment and/or operation of electricity storage facilities are subject to licensing from CERA, in accordance with the provisions of the EML. The application fee for a license to instal an energy storage facility is €0,10/Kw (with a minimum fee of €200). The application fee for a license to operate an energy storage facility is also €0,10/Kw (with a minimum fee of €200), yet there is also an annual fee of €0,70/Kw. It is noted that only natural persons who are citizens of and resident in an EU member state and legal persons established in an EU member state may apply to CERA for a licence under the EML.
Participation in the competitive electricity market is contingent upon accession to the Contractual Framework of the Electricity Market Rules, which governs market conduct and trading arrangements as these are prepared by CTSO and approved by CERA. The participation of electricity storage entities in the wholesale market is particularly governed by the Manual for the Temporary Operation of Electricity Storage Facilities. This provisional framework provides that for the duration of the validity of the Manual for the Temporary Operation of Electricity Storage Facilities, energy storage entities will only take part in the forward and the day-ahead markets of the competitive electricity market. Electricity storage entities will not take part in the balancing market, however eligible entities can provide ancillary services from electricity storage facilities, specifically the upward and downward Frequency Containment Reserve and the upward and downward Frequency Response.
Incentives for investments in energy storage
Due to the lack of cross-border interconnections at least until 2029, the NECP underlines the need for energy storage deployment over the next years. The projects expected to be deployed in 2026 involve electromechanical technology (lithium-ion batteries). However, the NECP notes that the installation of two pump hydro units with a capacity of 40 MW each and 8-hour storage capacity, which will be implemented in 2033-2034, constitutes the most cost-effective solution. For this reason, the NECP further clarifies that all necessary studies concerning existing dams and/or potential new ones must be carried out, with the appropriate technical assistance, in relation to the installation of the said pumped storage units and that the necessary legal, regulatory, as well as procedural steps must be completed so that the tender for the implementation of the project may be announced.
All forms of incentives, including tax incentives, investment aid and subsidies are crucial for the development of such technologies. In February 2025, the Ministry of Energy, Commerce and Industry launched phase A.1 of a scheme co-funded by the Just Transition Fund of the EU for allocating fund grants amounting to €35 million to the integration of energy storage systems into existing RES units. The programme aims to promote energy storage of a capacity of approximately 150MW and a total storage capacity of approximately 350MWh, aiming to increase the penetration of RES into the electricity system by reducing curtailment, as well as secure the decarbonisation of the energy system.
The call for applications in connection to Phase A.1 of the scheme has closed, however it is expected that further calls will follow focusing on energy storage technologies connected to new renewable energy projects and new hybrid energy system projects.
Our team at Georgiades & Pelides LLC monitors the rapid developments in this sector and can provide the necessary legal guidance and assistance to clients who consider investing in energy storage technologies in Cyprus.
