Ministry: €400 million cost of not reaching 2020 renewable targets 'hypothetical'

The island would have to fork out over €400 million by 2020 if it fails to generate 10% of its energy from renewable sources such as wind, solar, or water and biomass.

A report by the Auditor General has estimated Malta’s potential contingent liability in the event that renewable energy targets, outlined in a Commission directive on the promotion of the use of energy from renewable sources, are not attained. The study was undertaken following a request raised by the Public Accounts Committee during its deliberations of the performance audit report Renewable Energy and Energy Efficiency in Malta, which was published in September 2009.

As an EU Member State, Malta is required to produce 10% of its energy consumption from renewable energy sources by 2020. Additionally, Malta must establish a minimum 10% target of renewable energy in the transport sector.

The NAO based the financial liability on two scenarios: a best-case scenario where Malta attains a 9% target, and a worst-case scenario where only 1% of RE is used.

In the first case, Malta would incur a penalty of some €180,000 to an annual payment of €236,000 by the European Court of Justice, in the event that the mandatory targets are not attained. But in the worst-case scenario, this penalty would be as high as €26.2 million. Additionally, the non-generation of renewable energy would derail targets to cut down on carbon emissions: a price tag of up to €100 per tonne emitted above the targets.

Malta would also have to invest in ‘statistical transfers’ if it doesn’t make the renewable energy targets: green credits to make up for the shortfall. The NAO says this would cost up to €6.5 million in the best-case scenario, but this goes up to €58.5 million in the case of the 1% worst-case scenario.

Malta could also invest in Europe-wide capital projects to generate renewal energy, such as wind energy farms. The NAO estimated the cost at between €36.1 million, up to €324.5 million in a worst-case scenario where the project must achieve the 9% renewable energy target by 2020.

The results and conclusions presented in this study are subject to significant qualifications which render the estimates and conclusions presented strictly hypothetical. “The economy of climate change and renewable energy is relatively new and still being developed. It is not easy to have a precise estimated of what the impact of not achieving the 2020 targets will be,” the resources ministry said in a statement.

The ministry referred to statements by the Auditor General, that many parameters on which its estimate of the financial liabiliy was based, are yet to be established or will change. “That’s why the Auditor General said the study is based on various hypothetical situations. The study makes various assumptions since the estimates are based on future circumstances.”

A major limitation of this study related to certain overseas scarce data and information available on the subject matter. Another major limitation related to the unknown potential impact of technological advancements in the renewable energy field.

Assumptions were made with regards to the duration of Malta’s non-compliance with the relevant Directive and the gravity assumed by the European Court of Justice in imposing financial penalties on Malta.

The Maltese government is currently considering the location of wind farms and spearheading a solar panel project that will provide installations over the roofs of government buildingss.