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    The challenges for Energy Policy in Malta

    4 minuti qari

    The fierce political debate on electricity prices that has dominated the first weeks of the electoral campaign is vintage electioneering, with politicians eager to make short term gains at the expense of economic reasoning and the achievement of sustainability. We have seen this happening in past elections and we suffered badly for it. Stating that more money can be thrown at a problem which is already putting strain on the country’s finances reminds me of a ship captain deciding that the best way to save his vessel from capsizing is to hit the rocks for it to be steadied on its side. It is strange that throughout the debate on energy prices, little reference was made to a document published by Government on energy policy. The document launched by Government at the end of last year illustrates the vision for an energy policy for the future. It mirrors the European Union energy policy which proposes amongst other things a cut of at least 20 per cent in greenhouse emissions from all primary energy sources by 2020 (on 1990 figures), a cut of up to 95 per cent in carbon emissions from primary energy sources by 2050, a minimum target of 10 per cent for the use of bio fuels by 2020, and the “unbundling” of distribution from supply and generation of energy companies to create or strengthen market competition in the sector.

    The European Union is the world’s leading importer of oil and gas and it currently depends on 82 per cent importation of oil and 57 per cent importation of gas. Malta totally depends on oil importation and on one energy supplier, EneMalta with its plant in Delimara. An alternative source of energy is the interconnector facility with Sicily. This will provide an alternative source to our electricity supplies.

    The price of electricity should reflect the economics of energy generation. The challenges facing our energy policy reflect the monopolistic nature of our electricity generation sector and the subsidies culture which has dominated the economy for these last fifty years. Subsidised fuel prices distort the market mechanism, create misallocation of resources, give a false impression that electricity is cheaper than it really is and it therefore encourages waste, misuse and abuse. The problem is therefore not only that of our total dependence on imported fossil fuels, but that the inefficiencies in operations and the management of our power plant company and its distribution distort the nature of the true state of energy supplies in Malta.

    The energy policy document addresses these issues. The matter is top priority for any administration that will be in power in two months time. The solution is not that of having two energy structures – a new private company and the state entity that will retain its present remit, but to modernise and rationalise the EneMalta of today. Enemalta and parts of the company need to be privatised to ensure the introduction of appropriate management structures. The distribution system can to be “unbundled” and awarded by tender to professional and competent private foreign contractors. Efforts will be made to encourage alternative energy. Malta has great potential in this field. It is a pity that the aborted Budget for 2013 had a number of incentives aimed at solar energy generation for both industry and consumers. The country lends itself perfectly for the generation of this energy but also for the research and technological innovation in renewable energy, energy conversation and experimentation in low-energy construction. This will be a field day for the University of Malta and other foreign Universities that will be attracted to the country to set up research facilities here with the private sector. We can envisage a “Silicon valley” in solar and wind energy in Malta.

    Continuing with an energy policy that perpetuates subsidies and that depends on fossil fuel can be a short term political solution that wins elections. It will only create a bigger problem for the country to tackle in the future. Of course it gives short term political results, but not socio- economic benefit for present and future generations.

    Joseph FX Zahra
    Economist