The windmills are coming…

Writing in MaltaToday, Energy Minister Miriam Dalli and ICM CEO Ismail D’amato, said that 5th December marked an “important milestone” in the diversification of Malta’s energy landscape. This day marked the announcement of a future floating wind farm over the waters within the EEZ. This shall produce around 300MW of energy. Observe that such a project has an estimated contract value of €1 billion. Malta wants to attract investors to design, construct, operate, maintain and decommission such a marvel situated 12 nautical miles away from shore.

The concession will be for 35 years and the two sites identified by the government are Hurd’s Bank, off Marsaskala, and to the south, off the Freeport. Hurd’s Bank, which is a shallow area in international waters is currently extensively used for ship bunkering.  This location due to its shallow water, is ideal for anchoring floating turbines or solar panels.

Bidders will be expected to identify where they plan to site their project within the two identified areas. A scientific evaluation task force took into consideration the distance from the Delimara power station, where the cables will be connected to the areas that are likely to suffer least environmental impact and the strength of the wind. The two areas are relatively shallow reaching depths of about 90 to 150m. The Hurd’s Bank could also be used to locate projects in emerging technologies such as floating carbon storage.

Energy generated by turbines will be transmitted back to shore via export cables. The competitive process will involve three stages. Stage 1 is the Preliminary Qualification Questionnaire (PQQ), Stage 2 is the Invitation to Participate in Dialogue (ITPD) and Stage 3 is the Best and Final Offer (BAFO).  The bidders have until 28 March 2025, to place their submissions.

One may pause and recall the positive change in attitude offered by the energy department to accelerate production of green energy from domestic use of photovoltaics.  New grant schemes and feed-in tariffs were issued to help families and businesses invest in smaller renewable energy systems. The first scheme, aimed at residential buildings, offers grants of up to €3,000 for photovoltaic systems, and up to €7,200 for battery energy storage systems.

Observers may wish to question what tangible progress was achieved in the sphere of green energy during the Labour administration, now in its eleventh year. Since the Muscat administration, the sure-fire policy was to turn away from burning heavy fuel oil at the old Delimara plants and exclusively import fossil fuels through Electrogas and BWSC plants and energy imports via an FSU vessel permanently anchored in Marsaxlokk.  From a long-term perspective and from a Net Zero policy, the wind farm at its peak can produce one third of present consumption. The question remains in this concession whether a second green electricity source will eventually replace the use of LNG.   Good news is that the European Investment Bank is now officially in Malta and can possibly oil the wheels for operators for bridge finance.

Another novel strategy is Green Finance, as this includes promoting investments and Green Bonds used in low carbon energy generation and sustainable infrastructure.  So far, only one bond of €25m has been launched locally by the State, but more issues may follow.  By contrast, in the US, funding for low carbon industries is backed by solid legislation.  Such a drive resulted in substantive investments in infrastructure, including modernizing the electric grid, expanding renewable energy capacity, and supporting the development of clean energy technologies. It includes legislation to extend tax incentives and grants for renewable energy production, power storage, and electric vehicles.

Back home, we are pleased to report that Hon. Miriam Dalli, energy minister launched a PMC in May 2022 concerning an offshore solar site four nautical miles off Delimara. This has been identified as a possible location for a floating farm of solar panels. Here, there is potential for the creation of a modest 50 megawatts of clean energy. In the context of the total island’s electricity annual peak of 870 megawatts, 300 megawatts are just tinkering on the surface, but if and when the floating wind farm comes on stream it will account for circa one fourth of present consumption.  Another PMC is aimed to solicit proposals issued for investors for the deployment of vast photovoltaic farms, extending up to 12 nautical miles off the coast.  

The ministry is currently supporting the ongoing technical studies to conclude a competitive call for offers. Another dream will be the production of hydrogen gas by electrolysis of sea water. A by-product is pure hydrogen gas conveniently bottled in pressurized canisters for export. The wind farm concession falls short of indicating the parameters of a feed-in tariff to Delimara or if there is scope for any excess energy to be exported by the concessionaire.  As can be expected, an analysis is crucial to indicate the future growth of offshore renewables in Malta. Experts concede that the speed of growth will be driven by two main factors:

a)  the cost competitiveness of energy production by the offshore wind industry; and

b)  the level of policy support for the development of renewable energy.

At no stage does the consultation document mention the generation and use of green Hydrogen via electrolysis. Therefore, consumers in Malta observe how the penny has dropped that so far, Delimara is planned on short-term generation of electricity using LNG. This is imported from Socar - a state agency owned by the Azeri state.  Ideally, this fuel needs to gradually give way. Our Net Zero challenge is be reached by 2050. Ideally, producing hydrogen via electrolysis can be exported using the future “Melita” TransGas Hydrogen-Ready Pipeline.  This has been identified as a project of common interest by the European Union.

Malta is a safe bet for investors, as it guarantees full protection during the commissioning period. So far, Malta’s tax code has no specific tax incentives to attract investors in EEZ, as is the case with other sectors such as aviation, fintech, financial services, pharmaceuticals, tourism, and gaming. One hopes that a serious attempt is made by tax experts advising Castille to draft incentives fine-tuned to attract international investors. Hope springs eternal but of course, in such instance it is the early bird which catches the worm.