Diesel for Delimara would not raise utility bills – energy expert

Finance Minister Tonio Fenech’s claim that the use of gasoil (diesel) instead of Heavy Fuel Oil (HFO) would result in a 30% spike in utility bills is disputed by environmentalist and leading energy expert Dr Edward Mallia.

Mallia based his calculations on figures included in a cost-benefit analysis for generating energy by different fuels at the new Delimara power station. Enemalta presented the document to MEPA as part of the Integrated Pollution Control (IPCC) permit process.

Although a planning permit was issued for the new power station, the decision on which type of fuel has still to be determined in the IPCC permit.

The government has always justified the use of the more polluting heavy fuel oil on the basis that it is cheaper than gasoil (diesel).

In June 2010 Fenech warned, “if we produced electricity from diesel rather than HFO, the electricity bills would have spiked up by 30 per cent.”

The cost benefit analysis confirms that at current prices generating Energy by Heavy Fuel Oil (HFO) is 50% cheaper than generating energy by diesel.

But the same cost benefit analysis also reveals that the new Delimara Power station extension (DPSE) will account for 30% of energy demand in 2012, when DPSE will take over a third of total generation which is presently produced in the Marsa power station.

If the DPSE used gasoil instead of the present HFO used at Marsa at the same efficiency as Marsa, Heavy Fuel Oil will be 50% cheaper than diesel.

But since the DPSE has twice the efficiency of Marsa it will only use half the fuel currently used in Marsa.

According to Enemalta the new plant will be 47% efficient compared to 23% efficiency level for the Marsa plant.

So the average cost of producing one unit of energy in the new power station extension will actually amount to 75% of the cost of producing one unit at Marsa today.

“The overall cost of electricity in 2012 should in fact go down through use of diesel in DPSE,” Mallia concludes.

This means that although diesel is more expensive than HFO, the increased efficiency of the new plant compared to the Marsa one will result in a reduction of energy costs for Enemalta over present levels. 

Furthermore in 2013 the Sicily interconnector (SI) is expected to contribute 20% of energy demand. According to the cost benefit analysis this is “expected to optimise costs from both the financial and emissions perspective”. Finance Minister Tonio Fenech has described the energy from the interconnector as “cheap”.

“Without firm figures for the SI nothing much can be said about average cost of units compared to present. But no great shock in the price of energy seems likely” says Mallia.

The same situation holds for 2014, when Marsa would have stopped producing energy, the old Delimara provides less than 1% and the SI a staggering 76% of energy demand.

Therefore after 2014 the price paid for electricity by the consumer will largely depend on the price of energy imported through the interconnector, which remains unknown.

Mallia also disputes a number of technical assumptions made in the cost benefit analysis, which tend to inflate the cost of gasoil (diesel) when compared to HFO.

The report assumes equal piston engine maintenance costs for HFO and gasoil, which Mallia considers doubtful. This is because HFO is not “really suited to piston engines”.

Enemalta also came up with the idea that the residual HFO sludge (three tonnes a day will be produced) which cannot be burnt in the piston engines will now be burnt in the old Delimara boilers.

“No mention of the undoubted increase in boiler maintenance costs is made”.

Another flawed assumption, according to Mallia, is that the use of diesel still requires a desulphurisation plant producing hazardous waste.

“This necessity is only designed as a cover-up for the false claim that the Integrated Pollution Control Permit (IPCC) was going to decide on the chimney height and the fuel for DPSE. These had been decided beforehand; so much so that both chimneys and desulphuriser are already in place.”

Mallia also challenges the statement that all fuels considered – HFO, gasoil and natural gas – carry equal risks when used.

As examples of the higher risk entailed in using HFO Mallia refers to 30 tonnes per day of hazardous waste, which will be produced if HFO is used.. [see page 6] This requires collecting, storing and eventual round-about land transport to the Freeport. and must carry greater risk than gasoil which need produce no such waste.”

The cost benefit analysis excludes the use of gas instead of HFO or gasoil before 2015, due to the infrastructural adjustments needed to reconvert the new plant.

According to the cost benefit analysis conversion from the more polluting Heavy Fuel Oil to the more environmentally friendly gas option will cost an extra €273 million in required investments and capital costs.

This includes a $320 million (€246 million) expenditure on the pipeline infrastructure itself and €27.5 million in additional investment expenditure to enable the plant to operate on gas.

The report recommends flexibility in using different types of fuel. 

“It is essential that the country is in a position to choose between different types of energy sources from time to time.”

Cubed Consultants Ltd, a company founded by economist Gordon Cordina, conducted the cost benefit analysis.