This article reviews the application of solar energy technology in Cyprus and presents an energy analysis, including the use of solar energy, in the island. Cyprus has no conventional sources of energy and is dependent on imported oil. However, its geographical position is such that it is one of the countries where the potential for solar energy utilisation is very high. Cyprus began manufacturing solar water heaters in the early 1960s and today it produces more than 30 000 m2of solar collectors yearly. It is estimated that more than 130 000 solar water heaters are in operation, which provide the equivalent of 9% of the total electricity consumption in the island, and corresponds, approximately, to 4% of the national energy consumption. However, the use of solar energy for space heating and cooling provides a further challenge because it does not appear to be economic under the climatic conditions and system design practices currently prevailing in Cyprus. The article provides a statistical analysis of the energy demand and identifies areas of further growth for solar energy technology.