Author: George Mangion - Senior Partner PKF Malta
Published on Business Today: 20th April 2023

This week a renewable energy and ESG conference was hosted by PKF in collaboration with Times of Malta at the Hilton. This event was well attended and managed to pack various technical presentations from 16 local and foreign experts explaining how we can start a path towards green energy and how Malta can gear up to follow the new directive on ESG. The audience were treated to two videos broadcast from experts at PKF offices in New York on ESG.

It was a pleasure to note that the event was opened by Miriam Dalli, minister for energy and sustainable development and enterprise. She delivered a keynote speech on this exciting and innovative subject. Opposition spokesperson Mark Anthony Sammut also addressed the audience and stressed the need to take a serious regulatory approach (as was the case in 1994 when MFSA started regulating the financial services industry). He advised that Malta could become a Centre for research on this subject.

One of the foreign experts Dr Srdjan Sokolovic covered the technical path of how Malta can make use of its Exclusive Economic Zone to start producing green hydrogen. He explained, that if Malta decides to exploit its waters in EEZ, it can by means of extensive electrolysis generate green hydrogen for use both in running an electricity power plant and eventually for use by inland mobility.

At present, the cost of hydrogen production on a commercial scale may be higher than equivalent fuels such as LNG, however, he predicts that by 2030 the price will go down to around $3 per kilogram. Used as fuel for cars, hydrogen is more powerful. He stated that one kilogram of hydrogen could propel a car for 95km whereas the same amount of gas could provide energy for only 15 km.

If government crosses this revolutionary path, then in five to ten years Malta could start its own production of green hydrogen, or it could export it using pressured containers on ships, or via a future pipeline between Malta and Sicily.  He explained, how hydrogen could be used in the production of electricity, in the beginning with a mixture of gas, maybe 5%, or it could go in the future even up to 100%.

A consultant at Clarkson Renewables said that Malta’s future capacity may reach 25 Gigawatt from floating offshore wind farms. At present, Malta uses only 11% of total energy locally generated from renewables (mainly P.V’s - no windmills except for a foreign investment by Enemalta in Montenegro) while Europe strives to increase it’s average rate of renewables to reach 37%.

A lot has been written how the island started late to convert to renewables while we consumed the best part of a decade to test, build and run a fossil fuel plant supplied by LNG from a floating service vessel.  Time is ripe for a more radical focus to switch to cleaner fuels.  For visionaries, the subject can be part of a long-term project to be self sufficient in producing hydrogen and methane/ammonia gases - part of which can constitute future economic pillar.

Perhaps, this is the right time for policymakers to stop playing with renewables as a national sport -churning it like a spinning top.  Really and truly, we woke up late to the technology as offshore wind capacity is forecast to more than triple by 2026.  By then, offshore wind additions are expected to account for one-fifth of the global wind market, a major milestone.

The question is asked - will renewables lower our cost of energy?  This was the crucial battle cry in 2013 by the Joseph Muscat movement - he promised to cut tariffs and attract private investment to build an electricity plant burning LNG. The electoral promise was kept and the Labour Party crushed in to power with a bigger majority in the 2022 elections.  Now the chicks came home to roost as burning fossil fuels to generate electricity needs to be gradually phased out.

It is interesting to note how in order to keep electoral promises of 2013, Castille is spending more than €400m annually in subsidies to cushion the high cost of energy. That subsidy and other inflationary pressures are pushing the national deficit beyond the EU-set limit, which could trigger an excessive deficit procedure. Experts at the PKF event said that raising electricity production from renewable sources would be a key part in avoiding a spike in prices thus making the country less dependent on vagaries of LNG price.

This does not mean Malta must have offshore wind farms up and running by next year but it follows that the government must persuade the European Commission that it will have new sources of green energy in place over the following years. It goes without saying that any arduous journey starts by taking the first definitive steps. Meanwhile, Malta is bound by international treaties to become carbon neutral by 2050. So, the obvious question to ask is, where will Castille secure the millions needed to exploit our lofty targets.

The solution was announced by minister Miriam Dalli when she called for increased private investment in renewable energy sources. She came up with the idea to tap idle capital at local banks. These institutions report balance sheets that are chronically over liquid and are sitting on €24 billion in deposits paying comparatively low interest rates. Putting our money where our mouth is should be sound advice for depositors and banks.  The country needs more commitment from local banks towards the implementation of public and private ESG objectives.

HSBC in Germany is partner to one of the most successful private-public programmes to accelerate the development of clean technologies with the investment of USD100m in 2022.  Barclays is targeting to facilitate $1 trillion of sustainable and transition financing by 2030 and is investing substantially in climate-tech start-ups supporting new green technologies and infrastructure projects.

While Dalli’s efforts to renew subsidies on electric cars are commendable, her government did little in practice to set up a national renewables council. Thousands of fuel-guzzling vehicles, many of them old and second-hand, are still being imported monthly – further increasing the country’s already high transport-related pollution levels.

Words speak louder than acts. Flash back to 2013/4, when top government ministers paid various business meetings in Azerbaijan to secure private investment towards financing the Electrogas plant, so history seems to be rewritten noting how Dalli pleads with local banks and the financial industry to play a pivotal role in participating in a historical move to a green economy.

We wish her all our support and humbly pass our contacts for her ministry to succeed in this Herculean venture.

Author: George Mangion - Senior Partner PKF Malta
Published on Business Today: 20th April 2023
Get in touch: info@pkfmalta.com