Com­mis­sion­ing of power sta­tion on time would have cost the coun­try €138 mil­lion

Malta Independent - - FRONT PAGE -

If the new De­li­mara power sta­tion had been com­mis­sioned in 2015 as per the Labour Party’s elec­toral pledge, it would have cost the coun­try an ex­tra €138 mil­lion over the last two years, ac­cord­ing to an in­de­pen­dent anal­y­sis com­mis­sioned by the Na­tion­al­ist Party seen by this news­pa­per.

The study es­ti­mates the ad­di­tional costs the coun­try would have in­curred in 2015 and 2016 if the coun­try’s en­ergy re­quire­ments had been met by the new Elec­tro­gas power plant in­stead of the elec­tric­ity in­ter­con­nec­tor.

In ac­tual fact, the study finds it was the use of the in­ter­con­nec­tor, which was com­mis­sioned in March 2015, which had been re­spon­si­ble for keep­ing the prices of elec­tric­ity down over the last two years.

Ac­cord­ing to the study, if the Elec­tro­gas power sta­tion had been up and run­ning as orig­i­nally planned as per the gov­ern­ment’s elec­toral pro­gramme, and had be­gun to sup­ply the same en­ergy pur­chased from the in­ter­con­nec­tor, it would have cost the coun­try €54 mil­lion more in 2015.

Us­ing the same yard­stick for 2016, when over 70 per cent of the coun­try’s en­ergy needs were pur­chased from the in­ter­con­nec­tor, the Elec­tro­gas power sta­tion would have cost the coun­try €84 mil­lion more in 2016.

More­over, the ex­pert anal­y­sis also calls into ques­tion the ac­tual need for a new power sta­tion in the first place, given that en­ergy pro­duc­tion data for 2016 shows that the in­ter­con­nec­tor is able to cope with three-quar­ters of the coun­try’s en­ergy needs and that the BWSC plant would have been more than enough to cater for the re­main­der of the coun­try’s en­ergy re­quire­ments.

Ac­cord­ing to the anal­y­sis, the ad­di­tional cost of pro­duc­ing en­ergy lo­cally, as op­posed to sourc­ing it from the in­ter­con­nec­tor, is in the re­gion of €138 mil­lion, al­most €70 mil­lion a year, over 2015 and 2016 to­gether.

2015

Ac­cord­ing to data from the Na­tional Sta­tis­tics Of­fice, dur­ing 2015 Malta bought elec­tric­ity from the in­ter­con­nec­tor amount­ing to a grand to­tal of 1,053,981 Mwh, since the pro­ject was com­mis­sioned in March 2015.

The work­ings es­ti­mate the ex­tra pro­duc­tion costs Malta would have in­curred if the equiv­a­lent amount of en­ergy im­ported from the in­ter­con­nec­tor in 2015 had been pro­duced by Elec­tro­gas.

Em­ploy­ing the to­tal 2015 en­ergy vol­ume of 1,053,981,000 kWh, the ad­di­tional cost of pro­duc­ing the same vol­ume by Elec­tro­gas would have been (x €0.051 per kWh), or €54 mil­lion. • Elec­tro­gas rate €0.096 per Kwh • In­ter­con­nec­tor rate €0.03c – €0.06c per Kwh (the study uses an av­er­age price of €0.045c per kwh) • The dif­fer­ence in rates is of €0.051 per Kwh

2016

Fig­ures from Euro­stat, the Euro­pean Union’s sta­tis­ti­cal arm, show that 72 per cent of Malta’s en­ergy re­quire­ments over the course of 2016 (Jan­uary through Au­gust 2016) were im­ported from the in­ter­con­nec­tor. This was the case this year be­cause the BWSC plant was switched off so that the con­ver­sion to nat­u­ral gas to take place.

The fig­ures clearly show that the in­ter­con­nec­tor on its own is able to sat­isfy al­most three­fourths of the coun­try’s to­tal en­ergy re­quire­ments.

As­sum­ing that in 2016 the re­quired to­tal pro­duc­tion was close to 2015’s lev­els (i.e. 2.3 Megawatt hours), the ad­di­tional costs that would have been in­curred by sourc­ing elec­tric­ity solely from Elec­tro­gas have been es­ti­mated as fol­lows: • If en­ergy was pro­duced by Elec­tro­gas: 0.72x 2,300,000,000 kWh x €0.096 = €159 mil­lion • In­ter­con­nec­tor: 0.72 x 2,300,000,000 kWh x €0.045 per kWh = €75 mil­lion

As such, the study finds that the pro­jected ad­di­tional costs for 2016 would have been €159m €75m, or €84 mil­lion.

As such if Elec­tro­gas had been in op­er­a­tion in 2015 and 2016, it would have cost the coun­try (€54m + €84m) €138 mil­lion more to sat­isfy its en­ergy re­quire­ments, com­pared with en­ergy be­ing sourced from the in­ter­con­nec­tor.

Com­par­ing costs

The study com­pares the costs of the Elec­tro­gas plant op­er­at­ing at full po­ten­tial ca­pac­ity and the cost of elec­tric­ity from the in­ter­con­nec­tor.

The Elec­tro­gas plant’s ca­pac­ity is of 200MW. As such, the po­ten­tial out­put in one year is 200MW x 365 days x 24 hours a day – i.e. 1,883,400 MWH.

While in re­al­ity the ac­tual charge­able out­put would be less, be­cause of in­ef­fi­cien­cies, for cost pur­poses the po­ten­tial out­put was taken into con­sid­er­a­tion. • The po­ten­tial an­nual out­put us­ing the Elec­tro­gas plant would cost €180 mil­lion • The same out­put us­ing the in­ter­con­nec­tor (€0.045c per Kwh) would cost €85 mil­lion

The study finds that, “Al­though it is un­der­stand­able that Malta needs to have its own power plant to safe­guard its po­lit­i­cal in­ter­ests, which un­der­stand­ably suf­fers from the lack of economies of scale, it is high time that the coun­try starts eval­u­at­ing the an­nual costs of run­ning two iso­lated lo­cal power plants.

“Ir­re­spec­tive of the high level of ef­fi­ciency reached, lo­cal en­ergy pro­duc­tion will re­main costlier when com­pared to larger power plants which are found in Malta’s prox­im­ity. Cases in point are Italy, Si­cily and France.”

Method­ol­ogy

The study re­lies on of­fi­cial data on the to­tal power gen­er­ated in Malta and im­ported en­ergy dur­ing 2015 and 2016. The equiv­a­lent of im­ported en­ergy in Kwh via the in­ter­con­nec­tor was costed us­ing the es­tab­lished rate of (€0.096 per Kwh), the same rate with which Elec­tro­gas won the ten­der to sup­ply Ene­malta with elec­tric­ity and liq­ue­fied gas.

The rate ap­plied for im­port­ing en­ergy from the in­ter­con­nec­tor ranges be­tween €0.03c and €0.06c per Kwh. For the scope of un­der­tak­ing the cost­ings, the mean rate of €0.045c per Kwh was used.

Back­ground

• An in­ter­na­tional eco­nomic en­vi­ron­ment char­ac­terised by his­toric low oil prices (with lat­est prices hov­er­ing at around $49 a bar­rel). • Fol­low­ing a €200 mil­lion in­vest­ment, as from 2015 the util­i­sa­tion of the in­ter­con­nec­tor be­tween Malta and Si­cily was pos­si­ble. The util­i­sa­tion of the in­ter­con­nec­tor in 2015 amounted to 47 per cent of the to­tal en­ergy pro­duc­tion. In 2016, the util­i­sa­tion fac­tor was the equiv­a­lent to 72 per cent of Malta’s en­ergy needs. • To­tal in­vest­ment out­lays on en­ergy projects amounted to €730m. If this out­lay is amor­tised over 20 years, this fig­ure will be the equiv­a­lent to al­most €0.02 per kWh (or per unit) pro­duced. • The cost-ef­fi­cien­cies earned from the new BWSC plant ranges be­tween €30 and €40 mil­lion a year, and are ex­pected to in­crease with higher util­i­sa­tion and en­ergy prices.

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