Electrifying the energy debate

Our debates about energy generation and prices show an admirable mix of fossil fuels and renewables. The heat is natural; the huffing and puffing generate a lot of wind; there’s even a lot of gas. But in the end, it’s just not electrifying.

It’s not only in Malta. Across the Western world, most politicians and voters agree environmental and energy security are important but, somehow, they are not important enough to mobilise them into effective action.

The usual explanation is that these topics are too big and too far for voters to be able to focus properly. Sounds true but in that case we are letting our politicians off the hook.

In the wake of an environmental disaster like BP’s off the Gulf of Mexico, many got indignant at BP drilling in Libyan waters. But we never got round to discussing that the issue is not about BP as such (even if its share price has been affected).

The risk of such accidents lies in the very nature of fossil fuel extraction.

If the risk bothers us, we should question, insistently, our dependence on such fuels.

Whatever happens to BP and offshore drilling, the risks are about to get greater, as William C. Ramsay, formerly deputy executive director of the International Energy Agency, reminded his audience last Friday at the European Ideas Network’s Summer University in Budapest. (Disclosure: I was the rapporteur of the energy and environment roundtable at which Mr Ramsay spoke.)

“From now,” Mr Ramsay says, “nearly all incremental oil, gas and coal production will come from outside OECD countries.” And the significance of that? It means fossil fuels “will travel further in ships or pipelines, through difficult waters and choke points”.

That means dependence on certain kinds of fuel will make us lean on unstable countries and states prepared to turn off their gas supply to teach us a lesson.

This likely future scenario – although I can think of some eastern European countries where this is not simply a scenario; it’s recent experience – links energy up to national security. Yet, what kind of discussion are we having, at national and European levels, about it?

Nationally, we have a polemic raging about whether the government, a few years ago, could have taken steps to make our energy supplies and electricity generation cleaner and more efficient.

Can we avoid having another polemic, a few years down the road, about whether, in 2010, the government and the opposition could have agreed on a strategy that would diversify our supplies and sources of energy?

Such a strategy would need to have three elements. The first concerns the trade-off between utility prices and clean energy.

It might appear that we have a debate about this at the moment, with the government arguing that too fast a transition to cleaner electricity generation would inflate utility bills exponentially and the opposition countering that clean air is worth paying a steep price for.

But this is a shouting match, not a real debate. Of course, clean air is worth paying a price for but just how steep?

Ironically, without a realistic answer that admits a trade-off at some point, the government’s own idea of what constitutes a prudent trade-off cannot be scrutinised properly.

The second element would address the question of subsidies for renewable sources of energy. Government subsidies are paid for by the taxpayer. Mishandle subsidies – by giving the wrong amount to the wrong technology – and you risk turning voters against green energy.

According to Mr Ramsay, Europe generally has been so “fixated” on wind energy that it risks doing just this: The energy grids are not keeping up with the intermittent electricity supply while the level of subsidies guarantee a tidy profit for wind barons without a commensurate gain by energy consumers.

The issue is about finding the right level of subsidy for technologies in their early development phase and then having the political guts to take it away when it’s no longer needed.

Anything else and investors will place their money in the wrong ventures, generating jobs that may be dubbed “green” but which have no sustainable future. There is a political angle to all this. Unless there is some broad bipartisan agreement about the general level of subsidies and desired mix of technologies, the ambiguous situation will discourage in­vestors seeking to make a long-term business plan.

The third element of an environmental and energy security strategy concerns the prices Malta is able to secure on the international markets.

At the moment, the arguments concern government decisions and hedging agreements.

However, even if the best possible decisions are consistently taken and Malta begins to use more gas, on current trends we will still be paying more for fossil fuels than other countries.

For one thing, we are a small buyer. Other current small buyers of gas are paying some 30 per cent more than major buyers (who are able to force suppliers to allow greater purchases on the spot markets).

And this trend is only likely to be exacerbated as developing countries become greater consumers of world gas, reducing our market strength further.

Mr Ramsay argues that a single European voice on energy matters (which entails the convergence of energy production, pricing and regulations) is essential. But there are different kinds of single voices, entailing different visions of subsidiarity. Malta needs to have a single voice concerning what kind of European energy integration it wishes to see.

ranierfsadni@europe.com