Advantages of a renewable energy legislative framework

In his address to a joint session of Congress in February 2009, US President Barack Obama said: “To truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy.”

The investor must be provided with an adequate financial return- Damien Degiorgio

Renewable energy has fast developed into one of the main platforms of political debate the world over, mainly due to ecological concerns and the astronomical increase in fossil fuel costs. Malta is certainly not an exception, and the last few years have seen an exponential increase in exposure and investment in renewable sources of energy. It would seem that sunny Malta has finally acknowledged that the benefits of its climate are not limited to attracting tourists to the island, but extend to mitigating its absolute dependence on fossil fuels as its sole source for its energy requirements.

This awareness, coupled with the not negligible target imposed by the EU Commission on Malta to ensure that 10 per cent of its energy requirements are derived from renewable sources by 2020, has been reflected in legislation and schemes introduced by the Government to attract private investment in the renewable energy sector, concentrating particularly on the installation of photovoltaic panels on private rooftops and, to a lesser extent, the creation of wind farms.

These efforts, while noble in intention and offering a wide segment of the population with the possibility of contributing towards the attainment of EU-imposed targets, have not proven sufficient to attract significant interest from the private sector to invest heavily in the renewable energy sector, providing a much needed boost in the figures of energy from renewable sources.

Whereas it would appear that interest is not lacking, the administrative and legislative structure required to assess the extent of the investment and the return one would reasonably expect from such an investment has not been established as yet.

This situation should not be deemed as a shortcoming by the Malta Resources Authority or by the Government; the sector is in its infancy, both on a global and on a local scale and the authorities need to have significant data to be able to assess the way forward, both from an economical and a logistical point of view.

Such an assessment should give due relevance to the reality that a greater reliance on renewable energy will have multiple positive consequences for our society, which would first and foremost be less dependent on fossil fuels for the provision of its energy requirements. This would quickly reduce the deleterious effect these have on the environment, the fines that will be imposed on the State unless specific targets are met in a timely manner, and reduce Malta’s fuel bill, which has a direct impact on all sectors of society which must ultimately fork it out.

This assessment should also not neglect the considerable increase of opportunities represented by the interconnector between Malta and Sicily, particularly from a logistical point a view, since this link may be deemed as a solution to one of Malta’s main, historical deficiencies: lack of space. Investors will be in a position, given the appropriate administrative and legislative framework, to invest in PV and wind farms in other legal jurisdictions, with a view to exporting the product to Malta through the interconnector, doing away with the geographical limitations imposed by Malta’s territory.

Clearly the time is now ripe for the introduction of a comprehensive legislative framework which establishes in no uncertain terms what a private investor is to expect in return for investing in the renewable energy sector, along with an administrative structure capable of supporting this initiative in an efficient manner.

Such a legislative framework must represent a balanced approach, on the one hand imposing suitable obligations on the investor to ensure the latter meets his targets in a timely manner since these targets would necessarily have to be aligned with the achievement of the State’s targets on an international level.

On the other hand, the investor must be provided with an adequate financial return, consisting mainly in a feed-in tariff which encompasses among others a decent return on the capital employed and a reasonable profit margin.

Damien Degiorgio is senior associate at Fenech Farrugia Fiott Legal.