Doubts cast on ‘giant project’ to supply north’s electricity

By Esra Aygin

September 10, 2023

An agreement signed with a private Turkish company to produce all the electricity in the north is riddled with problems say those in the field, who fear further dependence on Turkey

Turkish Cypriot head of coalition Unal Ustel and Turkish vice president Cevdet Vilmaz sign the agreement

Turkish Cypriot authorities have pledged to give up local electricity production entirely and become completely dependent on a planned cable from Turkey to the north.

The provisions of the recent agreement with private Turkish energy company Aksa to create the electricity cable link reveal that the pledge to get power exclusively through this cable was made blindly, as the details of the project – like the capital cost, sales price or transmission capacity – are still unclear.

According to the agreement, Aksa, which has close ties with Turkey’s ruling Justice and Development Party AKP, will carry out a feasibility study by July 2024. An ‘interconnection construction and operation agreement’ will then be signed, and within five years the cable link will be fully operational.

Following a memorandum of understanding for an electricity cable project from Turkey signed between Turkish Vice President Cevdet Yilmaz and ‘prime minister’ in the north Unal Ustel, an agreement was signed between Aksa and the Turkish Cypriot public electricity authority Kib-Tek on July 19. No public tender was held for the selection of the company to carry out the electricity cable project and it is not clear how Aksa was chosen.

With the agreement, Turkish Cypriot authorities have pledged that once the cable is operational all electricity needs in the north will be met by it. “The existing electricity plants will only be put into use if the electricity supplied through the cable is inadequate or there is a technical need,” the agreement states.

“After the feasibility study we will rapidly take the steps to materialise this giant project. We will put the signature of Aksa on this energy bridge with the TRNC,” Aksa CEO Cemil Kazanci said after the agreement was signed.

“We are realising a 30-year-old dream. This project will make TRNC a real part of the ‘Turkish Century’,” Ustel added.

Aksa’s facility in the north

Even though the idea of the cable link has been voiced at various points in the past, it was set as a top priority by Turkish President Recep Tayyip Erdogan after his re-election in May. Branded “the second project of the century” after the water pipeline from Turkey to the northern part of Cyprus, the cable link is promoted by Turkish and Turkish Cypriot officials as “the solution to the electricity woes on the island”.

Turkish Cypriots have been suffering from sweltering power cuts mainly due to lack of necessary maintenance, repair and investments in the electricity infrastructure. Moreover, as electricity is mainly produced using imported fuel oil, high electricity prices due to the volatility in fossil fuel prices, the war in Ukraine and the depreciation of the Turkish lira, are crippling the community.

Experts, civil society and opposition parties are questioning however, the logic of making such a huge commitment without a tender and without knowing the costs.

“Handing the electricity cable project to a private company without a public tender and with a guarantee to purchase… is in total violation of law. There is no provision in the agreement that stipulates how the costs will be calculated in the electricity cable project and this violates basic principles of economy. This agreement is aimed at selling off the assets of the community and is a destructive step and an illegal attempt that does not protect the interests of the people,” the Republican Turkish Party CTP, which took the agreement to the High Administrative Court along with the Cyprus Turkish Electricity Authority Workers Union El-Sen, said.

The Turkish Cypriot Chamber of Mechanical Engineers, which filed a criminal complaint over the agreement saying no regard was paid to public interest, said that the agreement only serves to give a private company a monopoly and increase its revenues.

“How can you ever say, ‘I will get 100 per cent of my country’s electricity through a cable?” asked chamber president Ayer Yarkiner. “How can you be this clueless? The term ‘project of the century’ is only being used out of ignorance. Nowhere in the world can a country put its signature under an investment without knowing its cost effectiveness.”

However, this is not the only point of contention. Although the agreement mentions an ‘interconnection’ none of the provisions describe a two-way transmission of electricity between Turkey and the north. The method that is envisaged in the agreement seems to be a system whereby electricity will be transmitted one-way from Turkey to the north by Aksa.

“Interconnection in the world is an alternative to diversify resources and decrease cost or ensure energy supply in case of failures,” explains energy economist and electrical engineer Yusuf Avcioglu. “There is no two-way transmission here. The agreement says ‘you will not produce electricity. I will give it to you through the cable.’ This is not interconnection… We have nothing to gain from this… We are totally surrendering to Aksa and Turkey.”

The second power station in the north near Kyrenia

The Turkish Cypriot ruling coalition sold the project to the public by reassuring them that they would be exporting the power generated by solar energy to Turkey through the cable and reducing energy costs.

Besides a solar farm, households in the north have the right to set up solar panels and sell to the grid.

“You lied to people,” CTP deputy Asim Akansoy said in a speech to the Turkish Cypriot assembly. “You said it would be a two-way transmission and we would sell our solar energy. Now you are handing 100 per cent of energy production to Aksa with a guaranteed purchase agreement.”

Experts agree that a simple one-way cable rather than an interconnection is detrimental for the Turkish Cypriot community, and being totally dependent on Turkey for electricity supply is one of its biggest risks.

Electricity prices are also expected to spike because the investment cost of the cable project plus all the operational and other expenses would be reflected in electricity bills. Reports in the Turkish media put the cost of the cable project to somewhere between $500 million to $1 billion.

At the same time, Turkey is an observer member of the European Network of Transmission System Operators for Electricity (ENTSO-E), which is the ultimate arbiter regarding the connection of a third state to the main grid. As long as the Cyprus problem remains unresolved, ENTSO-E is not likely to grant a permit to Turkey to make an interconnection with the northern part of Cyprus.

The contentious agreement also stipulates a guarantee of purchase whereby Aksa, through its electricity plant in Kalecik/Gastria in the Famagusta district, will produce at least 49 per cent of total electricity generated in the north for 15 years “during the transitional period until the cable is operational.” Despite persistent questions by opposition parties and civil society, Turkish Cypriot authorities have not been able to explain why this guarantee of purchase has been given.

This is seen by experts as a move to ensure Kib-Tek becomes idle even before the cable project begins operating.

“There is no limit to how much Aksa can produce,” explained president of the Chamber of Electrical Engineers Uner Kutalmis. “There should have been a limit so that the public electricity authority Kib-Tek remains relevant. There is no Kib-Tek anymore. There is only Aksa.”

After starting operations in the north in 2003, Aksa already produces 45 per cent of the electricity used in the northern part of Cyprus.

Furthermore, although the agreement gives the right to the Turkish Cypriot authorities to revoke it if Aksa fails to render the cable link operational in five years, an ensuing article states: “If either the Republic of Turkey or TRNC back out of the interconnection system, this will not be a reason for the revocation of this agreement.”

But you cannot just revoke this agreement after becoming so dependent on a private company, Avcioglu said.

“To be able to revoke this agreement, you need to have a production capacity that meets your needs. Right now, Aksa produces 45 per cent of the total electricity here. Do you have the capacity to cover that? No, not unless you make the necessary investments. Without doing that, you cannot just say, ‘I am revoking the agreement and I am surrendering half of the country to darkness’.”

https://cyprus-mail.com/2023/09/10/doubts-cast-on-giant-project-to-supply-norths-electricity/

North’s electricity deal with Turkey as elusive as ever

By Esra Aygin

July 2, 2023

The north suffered a total of 5,277 power cuts in 2022, two times worse than in Pakistan

Teknecik power station in the north

Plans to create an electricity cable link from Turkey to the northern part of Cyprus are far from transparent, with experts warning that if the interconnection method isn’t implemented, the Turkish Cypriot electricity woes would be worsened rather than alleviated.

In recent weeks, newly re-elected Turkish President Recep Tayyip Erdogan and his vice president Cevdet Yılmaz, who paid separate visits to the island, listed among their priorities an undersea electricity cable project from Turkey to put an end to the power cuts in the north. This was taken as a sign that the project that has been voiced occasionally for the last decade will finally materialise.

Turkish Cypriots have been suffering from sweltering power cuts mainly due to lack of necessary investments in the electricity infrastructure and frequent fuel shortages. There were a total of 5,277 power cuts in 2022 according to economist Mertkan Hamit, which makes the country two times worse than Pakistan with the worst average monthly electricity supply according to World Bank data.

Moreover, as electricity is mainly produced using imported fuel oil, high electricity prices due to the volatility in fossil fuel prices, the war in Ukraine and the depreciation of the Turkish lira, are crippling the community. The price of electricity increased by over 190 per cent since the beginning of 2022, according to the figures from the Turkish Cypriot statistics department.

But will the undersea cable project, which according to Turkish ambassador Metin Feyzioglu, would cost US$780 million (€717 million) solve the problem?

While the finer details of the cable project have not been made public, experts are expressing concern over the lack of transparency and warning that if the plan is to merely buy electricity from a power generator in Turkey through a one-way system rather than an interconnection permitting a two-way transmission of electricity between Turkey and the north, this would worsen energy supply security and further increase prices.

“I fear that the project on the table right now might merely be an electricity transfer without interconnectivity,” says Ozdil Nami, who was responsible for the energy dossier in the north between 2018 and 2019.

“The truth of the matter seems to have changed.”

There are political difficulties in front of establishing an interconnection with Turkey, as the country is an observer member of the European Network of Transmission System Operators for Electricity (ENTSO-E), energy economist and electrical engineer Yusuf Avcıoglu explains to the Cyprus Mail.

ENTSO-E, which unites European Union member states’ transmission grids, was established by EU countries in 2009 to increase energy supply security. There is a permanent connection between Turkey and the ENTSO-E’s Continental Europe grid since 2015 via Bulgaria and Greece.

“ENTSO-E is the ultimate arbiter regarding the connection of a third state to the main grid,” says Avcıoglu, who is also the former vice-chairman of the board of directors of the Turkish Cypriot electricity authority Kıb-Tek. “Therefore, ENTSO-E’s permission and approval is needed for any interconnection made by Turkey.”

According to Avcıoglu, as long as the Cyprus problem remains unresolved, ENTSO-E will not grant a permit to Turkey to make an interconnection with the northern part of Cyprus, and the only method that can be approved and implemented at the moment is the “isolated area feeding” method.

This is exactly the method the experts are warning against.

“This means electricity can only be transmitted one way by Turkey to the north through a power generator set up separately from the main grid,” Avcıoglu says. “This is not interconnection. A two-way transmission will be impossible. We would not be able to export the power generated by solar energy.”

Besides a solar farm, households in the north have the right to set up solar panels and sell to the grid.

A simple one-way cable rather than an interconnection would be detrimental for the Turkish Cypriot community Nami tells the Cyprus Mail.

One of the biggest risks is becoming dependent on the electricity supply from Turkey.

According to reports, the cable from Turkey “will meet one thirds of the total demand. This is a huge share. The smallest problem or failure would make the country plunge into darkness,” says Nami. “On top of that, we would not be able to sell our extra electricity generated by solar panels and the electricity prices would spike because the investment cost of this huge project plus all the operational and other expenses would be reflected in the electricity bills.”

In this case, it is vital that other alternatives are considered, experts say.

Caglayan Cesurer, the president of the Cyprus Turkish Electricity Authority Workers Union (EL-SEN), also made a statement warning about the risks or the project.

“If you connect the north to Turkey through a system which will allow us to buy electricity when needed and to sell electricity when needed, then go ahead,” said Cesurer. “But what you are trying to do here is to set up a system for a one-way purchase from a power generator in Turkey. At all costs, we will never allow a one-way sales agreement with Turkey through a cable.”

A question that arises at this point is, would Turkey, which has an income of about €2 billion per year as a result of its membership in ENTSO-E, go ahead with an interconnection with the northern part of Cyprus and risk being sanctioned?

“It is possible,” says Nami. “It is totally up to the political will of Turkey.”

Nami says that during his tenure in 2018, there was not enough political will on the part of Turkey to push forward with this.

“Turkish officials wanted to realise the project but also did not want any problems with ENTSO-E.”

However, Nami also relays to Cyprus Mail that during his meeting with ENTSO-E officials in Brussels the same year, he was told that Turkey would not be massively sanctioned if it went ahead anyway and made an interconnection with the north without ENTSO-E’s permission, as many member countries are benefitting significantly from Turkey’s presence on the grid.

As the Turkish Cypriot community awaits to find out about the details of the cable project,

Olgun Amcaoglu, who is currently responsible for the economy and energy dossier in the north, recently told reporters that the Turkish Energy and Natural Resources Minister Alparslan Bayraktar “has assured us that there would not be any problems with ENTSO-E”.

Clearly clueless about the plans, Amcaoglu concluded: “President Erdogan also conveyed to us that they are taking full responsibility.”

https://cyprus-mail.com/2023/07/02/norths-electricity-deal-with-turkey-as-elusive-as-ever/

North reeling from exorbitant energy prices, intermittent supply

 Esra Aygin 

Turkish Cypriots from all walks of life are breaking under the high cost of electricity and suffering from the continuing daily power cuts that last for hours on end.

On Monday, after receiving electricity bills for the month of March, a group of citizens gathered in front of the building of the Turkish Cypriot electricity authority KIB-TEK and threw eggs in protest. Many published photos of their electricity bills on social media and questioned in sheer desperation how, in a place where the minimum wage is 6,000 Turkish Liras (373 euros), they could pay electricity bills of 2,000-3,000 TL (124-187 euros). 

The bills for the month of March were the first after the Turkish Cypriot administration hiked the price of electricity more than 200 percent on average.  

“We have no electricity, but at the same time, there is no way we can pay the electricity bill,” tweeted journalist Ulaş Barış. 

“Imagine how our electricity bills would have looked like if we didn’t have power cuts every night in the coldest hours,” commented Tweeter user Emine Arıl. “We have come to a point where we are thankful for the power cuts. 

The costly electricity hurt the producers the most.

Businessman Tolga Ahmet Raşit, the director of ARUN flour factory posted a photo of his February and March electricity bills on social media. His bill, which was 47,000 TL (2,922 euro) in February, had risen to 200,000 TL (12,437 euro) in March. Raşit questioned how they could continue to produce under these circumstances. 

“Neither the people, nor the economic sectors have the ability to cope with these prices,” the Turkish Cypriot Chamber of Industry KTSO said in a written statement on Wednesday. “Especially for the manufacturing sector, whose main input is electricity, production has become impossible… Many enterprises will not be able to pay these bills. As a result, their electricity supply will be cut off and they will have to stop production and close. Some small enterprises have informed us that they will halt production for a period as of this month. Some are suggesting a communal civil disobedience.” 

“We are losing both, our minds and our livelihood,” announced the Union of Restaurant Owners. 

The backlash caused the administration to announce that they would subsidise electricity prices, which would result in a slight reduction in the price hike. The new numbers still indicate a 100 per cent increase in electricity prices. 

The move was widely seen as a symbolic rather than concrete step aimed at de-escalating the outburst in the community as nobody knows how it will be financed. As of Friday, the decision had still not been published in the official gazette. 

Sunat Atun, who is responsible for the finance dossier in the Turkish Cypriot administration, stated that they would need to find an additional monthly resource of 180 million TL (11 million euro) to be able to carry out the promised subsidy. Earlier, Atun had confessed that the Turkish Cypriot administration no longer has the ability to borrow from the market. 

“The government should explain how it would finance this subsidy,” said economist Devrim Barçın, warning that this step may result in price hikes elsewhere. In fact, on the same day, the Turkish Cypriot administration announced a sharp price hike in bottled gas, making it five times more expensive compared to a year ago.

“I don’t think this decrease in the price hike is sustainable,” economist Mertkan Hamit tells the Sunday Mail. “We are trying to buy a resource, whose value is increasing with a money, whose value is decreasing. The gap is increasing in both ends. A price increase is inevitable. The electricity prices will go up no matter what.” 

In the northern part of Cyprus, electricity is mainly produced using imported fuel oil. Turkish Cypriots use the Turkish Lira, which lost 44 per cent of its value in 2021 alone.

“The electricity bills before the decrease were impossible to pay,” says president Hurrem Tulga of the Turkish Cypriot Chamber of Shopkeepers and Artisans KTEZO. “Can they be paid now? It is doubtful. There is a huge anger. Businesses cannot decrease the use of electricity. A butcher cannot switch his refrigerators off. A café cannot turn its air conditioners off. The small businesses have no chance of surviving. They will close. Unemployment will surge.”  KTEZO held a demonstration on Wednesday to protest the Turkish Cypriot administration, which “keeps increasing prices for the people, but do not reduce their own expenses.” 

On top of the devastating electricity bills, Turkish Cypriots have been suffering from daily electricity cuts in the northern part of Cyprus since the beginning of this year. The cuts make life difficult for especially the young and the sick, as well as impacting every sector. The cuts – sometimes lasting up to 7 hours - are due to lack of investments in the electricity infrastructure, fuel shortages and the inability to buy some very expensive spare parts for failed turbines due to financial difficulties. 

KIB-TEK, which has a capacity of 340 mw a day is currently producing only 290 mw. Lawyer Feyzi Hansel filed a suit for damages against KIB-TEK two weeks ago for “violating its obligation to provide uninterrupted electricity.” 

According to economist Hamit, when it comes to power cuts, northern part of Cyprus is two times worse than Pakistan, which has the worst average monthly electricity supply according to World Bank data. 

“We are twice worse than the worst in terms of electricity service,” says Hamit. “We are in an awful situation.” 

The Turkish Cypriot administration has been buying electricity from the Republic of Cyprus daily.  

During a press conference last week, President Kubilay Özkıraç of the Turkish Cypriot Electricity Authority Workers Union EL-SEN stated that everyone has a debt of gratitude to the southern part of Cyprus for constantly providing them with electricity. He also lambasted the Turkish Cypriot officials for criticizing the Greek Cypriots. 

“Our (officials) are very patriotic,” said Özkıraç mockingly. “They are cursing the (Greek Cypriots) instead of cursing those, who condemned us to darkness. Even President (Tatar) is constantly attacking South Cyprus.” 

Özkıraç stated that three of the five generators have been out of order and in need of spare parts for months now. He also said that a thermal plant is also out of order. 

“Unless investments are not made, the power cuts will continue,” said Özkıraç. “Unfortunately, we have a chaos right now and this will continue.” 

KIB-TEK, which has a debt stock of 2 billion TL (124 million euro), had to borrow another 50 million TL (3 million euro) this week to buy fuel. According to Özkıraç, state institutions owe around 900 million TL (56 million euro) to KIB-TEK. Last week, the electricity supply of the offices of Turkish Cypriot leader Ersin Tatar was cut off because of outstanding electricity bills. 

Economist Hamit questions how anyone can expect economic development or sustainable growth in a country with so many electricity cuts. ““Electricity is the main input of all production,” he continues. “In that, it determines the price of everything. If we want to produce, we need to provide affordable, uninterrupted electricity.” 

Hamit continues: “If you make electricity so expensive on the one hand, and have power cuts every day, you force many businesses to work with additional costs due to the use of generators etc. In which case, it would be impossible to control the prices even in local production.”

In fact, according to the Turkish Cypriot statistics department, the inflation rate in March was 83.19 per cent compared to the same month last year. The inflation rate was 13.05 per cent compared to last month. The highest increase was in the price of electricity by over 200 per cent. 

The dire living conditions and economic hardship sent Turkish Cypriots out on the streets by thousands last week. In a demonstration supported by trade unions, political parties and civil society organisations, crowds protested “social annihilation” and “impoverishment” in the northern part of Cyprus. 

“In just one month, we surpassed the average annual inflation level in the EU, which is around 7 per cent,” underlines Hamit. “We have hyperinflation. We are rapidly moving towards becoming one of the least developed economies in the world. The poverty spiral will grow exponentially.”

https://cyprus-mail.com/2022/04/10/north-reeling-from-exorbitant-energy-prices-intermittent-supply/

North facing "humanitarian crisis"

 

Esra Aygin 

“Turkish Cypriots will, soon evolve and start being able to see in the dark, just like cats!”

This is what user Strahd Shonya wrote in their Twitter account to protest the unbearable daily electricity cuts in the northern part of Cyprus. 

Between 1 and 16 January when the list was last updated, there were a total of 139 electricity cuts mainly due to lack of investments, fuel shortages and the inability to buy some very expensive spare parts for failed turbines - all a result of one of the worse economic crises Turkish Cypriots are going through in their history. 

The Turkish Cypriot economy has been in free-fall in recent months as the Turkish lira plummeted because of the interest-rate cutting policies of Turkish President Recep Tayyip Erdogan. The lira, as of 20 December 2021, had fallen by 54.5 per cent against the euro since 31 December 2020 .

The fall in the value of the Turkish lira has led to soaring prices in in the northern part of Cyprus, where the economy is dependent on imports. The inflation here reached %46 in December - the highest in Europe. In the same month, the food and non-alcoholic price inflation was %58. Although the official currency is the Turkish lira in the northern part of Cyprus and people’s incomes are also in liras, many expenses like rents and school fees are in foreign currencies, which exacerbated the situation. 

As Turkish Cypriots experienced a huge drop in their purchasing power leading to a decline in their living standards, they also saw their debts cascade. Most borrowing in the north is done in foreign currencies since banks do not trust the lira. The depreciation of the Turkish lira against the British Pound, euro and the dollar put debtors, whose earnings are in Turkish liras and debts in foreign currencies, in a dire situation and left them unable to meet their financial obligations. The debt of the administration also soared as the funds from Turkey are recorded as payable in dollars. 

Another direct result of the foreign currency crisis has been petrol shortages as people rushed to stock up fuel, or the petrol stations stopped sales, or the main providers did not want to sell to the stations ahead of expected price increases due to the depreciation of the lira. 

The inflation and foreign currency crisis coupled with the long-standing interruption in the flow of funds from Turkey has forced the Turkish Cypriot administration to halt all public investment projects and borrow from banks to pay the salaries. 

“The borrowing limit of the administration is up,” said Turkish Cypriot politician Dogus Derya. “If the administration were a company, it would have to declare bankruptcy right now. We are getting poorer each passing day because of something we have no control over – because of the decisions made in Turkey. This is making the northern part of Cyprus unbearable. People are being tested with hunger.  We are at a very critical threshold.” 

Economist Mertkan Hamit agrees: “The situation is turning into a very serious humanitarian crisis. This can no longer be called an economic crisis.” 

The dire situation led many Turkish Cypriots to look to the southern part of Cyprus for job opportunities. In December, Turkish Cypriot union Turk-Sen, upon demand from its members, partnered with Greek Cypriot labour union Sek to allow up to 8,000 Turkish Cypriots to work across the divide mainly in tourism, construction, and restaurants. 

As people struggle to make ends meet, there also are increasing calls in the society to ditch the Turkish lira and unilaterally adopt Euro. 

Last Sunday’s general elections took place against the backdrop of this crisis and with the Higher Election Board asking the presiding officers of the ballot boxes to bring along battery-operated lamps or flashlights just in case there is a power cut. 

Unlike previous elections, the political parties did not talk about the Cyprus problem at all. The focus was the economy. 

“We can say that there were roughly three blocks in the elections, and they were all focused on the economy,” says Hamit. “But they all offered different solutions.” 

The first bloc was composed of those parties that see the solution in being able to get money from Turkey, according to Hamit. “They say they will have the best relations in Turkey, and they will be the best in convincing Turkey to send more money.” 

This block was mainly represented by the National Unity Party UBP, which got 40.4 per cent of the votes in the elections on Sunday and is expected to form the ruling coalition in the coming days. 

The second bloc advocates that Turkish Cypriots need to take responsibility and make reforms to improve the economy while also keeping amicable relations with Turkey, according to Hamit.  This bloc was mainly represented by the Republican Turkish Party CTP, which in its election manifesto had a number of economic measures including a “planned and gradual transition to a stable currency.” CTP got 32.8 % of the votes. 

The third bloc was the bloc that believes that there is neither the political will nor the budget to make reforms and any measure will anyway remain largely ineffective as long as the north’s dependence on Turkey continues. “This bloc advocates that if there is no solution to the Cyprus problem, we have no economic salvation. And this bloc manifested itself in the boycotters,” says Hamit.  

The abstention rate in the elections was %41,8 – the highest up to date. However, it is not possible to know how many of the absentees did this for political reasons. 

Hamit agrees that it is indeed very difficult for Turkish Cypriots to fix their economy under the current circumstances and does not think the economy and the Cyprus problem are mutually exclusive.

“We don’t have the ability to adopt any fiscal measures except makeshift, palliative and ineffective actions,” says Hamit. “We are cut off from the world. We use a currency we have no control over. We don’t have access to funding. We can’t borrow from international institutions. We don’t have foreign investment. We don’t have the appetite to make reforms. We only have access to funds from Turkey, which is using these funds to shape politics in the north. All these can only be solved with the solution of the Cyprus problem.” 

It is a huge contradiction to not prioritise the solution of the Cyprus problem amid such a huge economic predicament, according to Hamit, who believes that In terms of economy “These elections were a paradigm doomed to fail.” 

https://cyprus-mail.com/2022/01/30/north-facing-humanitarian-crisis/