Now, that we are seeing the end of the pandemic tunnel, folks are facing a new obstacle to growth as oil and gas prices are again at a peak.

This is an obstacle for a fast recovery and a gradual return to normality.  However, combined with the uncertainty of supply chains caused since the Russian invasion in Kyiv, everyone saw shortages of grains and fodder trapped in silos in Ukraine.  This has created an artificial shortage.  Added to that, is a dearth of liquefied natural gas terminals for shipping gas from places where it remains relatively easy to access.

This has pushed the price for LNG to record highs. Turn to Asia and shortages have led to power cuts in parts of China, this time, not due to shortage of fossil fuel at the utilities but from attempts to curb emissions by repeated Covid curfews. It does not rain but it pours and with dwindling coal stocks at power stations in India, such conditions lead to a surge in the price of imports of the commodity.  Look to Germany, and we note its national hydrogen policy, highlights the potential and the opportunities of green hydrogen.  The core mission is to replace fossil fuels particularly gaseous and liquid energy sources, which are an integral part of Germany´s energy supply.

The Federal Government has been aware of the potential of hydrogen technology for many years and has made available considerable funding and subsidies.  By the way, Germany in the past generated 40% of its electricity from buying Russian gas, this is now being phased out as Moscow has unilaterally stopped selling gas. Under the National Innovation Programme on Hydrogen and Fuel Cell Technology, a total of €1.4bn in funding is currently being provided and €310m will be provided under the Energy and Climate Fund for practice-oriented basic research on green hydrogen.  Germany adopted a package for the future which makes available another tranche €7bn for speeding up the market rollout of hydrogen technology and another €2bn for fostering international partnerships. Back home, the price hike on LNG does not augur well for Enemalta, which is buying electricity from the Electrogas monopoly contracted on a fixed term.

Electrogas buys its LNG exclusively from Socar (a State company in Azerbaijan and substantial shareholder in Electrogas).  As a makeshift measure the finance ministry is subsidising Enemalta and Enemed to buttress inflation and stabilize prices.  Some expect that in the near future, the problem will solve itself when the planned gas pipeline to Italy is ready and Malta will benefit from cheaper green hydrogen. As can be expected, the EU favours the use of clean fuel and wants members to cut down on the burning of fossil fuel. By sheer contrast, investment on renewables in Malta is modest with a mere 10% of electricity generated from clean energy such as PV panels or biomass yet no turbines are in use (EU median rate is 32%). 

Certainly, due to spatial limitations onshore renewables are a finite source. For an island, which is almost 100% reliant on transport and air travel powered by fossil fuel, this situation calls for a plan encompassing a scientific albeit speedy plan to de-carbonise.  An ideal option is to use renewable energy to produce green hydrogen. The 2023 budget may help this, if it attracts foreign investors to set up infrastructure in the EEZ (particularly Hurds bank) installing sophisticated production facilities in relatively shallow waters. Green hydrogen is created by using electricity to split water into hydrogen and oxygen through a process known as electrolysis. The hydrogen is collected and used, primarily in industry, while oxygen is released as the by-product or captured for use by others.  More good news can be heralded if transportation fleets are converted replacing internal combustion engines run by a technology called a hydrogen fuel cell that uses hydrogen as its power source.

Powering these vehicles with renewable hydrogen makes them truly zero-carbon. Green hydrogen is versatile and can be applied in various sectors.  It can be converted back into electricity through re-electrification in gas turbines, engines, or fuel cells. It can also be used to produce various types of synthetic fuels like e-kerosene, e-methanol, and e-gasoline, which support the decarbonization of the aviation, shipping, and transportation industry.

At PKF, we are currently working on an exciting initiative regarding sustainability and renewable energy, which could be a very interesting opportunity for business leaders, the academia and the energy ministry to come and collectively map future initiatives.  The roadmap is set to discuss a potential for offshore renewable energy projects in Malta. We have a number of interesting speakers already lined up and we invite you to follow our socials for further updates regarding attendance to this anticipated event.

miriam.sultana@pkfmalta.com