The policy of renewable energy

The recent call for expressions of interest for the financing, design, supply, installation, operation and maintenance of photovoltaic systems on public buildings in Malta raises some interesting questions on the government's policy on energy produced from renewable sources.

Contrary to some reports in the media, the call is not a tender for the actual work to be carried out but simply a call for those who would be interested in submitting such a bid. Eventually, a number of those who express their interest and qualify according to established criteria will be invited to participate in the ultimate tendering process. This means that a lot more time has to pass until someone is chosen to do the job.

The call has been issued by the Ministry for Resources and Rural Affairs (MRRA) and not by Malta's only energy provider, Enemalta. Interestingly, the portfolio of the MRRA includes the Malta Resources Authority (MRA), that is, the energy regulator in Malta. Since the regulator cannot also be the producer of electricity from renewable sources this situation is highly unorthodox.

The production of electricity from renewable sources needs to be incentivised by the establishment of a realistic feed-in tariff that would encourage private industry to invest in these sources. In this scenario it would make more sense if, rather than owning the photovoltaic systems, the government simply leased its roofs to independent power providers (IPPs) after issuing tenders where the bids would just be for the rent of the available spaces.

I do not see why the government should fork out the capital outlay - irrespective of the source of funds that are always public funds - when private industry can easily do the same thing, with Enemalta simply paying for the actual power being put into the national grid at the time that it is being used. In this way, moreover, the rental value of the roof spaces will also be part of the equation to government's advantage. Of course, the power could be consumed in the same public buildings where the system is installed, with only excess power being fed into the grid; thus saving distribution costs.

Malta has had the experience of a private contractor supplying reverse osmosis plants and then operating and maintaining them, with payment being unrelated to the actual volume of desalinated water produced. In the long run, this worked against Malta's interests, and the Water Services Corporation took over the operation and maintenance of these plants at a fraction of the cost that it was paying for the same service.

My gut feeling, therefore, is definitely against anything owned by the state but operated and maintained by a private party whose reward is not calculated on the basis of actual production. Letting private industry invest and produce power for which it is paid at a realistic and cost-based rate would seem to be preferable.

However, there seems to be reluctance on the part of the MRA to establish a realistic feed-in tariff that makes it attractive to invest in renewable energy sources. This is the why there are no IPPs in Malta as yet.

The reasons for this reluctance could be twofold. One is the practical difficulty in establishing a feed-in tariff that would cover energy from both wind and sunlight. Power generated by these two renewable sources costs more than that generated by fossil-fuel plants due to the significantly higher capital outlay, particularly in solar energy. Moreover, there are significant differences between the costs of the power generated by two renewables.

The precarious financial situation of Enemalta is probably the other reason why the government is reluctant to establish a meaningful feed-in tariff. Today, Enemalta's revenue from electricity does not even cover its total operating and financing costs and payment of interest on loans - hence its declared losses every year. For a number of years, repayment of the original capital outlay has been foregone and is now probably out of Enemalta's financial 'equation'.

Although few people know it, since joining the EU the government successfully negotiated a permanent derogation giving Enemalta a monopoly on distribution and supply of electricity. The size of our country was probably the decisive reason why the EU acquiesced to Malta's request.

While it pays the country to consume less electricity produced from imported oil, paradoxically Enemalta would be better off if this consumption increases; more so at the increasingly high tariffs. Giving IPPs the possibility to feed the grid with as much power as they can produce from renewable sources could lead Enemalta to a worse financial quandary. Has government therefore decided to control the production of renewable energy in order to safeguard Enemalta's 'interests'?

Rather than encouraging and enticing private enterprise to invest in the generation of power from renewable sources, the government has practically restricted the ownership of this industry to the ministry responsible for the MRA when this regulator cannot own these generation systems. What are the motives behind this overtly 'socialist' stance?

micfal@maltanet.net