‘Sargas: Paying €900 million for unclean energy’
Sargas CEO Henrik Fleischer spelt out his company’s promise to deliver the “cleanest energy for the best price” last month. Photo: Jason Borg
Contrary to the impression given by Opposition Leader Joseph Muscat, neither the government nor Enemalta Corporation had discarded the Sargas floating power station project.
Introducing the debate on the financial estimates of Enemalta, Finance Minister Tonio Fenech said the corporation was still analysing the Sargas proposal, but it was doubtful why Malta should go for a €900 million project for unclean energy.
This investment was more than the sum total of the funds invested in the Delimara extension and the interconnector and Enemalta’s debt.
Mr Fenech also pointed out that the government could not carry out a joint study with a proposer.
The Sargas proposal was about conventional and not renewable energy, with one aim being to create carbon dioxide sludge, capture it and sell it for use in Danish oilfields. In that case, it could not be excluded that Malta itself could capture CO2 emissions from the Delimara power station and sell it off too.
Furthermore, Sargas was trying to greatly enlarge a much smaller system in colder Scandinavia which might prove to have different efficiency in different climates. And what about the environmental and visual impact of a very large barge in Marsaxlokk Bay and the ravages of the weather? However, the government would not ditch any potential real solution.
Current energy prices covered investment in production, distribution and the upcoming interconnector. Without return on capital employed, Enemalta would fall back and endanger jobs. If the corporation reduced its return on investment it risked downgrading and incurring higher costs in paying for supplies – and 70 per cent of its annual outlay was for oil purchases.
Out of a total investment of €350 million for energy, the opposition’s promise of a cutback of just €12 million did not mean much. And Labour would have to find ways of recouping it later as advised by MEP Edward Scicluna.
Mr Fenech said the government had always wanted to use gas for the power station, but the huge investments involved would have meant higher costs. The EU’s decision for all member states to be linked to the EU grid, and allocation of funds to Malta for the financing of a pipeline, had changed the scenario of financial viability.
In the meantime, if the government had not moved on with the Delimara extension it would not have been able to guarantee energy for the country up to 2015, when it would need to generate 420 mW compared with the 230 mW up to 1999.
The four oldest Marsa boilers which would be closed when the Delimara extension came on stream were working at 26 per cent efficiency, as against the industry norm of 46 per cent. The minister said that by 2013 annual emissions of sulphur dioxide would be down from 8,000 to 5,000 tonnes; nitrates from 5,000 to 2,600 tonnes; and carbon dioxide from 1.8 million tonnes to 1.6 million. Once the interconnector was up and going the figures would respectively come down further to 2,600, 1,400 and 1.1 million tonnes.
Nitrous oxides from the original Delimara power station had been reduced by 30 per cent.
With the interconnector Malta would have the opportunity to buy 571 to 670 mW for real stability and security, with even cheaper electricity than buying oil. Enemalta would have technical support from the Terna system in Sicily.
Enemalta’s investments in distribution had seen total average power cuts dwindle from more than two hours to 50 minutes.
Mr Fenech put five questions to Opposition Leader Joseph Muscat:
What impact would changing Delimara over to diesel have on the consumer through higher bills?
If he tampered with Enemalta’s return on capital employed, which of its projects would he stop investment on?
What studies had he commissioned before jumping on the Sargas bandwagon?
Was he scientifically convinced of the desired control of emissions and waste disposal of the Sargas system, which was neither tried nor tested?
What would happen to the Enemalta workforce if the Sargas project went ahead?
The questions were answered by Labour MP Marlene Pullicino.
Winding-up the debate, Mr Fenech said he doubted whether Dr Pullicino understood the questions. Instead, he said, she went into a panicked frenzy and did not answer anything. Mr Fenech said one had to keep operating the power station by low sulphur fuel oil not to increase utility tariffs.
Although Dr Muscat had claimed that a Labour government would reduce utility tariffs by operating the Delimara power station on diesel, tariffs would have to be increased by 10 per cent in the coming year if one took into consideration current fuel prices and consumption levels. Electricity consumption had increased by 2.3 per cent this year and it was estimated to increase by three per cent in 2012.
Mr Fenech said that Dr Muscat’s plans on the return on capital employed would lead to a four per cent decrease on utility tariffs, the overall effect would be a net increase of six per cent. On environmental issues, the minister said that the source of emission was not the Delimara power station but the Marsa plant. The Delimara power station was being built according to EU standards and the contractor was duty-bound to observe them.
Turning to the purchase of oil for the power station, Mr Fenech said that when he took over responsibility for Enemalta he immediately reviewed the system and set up a committee that had established procedures so that this would not be bought by any one person. He revealed that the Auditor General was verifying the system and he had no doubt that the auditor would confirm that the method being used was in the best interests of the country.
The Finance Minister said that Malta’s request for EU funds for the investment in the interconnector cable was before the Council of Ministers because negotiations on the next EU budget had started. Malta was still not an EU member when the current seven-year budget had been negotiated.
Minister Fenech challenged Labour MPs Joe Mizzi and Leo Brincat to go to the Police Commissioner about allegations of corruption.
He said that the price of fuel in Malta was lower than the EU average. One litre of petrol in Malta cost €1.41 while the EU average stood at €1.48. During the last 12 months, the increase in the price of fuel in Malta was also less than that established internationally.
Concluding, Minister Fenech said the opposition’s only promise to the people was that it would divulge its plans how to reduce utility tariffs nearer election time, showing once again that it was inconsistent and had not changed over the years.
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Edward Mallia
Dec 7th 2011, 21:37
@ John Schembri I expect a Minister, particularly one who has just given himself a €500 a week raise, to be minimally competent in whatever field falls under his responsibility, to have some feeling for the size of things, for the correct description of things. Gibberish does not qualify and does not excuse anything.
You are confusing an interconnector or link with a grid. Grids use AC transmission primarily because of convenience of voltage transformation. But LINKS between separate GRIDS are generally DC as that gets rid of the frequency synchronisation problems. We not only chose an AC link but also boasted that we will have the longest AC link in the world! The lack of space argument from Terna is odd; the subsequent warning about instability of AC links is then even odder. Odder still is the expression "all that Enemalta has to do" ; you can see how easy your recipe is from looking at recent large scale power cuts. In the one of some months ago failure to synchronise frequency of a rapidly switched on gas (gasoil) turbine to the grid frequency led to a general shut down.
You are quite correct in saying that Mr. Fenech cannot be challenged on reducing utility bills sustainably. He just has not done any reducing! In fact it is only through his magnanimity that we have not had a further rise in bills. As he said : now is not the time to increase charges. I suppose he is waiting till nearer election time todo that.
Mr Alfred Farrugia
Dec 7th 2011, 19:30
The EU average for unleaded fuel is 1.456 euro today, and not 1.48. These prices change every day, not solely at the end of the month. Why do we have to compare our price with the EU average? Why don’t we compare our price with that of Cyprus, not to mention Bulgaria? Why cannot Enemalta purchase its fuel from the same source as Cyprus where it costs just 1.20 euro?
http://www.energy.eu/
If we really wish to have competition why does Enemalta not compete with other energy companies such as BP, Exxon and Shell? Several years ago, fuel prices in Malta were cheaper than the tourist price – carta carburante – in Italy! So the local agents used to get competitive prices in spite of our little market.
Is Enemalta making a profit or a loss on the procurement and selling of fuel? Why cannot we purchase brand name fuel, if we wish to do so, or if the price is competitive enough?
Edward Mallia
Dec 7th 2011, 18:09
I cannot vouch for the accuracy with which Minister Fenech's speech was reported. E.g. generation figures he is supposed to have mentioned are given a 420mW - 420 milliwatts - wheras they should be 420MW -420 Megawatts-- a BILLION times larger!
That apart, when is Minister Fenech going to do some serious homework, so as to be able to discharge his Ministerial duties with a modicum of decency? What is CO2 "sludge"? Who on earth, other than Minister Fenech possibly, would build a power station 'with one aim being to create carbon dioxide sludge"? Sargas -- for whom I hold no torch, incidentall -- want to capture CO2 to avoid having to pay for emissions and to keep it out of the global warming circuit.
2. What is Minister Fenech talking about when he says that without the Delimara extension it would not have been able to guarantee energy for the country for 2015, when it would need to generate 420 MW compared to the 230MW up to 1999? That's plain gibberish. If Minister Fenech really did say that he should hand in his resignation tomorrow and perhaps apply for the post of assistant to Arsene Wenger.
For several years, we have been capable of generating, indeed have several times during recent summer peaks actually generated 420-430MW.
And again: With the interconnector Malta would have the opportunity to buy 571MW to 670MW for real stability and security, with even cheaper electricity than buying oil. Complete gibberish. The initial section of the IC will provide only 100MW; when the section section comes on stream -- and for this Minister Fenech has not yet given a timeline, we will have another 100MW, so 200MW in all. Repeat the Minister's figures are plain gibberish. And it says much for the quality of the Opposition spokesman for Energy that she does not seem to have pointed this out in her 'reply' to the Minister.
The final nonsense: Enemalta would have technical support from the Terna system in Sicily. There is NO terna system. Terna is the Italian network operator. And Terna has already acted as consultant to our government. Oddly enough they recommended that, clean contrary to international practice, we have an Alternating Current connection with Sicily rather than a Direct Current one. The one reason that they gave was that a DC link required more space than an AC link at each end of the cable. More space than what?The conversion plants at each end would not cover more space than a small football field. A piece of sicilian "furbezza"? But there was more: Terna did warn that AC links are subject to interruption of service, for obvious technical reasons which Minister Fenech would be quite unable to grasp but which Enemalta engineers are very familiar with. Regrettable when one of the latter was asked why we have gone for an AC link the best he could say was that decision did not fall within his remit at Enemalta. AC links are unstable because unless the frequencies of the respective grids are kept closely similar, the receiving side could trip and power be cut off. We have no control over Sicilian grid variations, so in effect an AC link makes us into a sub-section of the Sicilian grid. Where is Minister Fenech's "stability and security?
John Schembri
Dec 7th 2011, 19:11
@ Edward Mallia: the minister’s technical mistakes can be understood .Are you expecting the minister to be an engineer or technically minded?Truly I can understand your frustration when you see a small “m” instead of a capital “M”, but this is a world where what is said to the minister changes each time it is communicated.
If I can understand your argument ,you are against an AC grid because of synchronisation problems, but wouldn’t we have more losses if we opt for the DC grid?From the little I learned, in high tension power transmission AC has more advantages on DC.Would’t we need inverters on each side of the cable, resulting in an(my) estimated 10% loss in conversion from AC to DC and vice versa, and more equipment to maintain?Each time you convert energy you will have losses.
On Terna probably the Minister could easily have been misreported.
If synchronisation is the problem than all Enemalta has to do is to supply part of Malta on the European grid,Gozo and the Malta’s North district could easily be supplied with this cable.When (not if) there’s a cable fault, Enemalta changes over to the Delimara power station which will run at full capacity.
It all boils down to pounds, shillings and pence, or rather Euros. People are interested on how to reduce the costs of their service bills sustainably.On that Minister Tonio Fenech cannot be challenged.
pat muscat
Dec 7th 2011, 17:12
This is the same Minister who in 2008 solemnly declared that the recession would not hit us; and the same who in year 2011 declared that he does not believe in the 'cuc' Malti!
Joe Grech
Dec 7th 2011, 15:53
Please bear in mind that the person introducing the debate on the financial estimates of Enemalta and attempting to make a case for government's handling of the energy sector is none other than Tonio Fenech the same Minister who not so long ago declared that he ''did not know'' about the infamous VAT scam that had been going on for God alone knows how long in his own Ministry!
The Hon. Prime Minister did not ask him to resign then....so he's still about worse luck! Only this time he has become an energy guru!
Personally I take his assurances that this administration is treading intelligently and responsibly in the energy sector rather unconvincing. Honestly, can anybody blame me?
What will happen if Fenech's ''prophecies and assurances'' fail to materialize and he then simply offers a polite ''sorry I was not aware that this would happen''?
Francis Sammut
Dec 7th 2011, 15:02
MInister Fenech, the wages in the EU on average, are higher than in Malta. The cost of living in Malta is higher when compared with the EU average keeping in mind again our lower wages. This (wages) is never mentioned when comparing I wonder why! The minister mentioned the EU average on fuel. In the UK because there exists a free market on fuel and no monopoly, one finds different prices at different petrol stations. How's that for comparison? How in the world can the minister compare for instance Malta with Germany on the cost of petrol? He can't? Nobody can! As they say, comparisons are odious.
Giovann Demartino
Dec 7th 2011, 17:55
The price of oil, like any other commodity, does not take into consideration the wages of the individual. If the price of oil is a hundred dollars, it is a hundred dollars for us, for the Germans and for everyone else.
Mr leo attard
Dec 7th 2011, 19:09
@gIOvann Demartino.... I agree, just like when someone gives himself 500 euros a week raise without taking into account the 1. 16 euro a week his fellow citizens are getting.....
John Schembri
Dec 7th 2011, 19:17
What does the price of oil have to do with the wage people earn all around the world?
No one sells you a product cheaper because you earn less than other people.Actually you have a choice : “Take it or leave it”.
There are counties who are oil producers and still their fuel costs are higher than ours.
John Schembri
Dec 7th 2011, 19:28
@leo attard; when Joseph will become our prime minister , he will form a committee to establish the ministers’ wages.
Instead of beating about the bush ,Joseph has to explain to the public how for example a lawyer of the calibre of Anglu Farrugia or Jose’ Herrera , or an Architect of the calibre of Charles Buhagiar or an ex-MEP would work as a FULL TIME minister with the miserable honoraria a minister used to get before the change and which Dr Muscat is proposing.
Mark my words , in two years time the committee would conclude that the “rise” was actually not enough.
Pat Hobson
Dec 7th 2011, 13:42
The comment is only valid when there are comparisons which the government always likes to mention. When comparing the fuel prices in Europe compared with those of Malta.
John Schembri
Dec 7th 2011, 19:36
Putting everything in the balance we’re not that hard hit like other countries,when one compares one has to compare everything , one cannot pick and choose.
Up to now ,our situation is still under control.
j brincat
Dec 7th 2011, 13:16
@Louis Muscat
"When I buy something, nobody asks me what my wages are, but only tell me the price I have to pay whether I am earning 8000 euro s or 20 euro s.So I am afraid your comment is not valid"
AND I think you have missed the whole point completely!
(jb).
Stanley Colombo
Dec 7th 2011, 09:49
Yes, fuels may be cheaper locally than the rest of the EU, but what about the average wages?
Louis Muscat
Dec 7th 2011, 13:03
When I buy something, nobody asks me what my wages are, but only tell me the price I have to pay whether I am earning 8000 euro s or 20 euro s.So I am afraid your comment is not valid.
Mr Duncan Scerri
Dec 7th 2011, 13:19
Average ministerial wage is just fine, thanks for asking.
Joe Vella
Dec 7th 2011, 13:44
what about the other side side of the equation? What are the taxes you pay here in Malta Compared to the rest of developed countries. I also remind you, what you and I pay for our children higher education.
Angus Black
Dec 7th 2011, 14:23
Ask not how your wages compare to the rest of Europe, ask how much is left in the workers' pockets after they pay higher taxes, higher VAT, and property taxes which have not yet been introduced in Malta.
Ask them how 'free' their Health services are, how 'free' is Education, how many students receive a stipend and how many graduate owing the government thousands of euro.
When making comparisons, you either compare apples with apples or your analysis is worth zilch.