High returns to investors mean high cost to consumers

Nov 07, 2021 Features / Columnists, Peeping Tom

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Kaieteur News – The PPP/C has returned to its own ways. Unlike the West Indies team which was concerned with legacy at the T20 Cricket World Cup rather than selecting the right team, the PPP/C is concerned with projects which will make money for investors rather than for Guyana.
For reasons Jagdeo knows best, the PPP/C is hell-bent on resurrecting the Amaila Falls Hydroelectric Project. This controversial project was torpedoed by the combined Opposition in 2013. They did not support the pitch made by the developer who afterwards walked, effectively killing the project.
The PPP/C however believes in resurrecting the dead. It has returned to power and with a renewed determination to prove that it was right all along, and is now prepared to restore this project.
But the mathematics has changed. And with it, there are now more feasible options than this project.
Solar power is now the cheapest form of renewable energy. The International Energy Agency recently produced a report which indicated that solar energy is now the cheapest form of renewable energy. This finding was also echoed in another report published by the International Renewable Energy Agency.
But do not tell this to Jagdeo. He is more interested in moving ahead with the controversial gas-to-shore project and the Amalia Falls Hydroelectric Project.
Both of these projects are not likely to provide Guyana’s consumers with a competitive source of energy. Both are now only likely to deliver power to consumers at best at half of the present price of US$0.30 per kilowatt. But they are both certain to deliver high returns to investors at the cost to the Guyanese consumer.
In fact, in speaking about his pet hydroelectric power project, Jagdeo said that the proposal, which they received is to supply energy at US$0.07 per kilowatt. When this sold to GPL and GPL has to add its transmission and other costs, the final cost to consumers will be, at best, around US$0.15 per kilowatt, woefully inadequate to make Guyana’s manufacturers competitive but high enough to allow the investors to smile all the way to the bank. It is the Guyanese consumers who will therefore be subsidising this project.
The gas-to-shore project is expected to, at best, cut energy costs by a mere 50 percent, the same as Amaila Falls. This is not a competitive price for energy. Some of our local manufacturers, who have exited the GPL grid, are presently generating their own energy, using diesel, at a cost which is just above half of that which GPL charges. Therefore, a decline in the cost of energy by 50 percent is not as impressive as it sounds.
Amaila Falls is risky and costly. It will only generate about 165 MW and there are serious concerns about the generating and transmissions costs and the hydrology data. The project will have biodiversity impacts, especially in relation to the access road to the project site.
But Jagdeo is hell-bent on going ahead with the gas-to-shore project and his pet hydroelectric project. And he is so determined that he appears oblivious to examining other cheaper options.
One such option is solar power the cost of which has been declining. And it is no longer the case that solar energy is not competitive for grid systems.
At present, solar energy can be generated at US$ 0.04 cents per kilowatt or almost half the cost of the project cost of energy from Jagdeo’s hydroelectric and gas-to-shore options. And there will be no cost to the government since private investors will absorb all the investment costs.
And you don’t need to build a dam or a 50-mile road to a power plant which increases the cost of transmission. Massive solar farms can be established along the coast closer to the high demand centres. GuySuCo has extensive lands and canals, which can be used for solar farms and elevated solar farms respectively.
Guyana is rushing headlong into disaster. It is looking towards becoming an exporter of energy, high cost energy. But the result will be two other behemoths to add to the Skeldon Sugar Factory.
The so-called energy corridor, which is being touted between Guyana, Suriname and Brazil is a corridor of uncertainty. Not only will Guyana not be able to generate any substantial energy for exports but the cost of the energy will be prohibitive. Suriname and Brazil will not be interested and Guyana will be left with energy on its hands and with no uses for it. The so-called energy corridor is a pipe dream.
In the meantime, Guyana has a nightmare on its hands. The cost of the gas-to-shore project, not unexpectedly is rising. Read between the lines. While Amaila will not require any further government spending, it will end up resulting in high cost energy which will stifle local competitiveness.
Guyanese have to speak out against these two projects as presently conceived. The decision to move ahead with these major investments cannot be of the government alone, and most certainly cannot involve Jagdeo whose track record leaves much to be desired.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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