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James Debono
Investments Minister Austin Gatt’s assertion that conventional energy is cheaper than alternative energy sources at current fuel costs, is being disproved by costings presented by the Malta Resources Authority’s chief executive.
Electricity currently costs 4.4 cents per kilowatt-hour, excluding taxes. But a presentation given in September by engineer Antoine Riolo, CEO for the resources authority, at a seminar on renewable energy, claims the costs of potential offshore wind generation at is-Sikka l-Bajda can be generated at 3c3 per kWh.
Riolo based his costings on 2004 fuel prices, when energy from conventional energy cost 2c9 per kWh, when wind energy was still more costly than energy from fossil fuels.
The situation has now been reversed, with the cost of conventional energy reaching 4c4 per kWh due to the increase in fuel prices.
Another study by the Institute for Energy Technology of the University of Malta further shows that at “present prices, a medium wind site like Luqa can produce electricity at 3c5 per kWh, while a better site like Bahrija would generate at 2c5 per kWh,” nearly half the cost of a conventional fuel plant today..
Both studies have contradicted claims by Gatt, published in a paid advert in newspapers on 15 October. Gatt described the claim that alternative energy would result in cheaper energy as an “illusion”.
Gatt had also said that at the current rate of technological development and current oil prices, it costs more to produce one unit of electricity using any alternative rather than using traditional fossil fuels.
He reiterated this view in last Monday’s edition of Int X’Tahseb on Smash TV, although he has insisted higher financial costs should not preclude the development of alternative energy, “which offers health and environmental benefits.”
Asked whether the ministry still holds the view that alternative energy is costlier in the view of the MRA study, a spokesperson said the ministry cannot speak from a position of original competence on this issue.
“We of course monitor international and national studies but are not the competent authority to be the ones to study the differences in the costs and to decide on policy as a result of that difference,” the spokesperson said.
With the increases in oil prices in the recent months, the gap between the cost of conventional sources and alternative sources “is likely to have narrowed,” the spokesperson said.
The ministry is still holding firm to the view that it is unlikely that energy generation from oil is anywhere near as expensive as generating it from wind or solar energy.
It said it is unable to compare the methodology used by the MRA to determine the cost of offshore wind energy generation at 3c3 per kWh with the methodology used by Enemalta to determine that the cost of fossil fuel generation at 4c4 per kWh.
Comparing the unit cost of a product like oil, “for which the complete infrastructure exists,” with the unit cost of a product that “exists only in theory,” is considered to be a “simplistic exercise” by the ministry.
Referring to a speech made by Shell’s chief executive James Smith during the Commonwealth Business Forum, the ministry insists “the global effort to promote alternative sources of energy is still governed by the willingness of consumers to pay higher prices or on the availability of public subsidies.”
The ministry’s zeal for alternative energy is however not damped, despite its contention that renewable energy is more expensive. It is in fact asking all its entities to meet eight per cent of their energy requirements from alternative energy sources. “The reasons for switching to alternative energy are more important than the naked fact about the cost.”
Global warming, air quality and the simple fact that conventional sources will start running out in the lifetime of our children are seen by the ministry as sufficient reasons to start a transition towards alternative energy sources.
Still, whilst the ministry claims wind energy is more expensive to operate at current technology levels than conventional fossil fuel energy, this claim is disputed by the government’s own energy consultants Mott Macdonald UK, whose draft on Malta’s renewable energy policy is so far unpublished.
On 16 November at a Rome conference, Isabel Boira-Segarra, a Mott Macdonald consultant, presented figures showing that a large onshore wind energy plant in Malta is more cost-effective than a conventional fossil fuel plant. The so-called ACP ratio, which is used to compare the economic viability of one project with another, has been set at 0.95 for a large onshore wind energy farm. The lower the ratio, the more cost-effective.
The cost ratio for a fossil fuel plant was set at 1.
Boira-Segarra’s concluding remark on renewable energy in Malta that “political will is a necessity,” says it all.
jdebono@mediatoday.com.mt
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