‘World’s longest and deepest’ €2.4 billion subsea green electricity interconnector given a go at Mediterranean energy map metamorphosis

Following hurdles and delays, a multi-billion-euro underwater high voltage direct current (HVDC) interconnector project, envisioned to link Europe, the Middle East, and Asia, will connect the green electricity transmission dots for the Cyprus-Greece-Israel triangle, bringing together game-changing low-carbon and clean energy bonds in the transition to a net zero ecosystem.

A meeting, seen as a last-ditch effort between Greek and Cypriot leaders last week to sort out their differences and agree on a mutually beneficial way forward for the 1,240 km Great Sea Interconnector HVDC subsea link, former EuroAsia Interconnector, has led to a landmark agreement, securing the continuation of the pivotal Greece-Cyprus-Israel electricity interconnection project, according to the Greek electricity transmission system operator (TSO), Independent Power Transmission Operator (IPTO or ADMIE).

Moreover, Thodoros Skylakakis, Greece’s Minister of Environment and Energy, and George Papanastasiou, Cyprus’ Minister of Energy, Commerce, and Industry, are said to have signed a memorandum of understanding (MoU) on the dotted line, which confirms the strong political will of both countries to advance one of the largest electricity interconnection projects in the world.

The main hurdle such an agreement had to overcome was previously pinpointed to be Cyprus’ plan for the project’s revenue recovery period which resulted in a funding deficit of more than €100 million that stood in the way of the interconnector project’s development designed to forge renewable energy ties between continental Europe and the East Mediterranean.

To tackle the issue, IPTO disclosed its intention to invest €160 million into the subsea link and Greek officials pledged to curb the cost recovery in half, from €250 million to €125 million over five years at a rate of €25 million per year from 2025 up to 2030, in exchange for extending the guaranteed return period of a weighted average cost of capital (WACC) of 8.3% on the project from 12 to 17 years on the Cypriot side.

The Great Sea Interconnector, established by IPTO in January 2024, as the implementing and financing entity of the Crete – Cyprus – Israel electricity interconnection link and described as a project of strategic importance for Cyprus, Greece, and the entire EU, is believed to pave the way for the former to join the European electricity market, bringing multiple benefits to consumers and businesses.

The construction of the Crete – Cyprus interconnection, launched in 2023 to integrate Cyprus, which is seen as the last non-interconnected EU member state, into the European electricity transmission system, “will connect Cyprus to the European electricity grid, facilitating its energy transition and promoting Greece’s goal of becoming a corridor for clean energy transmission,” according to the developer’s data.

The next phase of the project, included in the European Union’s list of projects of common interest (PCI), which the EU bankrolled with €657 million in subsidies, is anticipated to bring Israel, which is also currently not interconnected to its neighbors, into the fold, enhancing its security of supply while gaining the ability to increase the participation of renewable energy sources (RES) in its energy mix.

“The world’s longest and deepest submarine direct current electricity interconnection will put an end to Cyprus’ energy isolation and enhance the energy security of Israel while accelerating the energy transition in Europe and Eastern Mediterranean region,” underlined the developer.

Entailing a transmission capacity of 1 GW and a voltage of 500 kV, the 1,208-km-long interconnection with a maximum depth of 3,000 m has been forecast to require approximately €2.4 billion to be brought online by 2030 for the connection of the Greece-Cyprus electricity grids via Crete and adding Israel to the transmission list later on. If the project links only Greece and Cyprus, the cost is estimated at around €1.9 billion.

The signing of the agreement between Greece and Cyprus follows months after the U.S. International Development Finance Corporation (DFC) handed over a letter of intent (LoI) to the Greek TSO, expressing its interest in investing in the project. Meridiam, a Paris-headquartered investment management company, also joined the shareholding structure of the firm in charge of implementing the project.

A few days ago, IPTO underlined a key finding of Mario Draghi‘s recent report on the future of European competitiveness, which outlined that Pan-European electricity corridors were fundamental for the continent’s economic growth, competitiveness, and energy transition, strongly highlighting the crucial role of international interconnections at the core of the Greek TSO’s strategy.

As the former European Central Bank chief’s proposal focuses on creating a flexible institutional framework, treating Europe as a single electricity area, Draghi puts forward the establishment of a permanent European coordinator to ensure political backing and monitor permitting progress of cross-border energy infrastructure projects.

In addition, a need to strengthen the European Union’s Connecting Europe Facility (CEF), intended to finance interconnections, was highlighted in the context of the next multiannual financial framework.