Oct 03, 2015 News
By Sase Singh
What is the strategy to sustain growth, reduce poverty and curtail dependence on imported oil post June 2015?
The comprehensive answer depends on how well we understand the world’s economic condition, where we are situated today in the global economic value chain, how well we have measured the state of our competitiveness and how well we comprehend its relevance to our future and our clarity behind the factors that drive the economy.
My attempt at answering all the parts of the questions will have to await future columns but keep your eyes on this question since how we interpret it will make or break Guyana. But let us attempt to first flesh out our understanding of the importance of having cheap and reliable electricity supply and why the Amaila Falls Hydro Project (Amaila) is extremely important to Guyana’s future.
Generating electricity is entirely fossil fuel-based, with the bulk of the generation being sourced from “old school” power plants utilizing heavy fuel oil or diesel. The likelihood of these plants breaking down incrementally over the next five years remains extremely high. To complement such inefficient operations, we are faced with technical and commercial line losses quantified at 28.5 percent.
In the United States, that loss is less than nine percent; in Jamaica it is more like 22 percent. Rich or not so rich comparators will generally reveal the same – we will continue to lose billions of dollars because we do not have cheap and reliable electricity production. We also have a relatively inefficient network.
How do we compensate for such inefficiency? By bringing down the production cost and enhancing the reliability of the electricity production system, our inability to more aggressively progress the idea of cheaper and more reliable renewable energy will directly contribute to economic stagnation, especially in time of economic anemia (using His Excellency’s word).
On paper, solar and wind looks sexy but the rubber hits the road when we try to convert those designs to implementable projects. The land of many waters has a natural advantage-hydropower. This is not the time for the policy team advising His Excellency to play games and mis-advise the President.
Guyana has significant hydropower potential, but we are yet to effectively tap this low cost and reliable resource on a commercially viable basis, unlike our neighbour Suriname. We hear Guyana will construct three small hydropower systems at Moco Moco, Tumatumari and Kato. But these small-scale initiatives do not answer the need of the coastlanders; the manufacturers and the entrepreneurs who represent more than 90 percent of the people that consume the bulk of the electricity.
These stakeholders continue to absorb one of the highest electricity rates in the Western Hemisphere. Why are our policy makers, past and present, in the land of many waters, struggling with this idea of tapping our hydropower potential estimated at over 800 MW?
The closest we came to unleashing this potential was the Amaila Project with a capacity of some 165 MW. However, because of the “rapacious energies” exhibited by a group of PPP cronies, who placed their personal greed in front of the national need, the entire idea had to be temporarily parked.
But what I am observing today is that this commercially viable idea is not being parked anymore. Rather, the engine has been turned off and the driver out to lunch while the people of Guyana continue to pay for one of most inefficient electricity systems in the Western Hemisphere with tariffs averaging US$0.32 per kWh.
From all appearance, the Amaila Project has been abandoned, at least in its present form.
Failure to re-design and re-launch will prove to be a very costly decision for Guyana. First there is the loss of $5,578 million that was already invested on the Access Road.
These funds could have built over 1,000 low-income houses and even have some left over.
What is even more disconcerting is that the window to tap into the Norwegian money is closing and fast.
It is an ill-advised path to tout solar energy when there are no bankable projects designed and ready for implementation. A re-designed Amaila Project remains an excellent idea once we can scrape all the fat out of the project that was reserved for the pockets of the PPP cabal.
We must never ignore this bankable project that can be served up to protect the nation’s energy security for the next 100 years.
The IMF has shown that the baseline scenario that illustrates this Amaila Project will add six aggregated percentage points to the GDP during construction phase (estimated at four-years) and will apply a GDP bounce to the economy of about one percent per annum over the next 20 years after construction.
This is logical as we spend fewer dollars on fuel and more on investing in enhancing our productivity. The arithmetic makes sense since the world fuel prices will not stay low forever.
We cannot continue to play games with our energy security since GPL generators cannot be expected to be a long term solution.
We can stop this impending national tragedy. I am of the firm opinion; a portfolio of renewable energy solutions led by a redesigned Amaila Project is the answer to driving our economic growth, reducing poverty and curtailing the importation of fossil fuels.
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