Although renewables offer some opportunity for utility scale projects in the energy and economically-challenged Caribbean, the real solution is natural gas, says John Snyder
For decades, Caribbean nations have struggled with the high cost of electricity, with as much as 85% produced by oil-fired power generation, according to available data. This makes the cost of producing electricity relatively high, with fuel costs accounting for more than half of the operating costs of service. On top of that, residents have to pay very high tariffs to utilities for a service that can be spotty.
Compounding this, Caribbean nations are generally poor, with low per capita incomes, have small populations that keep costs high because of scale and have limited natural resources. There is a growing interest in the Caribbean to shift away from expensive oil to cleaner energy sources.
Harnessing the Caribbean’s natural assets – sun and wind – does offer some opportunities for utility scale projects, but the real solution to their problems is natural gas. There are four key factors playing into this thinking.
The first is the emergence of cheap, abundant American natural gas and the expanding US LNG export terminal capacity in the US Gulf Coast and Florida and, in particular, small-scale liquefaction. Small-scale liquefaction production in the US is already making it possible for LNG to be shipped in international shipping organisation containers to the islands of Puerto Rico, Bermuda and Barbados for use in energy production.
The second is advancing technologies that have proven successful in other regions such as floating power plants and floating storage and regasification units (FSRUs) as LNG import terminals. Using FSRUs as import terminals can quickly get infrastructure in place to fast-track schedules and reduce capital expenditures and operating costs, making natural gas available in economically-challenged Caribbean islands.
El Salvador, for instance, is considering an LNG import terminal in La Union based on a Moss-type LNG carrier converted to an FSRU.
The third is the change in US regulations last year – the so-called “small-scale rule” – which sped the review and approval of applications to export small amounts of natural gas in the emerging small-scale LNG export market. The rule allows the export of LNG to non-free trade agreement countries in capacities up to 51.75Bn ft3 per year of natural gas.
The fourth is the policy change at local Caribbean government level to support investment and provide the regulatory framework to take advantage of lower-cost power generation. A great example is a recent contract between the Bahamas Power and Light and Wärtsilä, which will deliver a 132-MW power plant on a full engineering, procurement, and construction basis on a fast-track with commercial operations starting mid-year.
While initially the plant will operate on heavy fuel oil, using seven dual-fuel Wärtsilä 50 engines, it will be equipped to burn LNG once it becomes locally available. The flexibility of the plant will also allow increased levels of renewable energy from wind and solar power into the system from large-scale renewables on the island.
The shift from oil-fired to gas-fired plants will provide cleaner air and lower energy costs for the Caribbean in the years ahead, while expanding opportunities for LNG exporters, shipowners and the LNG industry.