Cyprus, Greece and Israel on Monday signed an initial agreement to build the world's longest and deepest underwater power cable that will traverse the Mediterranean seabed at a cost of about $900 million and link their electricity grids.

The project, called the Euro-Asia interconnector, will provide a back-up power source in times of emergency, said Israeli Energy Minister Yuval Steinitz, who was in Nicosia to sign a memorandum of understanding with his counterparts.

Cypriot Energy Minister Natasa Pilides said it marked "a decisive step towards ending the island's energy isolation, and consequently, our dependence on heavy fuels."

The cable will have a capacity of 1,000-2,000 megawatts (MW) and is expected to be completed by 2024, according to Israel's energy ministry.

With a length of about 1,500 km and a maximum depth of 2,700 metres, it will be the longest and deepest subsea electricity cable to have ever been constructed, it said.

Calling the project a '2,000 mega-watt highway', Pilides said the first stage is expected to be operational within 2025.

It will cover three sections of the Mediterranean: some 310 kilometres between Israel and Cyprus, about 900 kilometres between Cyprus and Crete, and about 310 additional kilometres between Crete and mainland Greece.

Greek power grid operator IPTO has started construction of the Crete-mainland part, seen concluding by 2023. The Greek operator and Eurasia have been working closely to make sure the two cables link to each other efficiently, an IPTO official said.

The European Union has recognised the cable as a "Project of Common Interest", categorising it as a project it is willing to partly finance.