Europe is approaching a winter of discontent as energy prices continue to rise. This is not good news for families and businesses that all depend on gas, petrol and electricity.
The reasons behind the soaring energy prices are well known. Some may be temporary but others will take a long time to resolve. The worst of the economic disruption caused by the pandemic seems over. Global demand is recovering strongly and this is causing energy prices to spike. According to the International Energy Agency, there has been a 600 per cent increase in European gas prices in 2021.
The planning approval of the 159-kilometre undersea gas pipeline, which will cost €400 million to construct and will connect the Delimara power station to Gela, in Sicily, is a most welcome development. However, its viability will take several years to become evident.
Attempts to tap into European Union funding for the project have so far been unsuccessful. The EU wants member states to become less dependent on fuel fossils like LNG, used by Malta’s power station. The use of hydrogen as a replacement for LNG is the preferred solution. The Malta-Sicily pipeline will be hydrogen-ready.
European Commission president Ursula von der Leyen has told the European Parliament that the bloc is “vulnerable” as it imports 90 per cent of its gas, much of it from Russia. She urged member states to ease dependence on natural gas and emphasised the need for a Green Deal, adding: “A speedy transition to clean energy would also make the bloc a more independent global player.”
But this transition to cleaner energy and, hopefully, more affordable prices is complicated and will take years to materialise. Meanwhile, the surge in gas prices will hit the EU’s most vulnerable families. Both von der Leyen and European Energy Commissioner Kadri Simson urged member states “to provide targeted support to their citizens as electricity and gas prices soar”. Some governments are already defining their plans to subsidise the energy bills of the most vulnerable.
The surge in energy prices did not come like a bolt from the blue. Pressures have been building up as economies start to revive. Still, Malta’s finance minister, the prime minister and the opposition leader hardly said anything in their 2022 budget speeches about how the country would cope with more expensive energy, from which no household or business will be spared.
No official announcement has been made about the energy price situation, which is no surprise given the looming election. It was the first item of discussion at the EU summit.
The price at which Electrogas provides LNG for the generation of electricity is fixed until April next year, providing Enemalta with some leeway. Malta also had the third-lowest household electricity prices in the EU in the first half of 2021.
However, there is no doubt the overall cost of producing power has increased substantially. Earlier this month, Enemalta avoided using the interconnector for some periods, citing high prices. This is not likely to be a sustainable practice in times of higher electricity demand.
Meanwhile, fuel and household gas are undoubtedly costing the country more to import.
Malta may still be relatively insulated from what the EU regards as a crisis, but this situation is not likely to last very long unless prices start to go down again soon.
The government would then need to take the public into its confidence and explain how it intends to protect vulnerable families from the worst effects of those prices.
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