Self-consumption: An important pillar of the energy transition

Tassos Gregoriou, former Manager of the Distribution System Operator (Cyprus)

 

Self-consumption, as the term has come to be known in the European Union (previously referred to as self-generation), is the production of electricity from renewables by consumers themselves for their own needs. This achieves partial autonomy from the electricity system, the degree of which depends on the percentage of energy that is exported and/or absorbed by the system or even stored (if there is a storage system). The traditional consumer becomes a prosumer and can potentially evolve from a passive consumer to an active self-consumer, actively participating in the management of their own energy needs and the system. In other words, in addition to contributing to the penetration of RES, self-consumers can also contribute to the achievement of other important energy transition goals, including participation in the energy market.

According to the REDII (Renewable Energy Directive II), the term self-consumption also applies to a group of two or more cooperating self-consumers located in the same building or residential complex (jointly acting renewable energy self-consumers or collective self-consumers). Energy Communities are the evolution of cooperating self-consumers and feature prominently in Directive 2019/944 on the internal electricity market.

The obvious benefits of self-consumption are:

1. Enhancing the penetration of RES in the energy system.
2. Access to energy at low prices.

However, the contribution of self-consumers is not limited to the above benefits, as they can play an important role in:

1. Achieving the necessary flexibility so that the electrical system can adapt to changing and distributed energy production, especially in cases where the self-consumer also has a storage system (including electric vehicle batteries).
2. Managing both their own needs and those of the system in a more economical and efficient way, taking advantage of market signals.
3. The effective integration of electric cars, through their increased ability to respond to electricity demand.

A prerequisite for the above is the provision of metering and other market information in real or near-real time. To this end, it is necessary to implement and operate smart metering systems and use appropriate tools for this purpose.

The European Union, through the Directives on the internal electricity market (2019/943 and 2019/944) and 2018/2001 (and its amendment 2023/2413) on the promotion of renewable energy sources, attaches great importance to self-consumption and calls on Member States to encourage and support it.

In other words, it is not enough for RES to achieve a certain penetration rate; they must also have specific characteristics, with an emphasis on local use and active self-consumption.

In Cyprus, self-consumption has been around since the beginning of the previous decade and takes the form of two support schemes concerning:

1. Net metering
2. Net billing

Based on data from July 2025, PV self-consumption systems amount to approximately 88,000 with a total capacity of 537 MW, compared to 422 MW for commercial PV. More specifically, the status is as follows:

PV system type	Number	Capacity (MW)	% of total
Net-metering	86.000	415	43,3
Net Billing	1.800	122	12,7
Commercial	253	345	36,0
At guaranteed price	1.754	77	8,0
total	89.807	959	100,0

 

Based on the above data, self-consumption has penetrated in Cyprus to a very large extent, contributing significantly to the penetration of RES and affordable energy for self-consumers. However, the favourable operating conditions of the net-metering scheme:

– Negate the rational and cost-oriented calculation of Network Usage Fees and Ancillary Services, as required by the above EU Directives.

– Create conditions of unequal treatment between consumers, since the cost of their integration into the system is shared by all consumers and not by those who cause it.

– Discourage, rather than encourage, energy savings through the reckless use of accumulated energy.

– Do not provide incentives to reduce the time lag (or increase the synchronisation) between production and self-consumption, which is a basic principle of self-consumption (it is estimated that the average synchronisation rate is around 30%).

– Discourage the evolution of self-consumers from passive to active ones.

In summary, self-consumption is an important pillar of the energy transition.

In Cyprus, through various government schemes over the last decade, a large number of PV systems for self-consumption have been installed, which have made a significant contribution to the penetration of RES and, at the same time, to self-consumers enjoying energy at an affordable cost. However, to achieve energy transition in the functioning of the internal electricity market, we must end net-metering schemes and impose the appropriate charges on existing ones. With the right market signals, hybrid net-billing systems equipped with storage systems will penetrate the market. The development of energy communities is also necessary to transform passive consumers into active self-consumers.

To this end, we need the development and use of smart management tools by bodies representing self-consumers. Finally, the evolution of the network will play a special role in becoming a platform for smart energy and information flow between all participants, in real or near real time.