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ENERGY Caribbean Yearbook (2013-14)

Energy issues energy

Energy issues energy security A price you can’t afford Energy security is said to be the ultimate goal of the Caricom Energy Policy (CEP). But what exactly does that mean? According to the policy document, it means: “The availability of, and timely access to, energy resources of an acceptable quality at competitive prices that are both affordable for consumers and reasonable for producers and reflect true final costs for producing and supplying energy.” There’s a mouthful for you. In fact, Caricom has always enjoyed energy security, thanks to Trinidad and Tobago, the only energy exporter in the region. A spokesman for Petrotrin, whose refinery has traditionally supplied gasolene, diesel and fuel oil to the Caribbean, once observed to this YEARBOOK: “Refined products from Trinidad and Tobago have always been essential to the lifeblood of the region. Refining started in Trinidad in 1911 and we have always had a tradition of supplying oil to the Caribbean. We have always met our commitments, through good and bad times. The other islands could always have relied on Trinidad for oil – even when they did not pay their bills.” Supplying a scattered archipelago made up of relatively small markets is no easy task. As the Petrotrin spokesman pointed out: “Petrotrin is a merchant refiner, meaning that we buy crude oil, we have some of our own and we make product and people order it, with required specifications – sulphur is a certain range, diesel of a cetane number, we will make that for you. This demands extraordinary flexibility from the refinery. We respond to specific customer needs.” That historic security role was ostensibly taken over by Venezuela when it launched its PetroCaribe programme in 2005. Trinidad and Tobago energy minister Kevin Ramnarine acknowledged recently that “some security is now being provided by the Venezuelans”, adding: “But Trinidad and Tobago still provides significant volumes of fuel to the Caricom member states.” The reason for that is refinery flexibility, which Venezuela’s PdVSA has been unable to match on a consistent basis. So “availability of and timely access to energy resources” is not a problem for Caricom. “Competitive prices”, however, have been a serious challenge in recent years. Soaring oil costs have hit Caricom companies and households hardest through the cost of gasolene at the pump (governments have had to bargain with fuels retailers to keep rises to a minimum) and in the cost of electricity. Companie “The other islands could always have relied on Trinidad for oil – even when they did not pay their bills” Fuel costs represent 40-50% of generation costs, says the regional utilities body, Carilec. The average regional fuel cost was $150 per megawatt hour in 2010. This has translated into crippling electricity bills throughout Caricom, except in Trinidad and Tobago (see box). Affordable pricing is thus the big challenge. Carilec itself has called for “the creation of an enabling environment, both regulatory and institutional, for the introduction of indigenous renewable energy into the national energy mix.” Countries The CEP comes down heavily on the side of RE. But will that, at least in its early days, really help to make power costs “more affordable” for consumers? Carilec itself has cast doubt on the likelihood of that happening. The Jamaican public utility restructuring and regulation consultant, Winston C. Hay, has categorically told this YEARBOOK: “RE is not the immediate answer to costs. I believe it ought to be encouraged and governments are developing incentives for individuals and small companies to get involved in RE, but, if anything, it will increase the price of electricity in the short term.” Caricom electricity prices Selected countries (US$ per Kwh, 2012) Antigua 0.38 St Vincent 0.36 Barbados 0.36 Grenada 0.35 St Kitts/Nevis 0.34 Guyana 0.34 Jamaica 0.32 Trinidad and Tobago 0.06 Source: Energy Dynamics 8

Energy the future of gas issues Regional policy undervalues gas Many, perhaps most, of the electric utilities in Caricom want to switch to natural gas for power generation instead of the high-priced diesel and the light and heavy fuel oil they Energy Policy (CEP) does not appear to grasp the significance of that. In a document meant to outline the energy path that regional states are expected to travel in the coming decades, only perfunctory mention is made of gas. True, the policy does encourage member states to “implement programmes and projects which aim to incorporate and optimise the use of natural gas in the energy mix” and to “establish natural gas as a key energy transitional have traditionally used. But the Caricom Compani source for the region”. But it fails to note the fact that specific gas-supply investments are already going ahead. These are, of course, the Eastern Caribbean gas pipeline, which will take gas from Trinidad and Tobago to Barbados, and the small LNG plant proposed for La Brea in southwest Trinidad. Compressed natural gas is touted as another gas source for Caricom, but the CEP appears much more enthusiastic about renewable energy, and urges the adoption of “geothermal, hydro, bio-fuels, solar power, wind power and waste-toenergy, which can provide direct replacement for fossil fuels as the principal source (base load type) for generating electricity at the national level and can support regional, or cross-border, supply of electricity.” That last reference is to Nevis and Dominica, which have plans for developing geothermal power and exporting it by undersea cable to neighbouring territories. It is also a reminder of Guyana’s long-held desire to use its large rivers for hydro-electricity and to export surplus power to the island archipelago. As the CEP points out: “Cross-border transmission of electricity can facilitate a paradigm shift where more member states can become exporters of energy” – rather than just Trinidad and Tobago with its existing trade in refined petroleum products, and regional gas delivery to come. Trinidad and Tobago might justly feel aggrieved that the gas it is prepared to offer its fellow Caricom members as an alternative to oil has been so casually treated in the CEP. Countries According to the St Lucia-based Caribbean Electric Utility Services Corporation (Carilec), the regional “trade union” for the power sector, only 5% of primary energy consumption is derived from natural gas, with 2% from RE, with oil accounting for the remaining 93%. Gas evangelists urge governments to increase that 5% rather than to undertake the complex and expensive exercise of creating geothermal and hydro-electric facilities, at least in the short term. Indeed, the 2010 Nexant study for the World Bank on “Regional Energy Solutions for Power Generation in the Caribbean” recommended gas more often than RE as part of the strategy to reduce energy costs up to 2028. Gas was identified as the main substitute energy source for oil for Barbados, Jamaica, St Lucia, the Dominican Republic and Haiti. With specific reference to the Caribbean gas pipeline, Nexant said it would be a “highly economic” investment for Barbados “if it displaces heavy fuel oil and diesel”, as it will. Barbados’s own National Energy Policy (2007) envisaged that 70% of its power would be generated by natural gas by 2030, with only 10% from oil and 20% from RE. The country will need about 46 mmcfd of gas to achieve this goal, which suggests it may be in line for LNG as well as pipeline gas. While natural gas is guilty of higher greenhouse gas emissions than RE, they are still far lower than oil’s. CO 2 releases from natural gas are 117,000 pounds per billion British thermal units of energy input, while those of oil are 164,000. The figure for coal, by comparison, is 208,000 pounds. Natural gas releases 92 pounds of nitrogen oxide per billion btu of energy input, compared with 448 for oil, and one pound of sulphur dioxide compared with 1,122 pounds from oil. Potential gas demand Power generation capacity (peak demand) in line for conversion to gas Antigua Bahamas Grenada Guyana Jamaica St Lucia St Vincent Suriname Source: Caribbean Energy Policy, 2013 51MW 308MW 30.5 MW 94MW 644 MW 55.9 MW 24.5 MW 145 MW energycaribbean YEARBOOK 2013/14 9

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