New UN report warns against two major energy projects Guyana is pursuing

Oct 30, 2022 News

By Renay Sambach

Kaieteur News – At a time when Guyana is pursuing a US multi-billion gas-to-energy project and a US$700 million hydro-electric project – an October 2022 United Nations (UN) Report warns against similar projects adding that solar and wind are the ‘cheaper’, better energy option for Latin American and Caribbean (LAC) countries.

An artist’s impression of the original iteration of the Amaila Falls Hydro Project.

On Tuesday, the United Nations Environment Programme (UNEP) launched its report titled, ‘Is natural gas a good investment for Latin America and the Caribbean?’ The UNEP is the world’s leading environmental authority. It provides leadership and encourages joint work in caring for the environment, inspiring, informing and empowering nations and peoples to improve their quality of life without compromising that of future generations.

The UNEP’s report assessed the implications in Green House Gas (GHG) emissions, costs and job creation of the different power sector options (natural gas and renewable energy). The Report proves that if the same funds that are being invested in the generation of electricity from natural gas were instead directed towards renewable energies then better economic results would be obtained and the region could recover faster and strengthen from the post-pandemic crisis, being in a better position to tackle climate change.

NATURAL GAS

The Report finds that pursuing natural gas projects in the Region is costlier than transitioning to renewable energy.

It states that an expansion of renewable energy sources instead of continuing a fossil fuel path, even with what has been promoted as ‘clean’ natural gas, would be by far the best choice for the Region in terms of costs, jobs, and GHG emission reductions. It finds too, that investing in renewable energy largely outweighs economic, social and climate benefits of natural gas for energy generation

According to the Report, the Region is responsible for 8.1 percent of GHG emissions. It stressed that in order to meet the Paris Agreement targets the exploitation of new oil and gas fields must stop now. However, it was pointed out that countries like Brazil, Argentina and Mexico are increasing their fossil fuel investments and exploitation, particularly in natural gas, while many other countries in the region like Guyana are planning new natural gas infrastructure projects.

An artist’s impression of the gas-to-energy project

Highlighted in the Report, is that natural gas equals to climate risk and lost opportunities whereas renewable energy equals to climate action, higher employment and economic outcomes.

It shows that a switch towards a renewable power system would bring the Region a net benefit of US$1.25 trillion by 2050 compared to natural gas which the region would receive a net benefit of US$454 billion by 2050. Stated in the Report also is that renewable energy far outstrips natural gas in terms of job creation 3 million versus 167,000 respectively would be created by 2050. Another benefit of renewable energy is that it results in 80 percent lower GHG emissions by 2050 and it is 75 percent lower than the GHG that would be emitted as a result of natural gas projects.

In fact, it was stated that even if natural gas plants are used to replace coal and oil plants it still does not produce significant job generation in the power sector, nor does it generate the emissions reductions needed to achieve the goals of the ‘Paris Agreement’ and avoid deepening the climate crisis. “There are several avoided costs mainly from diesel, coal and natural gas, as they are not used as an option for the transition,” it is stated in the report.

The Irfaan Ali Government has been pilloried for moving ahead with the gas-to-energy project despite no new feasibility study. This newspaper recently reported Opposition MP, David Patterson lamenting that critical issues are yet to be addressed for the US$2 billion gas-to-energy (GTE) project being developed by Government and its partner, US oil major, ExxonMobil.

President, Irfaan Ali

Back in 2018, the Inter-American Development Bank (IDB) had partnered with the State to conduct a feasibility study of the planned natural gas pipeline. The primary objective of the study, which was executed by Energy Narrative for US$70,000—an international entity that provides strategic market analyses and advice was to determine the overall feasibility of transporting natural gas from offshore Guyana, building a Natural Gas Liquids (NGL) separation plant and a Liquefied Petroleum Gas (LPG) production plant to market the liquids from the natural gas stream, as well as building a new electricity generation station to use the remaining dry natural gas.

Notably, a table was used in that report that was sourced from ExxonMobil in which the oil company said the pipeline would cost US$478 million. Four years later, Exxon estimates that the structure could cost Guyana US$1.3 billion. On the other hand, Vice President Bharrat Jagdeo explained that the Government is currently doing estimates for the Natural Gas Liquids (NGL) Plant and the power plant to generate some 300 megawatts of electricity for the country. These two facilities, he said, can cost Guyana an additional US$700 million. Given this hefty increase in the project cost, stakeholders have been calling for an updated feasibility study to prove the project’s viability.

SOLAR, WIND v. HYDRO

With the Region having some of the world’s best conditions in term of solar radiation and wind power, the Report pointed out that wind and solar technologies are winning the year-by-year race to be the cheapest sources of new electricity generation. As such, the UNEP report pointed out that wind and solar make the renewable pathway a no-regret option.

However, the Report showed that some renewable energy options are way more cost-effective than others. It showed that if countries in the Region pursue wind and solar powered projects over hydro-powered projects, a lot of money can be saved as it relates to construction costs.

To this end it was stated that wind and solar projects adapt more quickly to demand changes and also that the electricity production percentage from hydropower plants will decrease over-time. In fact, it was reported that the share of electricity production from hydro-powered projects will decrease from 45 per cent in 2019 to 41 per cent by the mid-century.

Vice President Bharrat Jagdeo

Further, it stated that new developments are primarily based on wind and solar-powered plants, along with geothermal plants in countries with reported potential, and small-scale hydro power plants (mainly run-of-river units).

Another factor the Report pointed out is the transmission cost for hydro, wind and solar projects. The transmission cost means the amount spent in excess of the fixed costs of operation for the electricity to be taken from the power-plant to cities and other areas. Notably, it was highlighted that not all transmission costs apply equally for a given power plant in the model. A table showed that distributed solar projects does not have any transmission costs whereas wind and hydro projects have a 100 per cent transmission cost per plant.

A reference that can be made based on what the UNEP’s report pointed out is between Guyana’s proposed US$700 million hydroelectric project, and Barbados US$100 million solar project. Earlier this year, the Government of Barbados signed a deal that will see the country realising some 178 MW of electricity using hydrogen and solar energy at a cost of some US$100 million. Notably, Barbados is now leading the Caribbean region with the announcement that it will be building the largest clean hybrid power plant in the Caribbean, producing base load power for 16,000 Barbadian households from solar and locally produced green hydrogen.

On the other hand, Guyana’s US$700 million hydro-electric plant will supply some 165MW to the national grid.

The Amaila falls project was introduced several years ago by the then Bharrat Jagdeo-led PPP Administration but was shelved. Back then it carried a higher price tag. When the PPP Administration came back into office the project came back on stream. The contract was awarded to a Chinese Contractor but it was disclosed in July 2022, that the company was having a hard time raising the money for the project.

Despite this, Guyana’s President later declared that despite the hiccups Government was not going to abandon the project. For his part, Jagdeo, who is now Vice President was reported in the media saying that solar is simply too expensive for Guyana. It was during a June 2022 Press Conference when Jagdeo, who was one of six persons back in 2010 to receive the UNEP Champion of the Earth, claimed that the generation of power in Guyana through renewable options such as solar, wind and even hydro is “very, very expensive” but the administration is still adamant to go ahead with the Amaila hydro falls project.