Subsidies and utility rates (3)

It’s alternatives we should subsidise!

It is sad to say it, but the greatest incentive for installing alternative energy measures is high electricity prices – the higher the better. Unless people factor the high cost of alternative sources against the high cost of conventional sources they will never make the switch. If the high cost of conventional sources is camouflaged in subsidies they will never make the switch either.

I have no doubt that part of the reason why we, as a country, do not invest in energy alternatives is that energy prices have been relatively cheap. Why bother? The other part of the reason is that the technology that really makes a difference to you (basically, PV panels) is still rather expansive and pay-back periods (even at 95 per cent surcharge) are somewhat long. The consequence of higher energy prices is that both these drawbacks become less burdensome and if we can add to that an aggressive investment aid strategy to help finance the installation of the panels together with somewhat better pay-back rates from Enemalta (at present we buy at the same price we sell; we should consider buying at a higher price) then investment in energy alternatives might really take off.

We are also adding another reason in our tariffs: the eco reduction mechanism through which if a household remains below a given benchmark (there are three different proposals) one gets a 15 per cent to 20 per cent reduction in its bill.

That reduction is paid for by those who go way above the benchmark: an ecological version of social justice. Using the lowest benchmark we are proposing – a level of consumption comparable with other Mediterranean countries – 109,000 households out of a total of 190,000 already qualify. Of course, we want to change people’s habits so our aim is to have that number grow year in year out.

What if these houses plough back their savings into more energy alternatives? Could we really change our energy consumption patterns?

The next big jump would then happen when Enemalta begins installing intelligent meters that allow us to give houses the option to switch some of their consumption (say washing clothes or heating water) to the night when it costs Enemalta less to generate electricity. The saving for Enemalta in this changing pattern would be passed directly to the consumer making the effort. We are in the process of concluding negotiations on this, so it’s still somewhat far off but this step will, hopefully, have a great impact in shifting demand that would drastically reduce peak loads and relative emissions.

Of course, Enemalta is prepared to buy in any amount of energy that can be provided by alternative sources and we also believe that one of the main benefits of the inter-connector to Sicily is that we can buy in wind energy from Sicily where there is heavy investment going on in this area.

So we could be in for some interesting times provided we understand that subsidies should be there to subsidise change and not to subsidise waste.

Tomorrow: Subsidising the commercial sector

Dr Gatt is Minister for Infrastructure, Transport and Communications.