Safeguarding Malta’s energy interests

Only once all the contracts have been published will we be able to tell if Labour’s energy policy really safeguards Malta’s interests in this sector

24 January 2017, 8:35am
It is undeniable that the shift from Heavy Fuel Oil to natural gas, coupled with the use of the interconnector represents an improvement in the quality of life of the Maltese people
It is undeniable that the shift from Heavy Fuel Oil to natural gas, coupled with the use of the interconnector represents an improvement in the quality of life of the Maltese people
There can be no doubt that the energy sector has proved the most contentious and difficult for the Labour government to handle: just as it had been for the preceding Nationalist administration, albeit for different reasons.

On paper, Labour’s declared policies appear well-thought through and practical. It is undeniable that the shift from Heavy Fuel Oil to natural gas, coupled with the use of the interconnector (which is locally emissions-free), represents an improvement in the quality of life of the Maltese people. But while the intentions behind Labour’s policies are commendable, a number of questions have arisen concerning the implementation. 

The recent switchover was made possible through a deal with a private energy consortium, for which the contracts remain unpublished (though we are assured they will be released in the coming weeks). Even without Labour’s clear pre-electoral pledge to guarantee transparency and accountability, such reticence is unacceptable.

What we know is that Enemalta, which is mostly State-owned, will be buying energy at a fixed price from Electrogas for five years: after which we will be contractually bound to buy energy from the same source for 18 years.

This proviso naturally limits Enemalta’s options to shop around for cheaper suppliers. And the period of time for which it will be contractually bound is one that spills over into the next three political legislatures at least. Muscat’s agreement has bound not just his own, but all future Maltese governments for the foreseeable future.

For this reason alone, it is imperative that the precise terms and conditions of the deal are made public. Muscat’s assurances of imminent publication are naturally welcome; but his government has already missed a self-imposed deadline for the end of last year. 

Meanwhile, there are good reasons to be sceptical about a contract which, from the outside, appears to favour Electrogas and BWSC more than Enemalta. Last Monday’s near nationwide black-out has exposed one fundamental reality: that Malta is currently buying 75% of its energy needs from the Malta Sicily interconnector.  

Logically, this suggests that Enemalta is buying energy at an advantageous rate from Italy through the interconnector. Otherwise, it would be madness to procure such a large percentage of energy from a single source.

In this sense, the government is duty bound to answer one legitimate question: will the Power Purchase Agreement (PPA) signed with Electrogas limit the share of energy we buy from the interconnector? If so, is this really in the national interest?

It bears mentioning that there are other factors that one should consider. Over-dependence on the interconnector is one of them: for better or worse, generating one’s own power allows for an energy sovereignty that would be absent if we are to import three quarters of our electricity from Italy. One must also be cognisant of any possible future changes in the relations of our two countries... especially in view of the political uncertainty hanging over Europe at present.

Price stability and security of supply are, however, other important factors.  The exigencies of transparency demand that the government should provide all information: including the price of energy which we are currently buying from the interconnector, compared to the price of energy bought through the PPA; as well as a detailed breakdown of the energy mix in Malta. How much are we contractually obliged to buy from Electrogas, how much from the Chinese-owned BWSC (which will also buy gas from Electrogas) and how much from the interconnector? What percentage is accounted for by renewals, and should this percentage be increased?

Moreover, a clear justification is needed if the interconnector is to be sidelined to make way for the commercial needs of Electrogas and the Chinese owned BWSC. One must recognize that Electrogas’ financial viability depends exclusively on its selling electricity to the national grid, and natural gas to the former BWSC plant. This viability cannot be taken for granted.

The government should also explain clearly what will happen to the agreement with Electrogas once a gas pipeline is completed... which would remove the inconvenience of having an oil-storage tanker anchored at Marsaxlokk bay. Will Malta be still contractually obliged to buy electricity from Electrogas, if this company is no longer required to provide us with natural gas?  In that scenario, Electrogas would be buying its natural gas from the (presumably State-owned) pipeline, only to sell back its energy to the national grid. It would become an unnecessary middleman, viewed from the perspective of Malta’s energy needs.

It is also of vital importance to increase the share of renewables in our energy mix. This is vital both to strengthen autonomy as well as for environmental reasons. While solar power has become more competitive than ever, and Malta stands to benefit from China’s leading role in this sector, news that Malta’s largest solar farm, occupying 36,000m2, will cater for only 850 households is not encouraging. 

Only once all the contracts have been published will we be able to tell if Labour’s energy policy really safeguards Malta’s interests in this sector.