The Malta Labour Party is evidently hinging on their energy proposal for the coming election. Besides being the only proposal we have heard until now, for PL this proposal is surely the fulcrum of its bid to take power. This proposal is however shadowed strongly by the inability of Labour to publish the related technical analysis and assumptions.
It is crucial to point out the fact that what Labour are proposing is already within the government’s plans. How? The Government, through the National Energy Policy for the Maltese Islands, published in 2012, states that the conversion to gas of the Delimara Power Station Extension together with the gas pipeline is within our plans, plans which are subject to EU funding.
EU funding in such case is crucial because if it is not available, it will render such projects uneconomical given that the capital costs involved are substantial for a small country like Malta. This fact has also been stated by the Prime Minister, Dr Simon Busuttil and Ministers George Pullicino and Tonio Fenech.
There seems to be a consensus on energy supplied by gas between the political parties. So, why is the Nationalist Party opposing firmly to Labour’s proposal?
Labour’s timeframes are highly ambitions and pretentious. Various local and international experts in the energy field stated that a power station could not be built in 18 months. A professional project, which is safe, up to standard and within the local and international commitments would require from three to five years. One does not build a power station just for the sake of building one. Quality in investment is crucial, otherwise, the economy and its inhabitants will suffer.
Labour’s proposal involves an investment in a brand new power station which this country can surely do without for the coming years. Any investment which does not add value to the economy is considered to be a deterrent to economic growth.
In order to transport gas to the power station Labour’s preferred option of building a gas terminal costlier than the PN’s preferred option which involved the transportation of gas through a pipeline. In addition, with its choice the Labour Party is moving away from the Europe Union’s idea of connectivity through the energy grid.
The Labour Party is clearly uncomfortable with its workings, if there are any. Doubt prevails within the Labour Party as to whether this proposal was essentially needed, provided that they can’t get their facts right to justify their nonsensical arguments.
Labour clearly chose the expensive route. Such a decision will cost Malta millions of euros, which will have to be paid by our tax payers. In addition, this may discourage foreign investors to invest in Malta as it portrays a perfect example of irresponsibility. Thus, the indirect implications or such impetuous and daring decisions cannot be taken for granted.
What Labour cannot understand is that Konrad Mizzi’s proposal will not save the party from losing yet another election. The electorate is intelligent enough to realise Joseph Mucat and Konrad Mizzi are evidently lying through their teeth.
Site selection and Environmental Impact Assessment
The site involves land reclamation which is no cheap factor. To add insult to injury, the same Labour Party who objected every project in the area, is now proposing an enormous alteration of the area, the size of the Mosta dome within the Marsaxlokk residential area. Labour assumed, without any form of consultation that this will be accepted by the residents, blinding the residents with the dismantling of the Delimara Power Station. A carrot and stick example.
With regards to the Environmental Impact Assessment (EIA), Labour declared openly that a site specific EIA of the Delimara Extension shall be used to for their proposed project. This EIA is linked to the BWSC extension, a project which was highly disapproved by Labour. This EIA, which was undertaken by exports appointed by the Nationalist Party in Government, is specific to the type of installation and area. Labour’s proposal involves a different adjacent area and different construction methods and designs. This implies that a specific EIA is required for Labour’s proposal, which is a time consuming process, if undertaken in a professional manner.
Labour’s economic magic
Labour promises a hefty decrease in price of electricity through a substantial decrease in cost of production. The consultants appointed by the Labour Party - DNV Kema - were appointed by Enemalta, have been given a very specific task by Labour. They were to identify the LCOE (Levelled Cost of Electricity) if their intended project is actually done. The use of LCOE was a specific tactic by Labour to hide part of the reality to the public. At no point did Labour point out that LCOE is a measure of the price of electricity in a break even situation.
Do they mean that their private investor will not make profit? To this one has to add the hedging risk the investor will be facing. If you have to bind yourself with a price for 10 years no matter what your costs will be it is obvious you will not risk and blow up the price as much as possible. This is like entering a job contract for 10 years at frozen pay thus not getting any pay rise even if the cost of living explodes upwards.
At this point we may ask what profit margin will the investor seek? To our knowledge there is no indication of what profit the investor will be looking into. Maybe Labour already has an idea of who the investor is and what profit will he demand? What is sure is that Labour already set the prices for the future in its fantasy land.
The clock ticks and you can’t stop it
Timeframes are an issue that have been highlighted by various stakeholders in their reaction to the proposal. Joseph Muscat is trying to trick the Maltese society into believing that he makes things work faster than how they are supposed to. It seems like Labour has no experience in how things work. 36 months is the minimum time that can be taken as a possible construction time for the plant they are planning which includes the gas ships (which are not even included in the costings), the terminal and the plant and maybe even the conversion to gas of the BWSC plant. This though does not include the ‘paperwork phase’. The tendering process, permits for construction and operation, environmental assessments, legal agreements etc. required.
Even if all this is a plain sailing no issue process, I would envisage it taking another 18 months to complete. The best estimate would be 54 months, which means just right to be inaugurated prior to the following election (coincidence coincidence).
Free markets and state aid
Labour’s proposal puts Enemalta in a very delicate situation it never was in – that of having a direct competitor on the market of electricity generation. Labour’s proposal sounds a lot like a cartel in energy. Will this inhibit other players in the market? This further highlights the impossibility to enact what Labour is intending.
All these points add up to one thing. Labour’s proposal can’t work, can’t give what is promised. Labour can’t deliver.
David Agius is the Nationalist Party whip