Marco Cremona | Higher water prices – a reality Malta must face

By 2015 Malta must apply the Water Framework Directive. What will this require?

Malta has always had water supply problems but the demand for water increased significantly in the last 50 years when our population started growing at an exponential rate. Other factors such as tourism, introduced in the 1960s, exacerbated the problem. Malta's manufacturing industry similarly played a part.

More recently, local agriculture became more intensive and irrigated. While the built environment has taken over a lot of agricultural land, the portion used for irrigation agriculture grew rapidly. Put together, these sorely strain Malta's limited water-generation options. Studies from early 1970s had anticipated this, so it is not a newly discovered problem.

Today we find ourselves in a situation where Malta is under pressure by the European Commission to implement the Water Framework Directive by 2015. Malta should have already implemented parts of it in 2010 (particularly Article 9 which deals with Water Pricing), and the pressure is increasing.

The Water Framework Directive sets out a number of requirements for all member states. Aside from stressing the need to bring water resources to an acceptable level by 2015, it also requires member states to ensure that they are of 'good quality' by that year.

What will the directive, and its effect on the local pricing of water, mean for our business sector?

Part of Malta's water quality issues are related to salinity. If one extracts more water than one is supposed to from Malta's aquifer, seawater rises up into it, and the water becomes saline. Saline water loses its quality, and thus its market value. In some places already, extracted ground water is no longer even fit for agriculture without treatment, let alone drinking. The directive requires this situation to be corrected.

Malta is probably extracting between 35 and 45 million cubic metres per year (though nobody knows exactly). It is unknown how many unregistered boreholes are extracting water, or how much water is being extracted from those boreholes which are actually registered because only a few boreholes have been metered.

Keeping in mind that we should be extracting only between 23 and 25 million cubic metres per year, to allow the aquifer to replenish itself naturally, it is a big problem. To reach this target, we need an immediate cutback of anywhere between 10 to 20 million cubic metres per year (to put these figures in context, WSC produces 16 million cubic metres per year from its reverse osmosis plants altogether). The hard decision is determining where this cutback needs to come from.

How does water pricing come into it?

The water pricing that the Water Framework Directive requires will mean that water is no longer extracted freely. The thrust of the directive is that water should be used efficiently. It does not establish specific pricing, but requires a disincentive on water consumption to ensure that water is used efficiently, and be strong enough a disincentive to encourage investment in water saving.

The Water Services Corporation currently extracts 13 million cubic metres of water each year. What it does not extract from the ground water, the WSC makes good for by treating seawater with reverse osmosis. Officially, the price of each cubic metre of groundwater production by WSC is 10c. This price includes the cost of pumping water to the surface, and some chlorination. This price is not realistic, and does not incentivise water efficiency in any way.

The directive also requires member states to implement factors such as cost recovery into water pricing structures. One of these is sewage collection and sewage treatment. Despite the fact that Malta is resisting this 'tax', we should be paying a sewage tariff, which should cover the costs related to treatment of sewage according to the 'polluter pays' principle.

The current water pricing does not reflect reality. It is heavily subsided, as substantial part of the supply is coming from ground water for free, and because WSC obtains 60% of its water from reverse osmosis, costing unofficially €0.60c per cubic metre, which it absorbs. This amounts to six times as much as the cost of extracted ground water.

Currently, the domestic tariff has a two-stage structure: those who consume up to 33 cubic metres per year, pay €1.47 per cubic metre. If one exceeds that volume, one pays €5.41 cubic metres per cubic metre. With regards to the commercial rate, the price at €2.10 for a certain threshold of consumption, which increases to €2.50, and then surprisingly enough drops to €1.75 for the top-most consumers. It is unclear in my mind why the price for top-level consumption drops substantially.

The Water Directive will require Malta to establish correct pricing that accurately reflects the cost of generating water, and to pass this on to the consumer. Were we to have a pricing structure that reflected reality, the water pricing tariffs upon which the actual consumption rates are based would probably be twice as high.

Which sectors are the largest consumers of water?

The largest sector that extracts and consumes water is agriculture, followed by the tourism sector, where hotels and other large operators either extract water from their own boreholes, or purchase water from bowser suppliers who extract water from their own boreholes. Industry sector operators that similarly either extract water themselves, or purchase extracted water. Local beverage companies in particular use water as the main ingredient for their products, which is very often extracted straight from the ground water reserves. The problem is that vast swathes of sectors are accustomed to extracting water freely and making use of it for personal or commercial purposes.

The sector that will be the most affected is agriculture, especially irrigated agriculture. While not all agriculture in Malta is irrigated, we have recently shifted considerably towards that model of agriculture without considerations on what it would mean for Malta's limited water resources. Despite the utilisation of EU funding for irrigated agriculture, there was insufficient investment in water-catchment options like reservoirs, and most of Malta's agriculture today depends on (free) groundwater.

Other affected sectors will include Malta's beverage companies as well as laundries, which both consume a lot of water and thus will feel considerable economic repercussions to a rise in pricing. It is the same for those hotels which rely considerably on either the mains for their water supply, or buy water from suppliers who extract from registered boreholes. It will have however little impact on those large hotels which are next to the sea and have their own reverse osmosis plants (which are however vulnerable to any increase in the electricity prices). In my opinion, most local manufacturing companies will not be severely affected, as few consume large quantities of water.

What can businesses do to offset such a cost? Are there alternative water-generation or saving options they can explore to cut down on water-related expenses?

There are many options. I am involved in the EU Life+ Investing in Water Project managed by the Malta Business Bureau.  We are auditing businesses and hotels, and it is surprising how much money can be saved simply by performing low cost interventions, such as placing restrictors on taps or replacing showerheads. Sometimes even up to 50% of water consumption. Other technologies such as rainwater harvesting are also a viable preposition for a lot of enterprises, as well as greywater or wastewater recycling. However, it should be however kept in mind that certain technologies require a certain economy of scale. It is those enterprises which consume large quantities of water that stand to make the biggest savings.

However what is arguably the biggest problem today is a lack of water consumption awareness. There are many companies that are significant water consumers but do not measure their own consumption by checking the town water meter, and rely solely on ARMS readings. When a leak or fault crops up, a significant amount of water would have gone to waste before they realise it. There are many ways to ensure greater water efficiency - but it starts with greater water awareness.

It is also unfortunate that while the government has been proactive in raising awareness of alternative energy generation and carrying out initiatives related to photovoltaic panels, solar water heaters, and even free energy-saving bulbs, the same cannot be said for water-efficiency initiatives.