Government could spend €80 million more than last year to keep consumer energy prices stable

The Government could potentially spend €80 million more on energy subsidies this year than it did last year, as the cost of electricity in Sicily has doubled over the past year.

Responding to questions from the media regarding rising energy prices, Finance Minister Clyde Caruana said energy price stability and related investment remain the country’s top priorities.

“Stable energy prices are what make our economy more resilient to external shocks. The way things are evolving is likely to be that energy prices will soar further before they start coming down,” Minister Caruana said.

The finance minister said higher costs could force the Government to spend €230 million to keep consumer energy prices at their current levels. This would represent an increase of €80 million over the €150 million spent on energy subsidies last year.

Interconnector data obtained by Times of Malta show that the cost of electricity from Sicily has doubled compared with last year, reaching 33 cents per kWh during some hours in August.

However, the Government has set aside an additional €250 million, on top of the energy subsidy expenditure already provided for in the budget. The funds were allocated in anticipation of the impact of the conflict in Iran and further international energy price shocks.

At pre-conflict levels in 2022 after Russia invaded Ukraine, the Government spent €350 million to maintain stable consumer energy prices.

The Malta-Sicily interconnector is an undersea cable that allows Malta to import electricity at market prices.

Sicily has some of the highest electricity prices in Europe. On 21st August, electricity prices in Sicily reached 21 cents per kWh, compared with 17 cents per kWh in other Italian regions.

Energy prices could rise further if European reserves are depleted before the colder months.

Meanwhile, diesel prices have also risen sharply following a drop in refinery processing capacity of 6.5 million barrels a day in July. Morgan Stanley expects Europe’s diesel stockpiles to fall to around 299 million barrels by November, which would be their lowest level since 2015.