3% renewable energy by end 2014? Oh, come off it Konrad Mizzi!

Konrad Mizzi, Malta’s Minister for the Energy, reported that the country will have an energy mix consisting of 3% renewable energy by the end of the year. Do you think that Malta can manage to generate the same amount of renewable energy in eight months that it generated in the first eight years of its EU membership?

Birds eye view of Hotel Fortina in Sliema showing what one would consider a lot of solar panels. I shudder at the thought of entire villages blanketed with these costly and ineffective renewable alternatives (Photo credit: maltashipphotos)

No. Actually, the more appropriate answer would be no, no, no, no, no. I would also throw a ‘lol’ in there somewhere, but it would be deemed highly unprofessional and childish. Just under a year ago, I wrote a blog entry regarding the situation of renewable energy in Malta and the limitations of the country in terms of reaching its mandatory 2020 energy target.

Since the above blog was published, Eurostat has since updated its data sheets to include 2012 (it takes a long time to collate the entire data sets from the EU 28, so we are always presented with data which is two years behind). The following table is an excerpt of the data presented, showing how Malta compares to the other small EU states Cyprus and Luxembourg, the newest Member State Croatia, and the top renewable energy producer Sweden:

The catch of this report is that the data for Malta for 2012 is an estimated that is based on the national data which is given to the European Commission under Regulation (EC) No 1099/2008 on energy statistics. As such, there is not even a clear indication of what percentage share of renewables Malta managed to produce in 2012, and from which sources (although Solar Energy is the main contributor).

Maltese governments have never really cared about producing renewable energy. It is true that Malta is extremely limited by its size and lack of natural resources, but they never really ever tried to engage with the international and national scientific community on the matter. There are several Maltese engineers and scientists specialising in Energy, why not expand an almost non-existent job sector and at least attempt to retain local talent?

The hard truth is that solar energy on its own will never be Malta’s way forward in renewable energy. It is too costly to install, despite the government incentives, maintenance is expensive in itself, and the energy return is not high enough. Furthermore, a 2013 Photovoltaic Barometer report states that Malta ranks 21st in European production of electricity from solar energy, and 13th in solar energy converted per capita. This figures make sense since there is a very limited amount of space where PV panels can be installed.

Unfortunately, Maltese governments tend focus on fossil fuel energy and disregard the introduction of other renewable alternatives. Previous administrations flaunted pilot studies in wind, wave and biomass energy but never saw them through, and the current government wants to construct a new gas fired power station. Fossil fuel energy provides the short term solution to Malta’s energy problems (or in this case the Labour Party’s pledge to reduce energy tariffs), ignoring long term energy commitments in the form of the EU 2020 targets.

Therefore, Konrad Mizzi’s announcement that Malta will hit 3% renewable energy production is laughable at best, unless he plans to spend a considerable proportion of public taxes to blanket the entire islands with photovoltaic cells.

New Energy Taxes in Malta? Wait for it

The British government’s website describes green taxes as taxes that “encourage businesses to operate in a more environmentally friendly way”. The most common forms of such taxes that governments worldwide employ are generally attributed to climate change mitigation. Given Malta’s recent pledge to build a gas powered power station, and the finance minister’s confirmation that indirect taxation will be used in the upcoming budget, will Malta be seeing the introduction of further energy taxes?

Many people are in favour of carbon taxes, as these will aid in the propagation of renewable energy sources. However, people are in some countries are becoming increasingly skeptic about such taxes as the revenue which they generally are not materializing into new and concrete alternative energy sources. Photo credit: paolaharvey

Green taxes are described as Pigovian taxes, which aim to sanction a particular market activity that is causing a negative externality – a harmful outcome that rises from activities or transaction and affects an otherwise unaffected party. In the case of carbon dioxide emissions, any person that emits unacceptable levels of this greenhouse gas is indirectly affecting the entire world population through his/her contribution to climate change.

In theory, green taxes are a positive way of how a country that control ‘environmental offenders’ who overuse energy, funneling the money towards research and investment into alternative energy as a means of reducing a country’s CO2 emissions. However, in most countries such taxes have just become another means at how governments can collect money from citizens, as the government itself is failing to reduce  set up new green energy initiatives and meet carbon emissions.

Let us take the UK as a case study. The government lists the following green taxes that it currently uses:

• Climate Change Levy
• CRC Energy Efficiency Scheme
• Emissions Trading
• Capital allowances on energy-efficient items
• Landfill tax
• Aggregates Levy

The majority of such taxes in the UK are designed to limit the consumption of fossil fuels and the subsequent reduction in CO2 emission. These taxes are then (supposedly) used to drive the use and investment in alternative energy sources, which in turn will contribute to a diverse energy grid and less green levies in the future. However, there is an all rounded sense of confusion as to how effective and fair these taxes are on consumers.

The current UK coalition government, composed of Conservatives and Liberal Democrats, seems to have some internal strife about green taxes. While both parties aim to reduce energy bills, Conservatives are looking into relaxing Green taxes to achieve this, while Liberal Democrats are advocating for retention of  these taxes, which would help in reducing future bills.

Photo credit: DECCgovuk

British Gas (one of the largest UK energy suppliers) have just announced a 9.2% increase in their energy tariffs, which would amount to an average annual increment of £123 per household. The harsh reality in the UK is that energy tariffs keep on increasing too frequently for consumers to handle, and the imposed taxes do not seem to be aiding in alternative energy investment. It becomes evident that green taxes in the UK are simply another source of income for the government, as it has so far failed to improve its alternative energy output. Such a rationale could explain the reasoning behind the Conservative’s decision to reduce current green taxes, even though the situation is still very open for debate.

EU Environmental taxes

A recent Eurostat report has indicated that environmental taxes in the EU-27 account for 6.2% of all revenues from taxes and social contributions. Environmental taxes can be of four types: energy, transport, pollution and resource taxes. Energy taxes include taxes on energy products (e.g. coal, oil products, natural gas and electricity) used for both stationary purposes and transport purposes. As exemplified above by the type of taxes used in the UK, in 2010 almost 75% of all environmental taxes were energy taxes. By convention, CO2 taxes are also included in this tax category since they are usually levied on energy products.

Transport taxes are also considered to be green taxes, and these mainly include taxes related to the ownership and use of motor vehicles. In2010, 21% of EU-27 total environmental tax revenue came from transport taxes. Pollution and resource taxes cover several taxes, including the taxes on the extraction of raw materials, those on measured or estimated emissions  of pollutants to air (e.g. NOx and SO2) and water; noise pollution (e.g. airports) and on the management of waste (e.g. landfills).

Green taxes in Malta?

Unbeknownst to most people, there are many environmental taxes currently used in Malta., with thee most common being ‘Eco-taxes’ and ‘Eco-contributions’. Eco-contributions are levies which people pay on certain products such as bottles, plastic bags, plastic disposables, tyres, mattresses, electronic equipment – any item which is perceived to end up as a pollutant. The Malta VAT department has issued an informative presentation on the Eco-Contribution –> click here.

Maltese citizens are also subject to the Eco-tax, which is mainly a charge on air travel, ship and hunting licences, water consumption and several motor vehicles taxes. A comprehensive list of eco-taxes is also available –> click here.

Source: Eurostat

As a total percentage of revenue from taxes and social contributions, Malta places fourth in the EU with 9.55%, of which Energy taxes are 4.89%, Transport taxes are 4.24%, and Pollution/Resource taxes are 0.42%. Despite these figures, it should be noted that the majority of energy taxes are obtained from industry, with households only contributing 18% to the total energy taxes.

As such, it can be hypothesized that there is a large room for taxation on Maltese energy bills, since Maltese households are the ones that contribute the least to energy taxes in the EU. On comparison, UK households currently contribute almost three times as much in energy taxes as Maltese households do.

With the implementation of a new gas fired power station, and all the associated environmental sanctions imposed by the EU, there is a high probability that Maltese consumers will need to start forking out huge sums on their energy bills in the form of energy taxes. This will mainly be attributed to the use of another type of fuel source, including transport and storage taxation as subject by EU standards, which will have to be covered directly by the government and indirectly by the consumer. Such is a result of a government that aims to meet immediate energy demands with gas as opposed to the much needed investment in alternative sources.

Energy bills: Going Green may save you Green!

The UK is still desperately trying to improve its renewable energy output, despite the fact that their current conservative government is boldly pledging to build more gas powered power stations. The Maltese government is also planning a new gas fired power station, and is claiming that its new energy plans will not have an effect on energy bills. What is the potential future of energy tariffs in Malta if it continues to ignore renewable energy commitments?

The guardian has recently reported that the UK is breaking domestic records in the installation of Solar installations, with an investment of £1.6 billion. However, it is claimed that the sector is still experiencing a considerable amount of pressure from the annually rising energy bills, which is driving the British government to plan a scrap of green subsidies and reduce potential investment in the sector.

Ovenden Moor Wind Farm in Yorkshire is one of the many wind farms in the UK that. according to Michael Liebreich, have generated enough wind energy during some periods between 2008 and 2012 to reduce wholesale short-term prices of energy (Photo credit: fruity monkey)

Michael Liebreich, chief executive of Bloomberg New Energy Finance (BNEF) and widely recognized leading energy analyst, said that such a move would be a mistake and would not bring down the costs of energy bills.

“Gas prices have risen more than 8% – we know that it is gas prices that are pushing up bills. I don’t follow the logic of how that has to do with green subsidies.”

UK Labour Party leader Ed Miliband has pledged that he would aim at solving energy tariff issues by freezing energy prices for 20 months. Liebreich also criticized Miliband’s plan: “If you control the price, there is less investment, therefore less supply, therefore prices go up. Anyone who says you can reduce prices through controls has been asleep for the past 30 years.”

British conservatives have argued that Miliband’s pledge is merely a gimmick, since “there is one thing governments can’t control and that is the international wholesale price of gas”. The way the current British government is coping with increasing energy prices and meeting its own environmental targets (or lower carbon emission targets) is by imposing green taxes or levies on household bills.

Possible future of Maltese energy bills?

Personally, I would forecast a fixed price on energy bills for the first five years, as dictated by the agreement made between energy minister Konrad Mizzi and the investors. This would satisfy the pledge made by the Labour Party to keep energy prices at a fixed rate. Once this five-year deal is up, there is no way of telling how much the price of gas will increase.

As argued above by Liebreich and British Conservatives, there is no control over international gas prices, which are currently on the increase. Should the purchasing price of gas by the Maltese government go up, energy tariffs will most definitely increase.

Furthermore, with mounting pressure by the EU to reduce our carbon footprint (which Malta has been failing to tackle since its accession), there is a high probability of green taxes being imposed.

It doesn’t make a difference which political party is in power, as the relevant parties in both the UK and Malta are not handling the issue of energy well. Investing heavily in gas as an energy source is a gross mistake, and a leap backwards. Investments in green energy is the way forward, as this is the only real energy source that can reduce energy tariffs. While recent plans to install a solar farm at the Malta Freeport is a welcome venture, it is still too early to tell what contribution this will have to national energy grid and future energy prices.

 

Make no mistake: Gas fuel is not cleaner

Times of Malta has reported how the deal on the new Gas fired power station has been finalised, with Electro Gas Malta consortium  chosen to build a new plant and related gas supply infrastructure. While the rest of the EU and the developed world moves towards securing renewable energy sources, Malta continues in its sluggish path away from them!

The Delimara Power Station is the proposed site for the new Gas fired power station (Photo credit: MEPA)

This gas fired power station scenario is the typical ‘wolf in sheep’s clothing’, where the government is dressing its economic aspirations in environmental ones. I would just like to state something for the general Maltese public:

Any Hydrocarbon/Fossil Fuel fired power station DOES NOT constitute a form of CLEANER energy or environment

If the government wants to build this new power station, it should do so without trying to blindside the general public into believing that we are producing cleaner air. Gas fuel will still produce Carbon Dioxide, which will contribute to climate change, which will see us increasing our carbon footprint as opposed to reducing it.

Clean Energy is defined by the US Environmental Protection Agency as “includ[ing] energy efficiency and clean energy supply options like highly efficient combined heat and power as well as renewable energy sources” – so where is the combination of green alternatives? Malta has long been dragging its feet in being a legitimate produced of renewable energy. Despite the numerous pilot projects and feasibility studies conducted by previous governments, there has been no significant change towards a future that is less reliant on fossil fuels. The move by the new government will further exasperate this situation. I have to reiterate the UK’s controversial decision to build 40 new gas powered power station and the campaigns in place to counter this (No Dash for Gas).

It is also quite baffling why this project is being rushed to such a degree. The current Environment Impact Statement (link to pdf –> GAS Power station environment impact statement) issued by MEPA  has been deemed as unsatisfactory by local NGOs, which indicate that the current report itself states that the operator has not yet decided to which level of detail the assessment should be carried out.

I also am curious to know whether or not a public consultation will be properly carried out, since the PM pledged at the UN General Assembly to aim for a people oriented decision-making process. The previous government failed catastrophically at such as an approach, so we have to wait and see what happens with this.

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MEPA’s project description for the Gas Power station –> Gas Power station project description)