Growth in the use of renewable energy sources (RES) has diverse benefits for society such as mitigating climate change, reducing the emission of air pollutants and improving energy security.

The EU formally adopted an update of the Renewable Energy Directive in October stating that, among other measures, increases the binding 2030 targets on RES, from 32% to 42.5%, with the aim of achieving 45%. Each member state will contribute to this common target, while no targets were introduced for individual countries.

Sadly, Malta and Belgium reported the lowest penetration of renewables, representing around 13% of their respective total energy consumption but the trophy goes to Sweden, Denmark and Estonia. These have experienced the highest growth in RES shares, with more than 20 percentage points increase since 2005. Romania and Slovenia, on the contrary, have seen an increase of less than six percentage points between 2005 and 2022. But what is the trend now? According to EEA early estimates, at 22.5% in 2022, the share of renewable energy in the EU increased slightly (+0.6%) from 2021.

Although this value represents a historical high, the growth rate of renewables has slowed since 2020. In absolute values, renewable consumption grew by a modest 1.4 million tonnes oil equivalent between 2021 and 2022, mainly driven by a substantial increase in solar power generation (+28%). Non-renewables, on the contrary, saw a significant reduction (-2%) linked to high gas prices and nuclear shutdowns. This in turn increased the relative share of renewables in total energy consumption.

How is the RES industry faring nowadays? The same question hangs over a wider green-hydrogen economy, which European governments hope to see emerge in the Mediterranean basin, turning the region into a sun-fuelled counterpart to a wind-driven northern dynamo already taking shape around the North Sea. Last November, the European Parliament passed the Net Zero Industry Act, which will introduce minimum domestic-content levels for public renewable-energy contracts.

The European Commission is also mulling a probe into China’s subsidies for its turbine manufacturers, which sell their gear for 70% less at home than what Western rivals charge elsewhere in the world. As can be expected, gains from cutting red tape are large. The International Energy Agency, an official forecaster, estimates that renewables generation would rise by an extra 25% by 2027 if bureaucratic and financing barriers were removed.

It seems that the outlook is hazy, because of a number of factors discussed later on. There is one positive thing that everyone knows about renewable energy, it is that it is getting cheaper.

Each year, the costs of wind and solar power fall as the world improves its ability to harness natural resources. In 2014 the levelised cost of offshore wind, a measure for comparing different methods of generating electricity, was around $200 per mwh, according to America’s Energy Information Administration; by 2023 it had fallen to $127, excluding subsidies. More good news follow as last year global capital spending on wind and solar assets was greater than investment in new and existing oil and gas wells for the first time.

Governments in America and Europe are spending billions on subsidies for clean tech over the next decade; China is offering juicy incentives, too. But inflationary forces spare no one. Costs related to wind turbines have soared too. Russia’s invasion of Ukraine pushed up the prices of steel, an important input of which both countries are large producers. But there are compensations, polysilicon prices (basic materials for PV panels) have fallen and production capacity is increasing, up and down the solar supply chain.

Western turbine manufacturers may be turning a corner too, helped by a greater technological and financial discipline. What is more, to create longer and more powerful blades, manufacturers have pushed into new frontiers with the technology, including experimenting with materials like carbon-fibre composites rather than fibreglass. To capture stronger winds at bigger heights, the average tower now stands at almost 100 metres tall. In 2018 General Electric, unveiled a 260-metre offshore wind turbine, not much shorter than the Eiffel Tower. Islanders in Mallorca now marvel at a new attraction in the tourists packed Mediterranean resort, a miniature economy is now entirely energised by “green” hydrogen. At its heart, two solar plants power an electrolyser, which splits water into oxygen and hydrogen, creating carbon-free fuel.

The hydrogen can then propel buses, be injected into the island’s gas grid and power fuel cells at hotels and the port. Spain and Portugal have ample land for such plants, as do the deserts of north Africa and the Middle East. In parts of Morocco and Mauritania, both sun and wind are abundant, forming rare sweet spots where electrolysers can run virtually non-stop.

Now is where the penny drops… why has Malta missed out in the past decade? Based on a PMC, issued in May 2022, one assumes that Malta will open its EEZ waters for the exploitation of offshore energy. Strategically to convert from LNG to green energy and partly to open the gates for export by vessels of pressurized hydrogen gas in containers. So far a high percentage of energy in Malta is imported from Italy via the inter connector most of it from non-renewable sources. Therefore, Malta has focused entirely on generating electricity using LNG imported from Socar, a State agency owned by the Azeri state. It is time that the islands wake up to the hydrogen revolution.

The offshore energy sector of most countries has been primarily controlled by multinational energy companies operating under long-term exploitation concessions and production-sharing agreements. Malta is a safe bet for such institutional investors, as it guarantees full protection during commissioning period. In some countries investors are exposed to considerable political and regulatory risk, because unforeseen changes in the legal environment of the host country may seriously undermine their financial feasibility or even result in the expropriation of the investment altogether. Malta is a safe haven for investment.

PKF has invested in hosting hydrogen-themed conferences and plans to introduce its business partners to bid for renewables and hydrogen generation when the tender is issued next year. 

Happy festivities for all readers.