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Gibraltar: on the crest of a wave

Everybody wants their power production to be as sustainable as possible – Gibraltarians are doing something about it, with the first step to be accomplished by the end of this year.

Gibraltar is trying to go green but there are obstacles. You want to put a wind farm in place? Certainly, in theory it’s a good idea but there are difficulties – such as the complete absence of space. There simply isn’t a wind farm shaped space on the Rock. There is one other answer, though; all but surrounding Gibraltar is a massive resource – the sea.

Tidal and wave energy is going to become very big for the Gibraltarian population even if they won’t notice the difference in how their power is provided.

It started in 2014 when the HM Government of Gibraltar signed a 5MW Power Purchasing Agreement with Eco Wave Power (EWP), an Israeli wave energy power company with its own patented technology. “The Government was looking for a renewable energy source that could be implemented in Gibraltar,” said EWP co-founder and marketing director Inna Braverman. “This was because Gibraltar had committed to the EU that it would get 15% of its electricity from renewable sources.”

Other than the impracticalities of wind power, the other option open was solar power. Once again sheer space defeated the idea; the climate is perfect but there isn’t enough roof space or open space to generate sufficient power – at least not without ruining the natural beauty of the Rock, confirmed Braverman. The ocean quickly emerged as the only way.

There will be two stages to the build, explained co-founder and CEO David Leb. There will be an operational smaller scale power station  in the water by the end of the year and the rest will be a year and a half to install, dependent on the availability of suitable ocean structure for the installation, he said. Braverman explained that the first stage will be the power station which will have eight floaters to pick up the power from the waves, to be built on the existing ammunition pier. “For the next stage we need a bigger space, so we couldn’t use the old pier; we’ll probably do it in the new marina or at least in a larger space.”

The technology is fairly standard on the land, explained Leb, while everything on the breakwater is tailored for each individual case. “The power station to harness electricity from the waves is based on the ground breaking technology that we have. We adapt the floaters for different locations and different places, so that’s made specifically for Gibraltar; the power station is pretty much standard.”

The technology involved will be innovative. At the moment EWP is experimenting with two sorts of floaters, the 1st generation version which is deployed in its Jaffa Port, Israel installation, but it’s building towards a 2nd generation version for Gibraltar.

 "We have come up with smarter components, higher-grade materials, and state of the art controls and automation allowing us to control the system remotely while monitoring its important indicators; this is in parallel to our progress in the deployment of the new power plant in Gibraltar,: said Braverman and Leb in the official announcement. “We would like to invite all our potential partners, clients and investors to come and visit the power station in Jaffa and witness the tremendous efforts that were invested by us"

Gibraltar is one of the few countries in Europe that appears to be doing something about its 15% commitment to electricity generation and its deadline is 2020; according to Leb, that 15% is about as far as it’s likely to go unless something dramatic changes. “It’s about space, we don’t have the space to add more, but I’m sure Gibraltar has its own ideas of bringing in further renewable energy sources just like any other countries in the world.” Braverman adds that  for the first time there are solar powered roofs in Gib, which  will not be creating commercial amounts of electricity but are sending some power back to the grid and showing positive progress towards renewables. “Our solution plus some less space-intensive ideas should enable Gibraltar to meet its EU obligation.”

EWP’s credibility as a provider has been underscored by Erasmus University, which has given it an award. The judges said: " Eco Wave Power's split units are well-engineered and smart with high potential for producing decentralized energy. The manufacturing costs sound interesting - a system with high potential"

Guy Clapperton is the freelance journalist who edits the New Statesman’s Gibraltar hub. You can also find him in the Guardian, Computer Business Review and Professional Outsourcing which he edits.

Photo: Getty
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Gibraltar - impact of Brexit

Last week our editor took a general overview of some of the scenarios for Gibraltar if Britain were to leave the Euro. This week, as the atmosphere in the British Conservative Party becomes ever more toxic, Michael Castiel, partner at Hassans lawyers on the Rock, goes into more detail (this piece written before the Iain Duncan Smith resignation and subsequent arguments happened).

However unlikely it may prove, the prospect of Britain's withdrawal from the EU sends shivers through Gibraltar's financial services, gaming and tourism industries, which are at the core of Gibraltar’s economy. For, if Britain leaves the EU, Gibraltar goes too, and, should Brexit occur, it is Gibraltar’s relationship with the UK that as in the past, largely will shape Gibraltar's future.

Gibraltar joined the European Union in 1973 as part of the UK. While rights to freedom of services across borders of EU member states apply between Gibraltar and the rest of the EU, because Gibraltar is not a separate member state (and is in fact part of the UK Member State) those rights do not apply between Gibraltar and the UK. Instead a bilateral agreement, formalised almost two decades ago, gives Gibraltar's financial service companies the equivalent EU passporting rights into the UK. Accordingly and pursuant to such agreement, where EU rights in banking, insurance and other financial services are concerned, the UK treats Gibraltar as if it is a separate member state.

This reliance on the special relationship with the UK is recognised by both the Government and the Opposition in Gibraltar, and when the territory (which in this instance as part of the UK electorate) goes to the polls on 23 June, the vote to remain in the EU is likely to be overwhelming. This may have symbolic significance but realistically seems unlikely to influence the outcome. In actual terms, although some non-EU jurisdictions use Gibraltar and its EU passporting rights as a stepping stone into Europe, almost 80% of Gibraltar’s business dealings are with the UK.

But whether or not Britain maintains the 'special relationship' with Gibraltar, if Brexit becomes a reality, other factors will come into play, with the ever-present Spanish Government’s historic sovereignty claim over Gibraltar topping the list.

Recently Spain's caretaker Foreign Minister Jose Maria Margallo went on record that if the UK voted to leave the EU he would immediately 'raise with the UK the question of Gibraltar.' If this was to come about it could take one or more of several different forms, ranging from a complete closure of the border between Spain and Gibraltar, demanding that Gibraltar passport-holders obtain costly visas to visit or transit Spain, imposing more stringent border controls, or a frontier toll on motorists driving into or out of Gibraltar. The latter idea was in fact floated by the Spanish Government three years ago, but dropped when the EU Commission indicated that any such toll would contravene EU law.

Here, again, imponderables come into play, for much will depend on which political parties will form the next Spanish government. A Spanish government headed by the right wing PP party is likely to take a less accommodating attitude towards Gibraltar (the Foreign Minister having recently indicated that in case of Brexit the Spanish Government may opportunistically push once again for a joint sovereignty deal with the UK over Gibraltar) whereas a left of centre coalition will likely adopt a more pragmatic and cooperative relationship with Gibraltar in the event of EU exit.

The most significant changes to Gibraltar's post-Brexit operation as an international finance centre are likely to be in the sphere of tax, and while Gibraltar has always met its obligations in relation to the relevant EU rules and Directives, it has also been slightly uncomfortable with aspects of the EU's moves towards harmonisation of corporate taxes across member states.

Although it was formed as a free market alliance, since its inception fiscal matters have been at the root of the EU, but Gibraltar's 'special relationship' with Britain has allowed considerable latitude in relation to what taxes it imposes or those it doesn't. However, as is the case with other member states, Gibraltar has increasingly found in recent years its fiscal sovereignty eroded and its latitude on tax matters severely curtailed.

As in Britain, Gibraltar has benefitted from several EU Directives introduced to harmonise and support the freedom of establishment, particularly the Parent-Subsidiary Directive which prohibits withholding taxes on cross-border intra-group interest dividend and royalty payments made within the EU.

As a stepping stone for foreign direct investment, should Brexit come about EU subsidiaries could no longer rely on these Directives to allow tax-free dividend or interest payments to their holding companies based in Gibraltar. In the case of the UK, bilateral double tax treaties will no doubt mitigate the impact of the non-application of any tax related Directives. Gibraltar, however, is not currently a party to any bilateral double tax treaties. Accordingly, Gibraltar would either have to seek from the UK the extension of all or some of the UK’s bilateral tax treaties to Gibraltar (subject of course to the agreement by the relevant counterparties) or it would need to negotiate its own network of bilateral double tax treaties with a whole series of EU and non EU Member States. To say the least, neither of these options would be straightforward to implement at short notice and would need the wholehearted support of the British Government

Whilst Gibraltar’s economy is likely to be adversely affected should Brexit occur, there may be some potential benefits. An EU exit would result in fewer regulations and possibly may provide Gibraltar with greater exposure to emerging economies.

From a tax perspective, an EU exit would probably enable Gibraltar to introduce tax rules and incentives that are contrary to EU tax laws and would provide the Gibraltar Government more freedom to adopt competitive tax regimes that may be considered contrary to EU state aid rules. How possible or effective any such strategy would be is doubtful given the OECD driven anti-tax avoidance climate affecting all reputable jurisdictions whether within or outside the EU.

In this as well as other possible change much will hinge on any post-Brexit relationship with the UK - an issue which the Gibraltar Government addressed recently in a paper sent to Westminster's Foreign Affairs Committee. It stressed not only that 'EU membership has been an important factor in the development of Gibraltar’s economy' but also the importance of 'clarity as to the rights the British Government will protect and defend for Gibraltar in the context of its own negotiations.' 

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