A cost-benefit analysis of using natural gas for electricity generation in Malta

Abstract

A Cost-Benefit Analysis ofusing Natural Gas for Electricity Generation in Malta The ever-increasing demand for electricity in Malta, coupled with the introduction of stringent environmental legislation, induces Enemalta Corporation to revolve to more cost-effective generating systems, which would also safeguard the interests of the nation as a whole. To this effect, the Corporation is considering various projects, one of which is the use of natural gas to fuel its power plants, by linking to gas sources in Sicily via an offshore pipeline. This study uses the relevant costing approach to evaluate the financial impact of using natural gas for electricity generation in Malta, replacing the current use of both fuel oil and diesel oil. It determines whether the various benefits of natural gas over other fossil fuels outweigh the high initial capital expenditure. The relevant costs and benefits were estimated, and various investment appraisal techniques, together with a sensitivity analysis, were adopted so as to evaluate the feasibility of the project. Finally, the viability of the project was determined in view of the assumptions made. Given the nature of the project, areas requiring more in-depth analysis were suggested in order to reduce further the risk of the investment decision.