The Energy Efficiency and Alternative Energy Committee of the Energy Chamber has taken a critical look at the electricity sector in Trinidad and Tobago and continues to show the opportunities where government can reclaim value in the gas sector. According to the Committee led by Christopher Narine-Thomas, the opportunity cost subsidy in 2017 rose to US$508M.
Many assume that there is a direct subsidy on the price of electricity in Trinidad and Tobago leading to rates which are among the lowest in the world.
The reality is that it is not the electricity that is subsidised, it is actually the natural gas which is subsided for use for power generation. Essentially, NGC is obligated to sell the natural gas to T&TEC for below the market value. The result is that 17 per cent of NGC’s gas is sold to the T&TEC. It was also reported recently that T&TEC is in $2B debt to NGC because of the inability to pay.
The opportunity cost is the value that the NGC could get if that same gas was sold at market rates to the petrochemical industry.
Currently the plants at Pt Lisas are operating at reduced capacity and would greatly benefit from the gas that can be freed up in the electricity sector. This can be done in two ways.
Improving the efficiency in power generation or integrating new renewable energy sources onto the grid.
When it comes to efficiency at the power plant, Narine-Thomas and the committee suggests that this may be the quickest win for the country.
He says that the plant at TGU is the most efficient at this time, and if all the other plants were upgraded to this level of efficiency NGC could divert 60mmscfd to the petrochemical sector.
This could result in an additional 40M/yr net to NGC via increased gas sales to petrochemicals. As a result, it would generate US$60M/yr to government via tax on increased NGC and petrochemical earnings, US$20M/yr to local services and wages in petrochemicals industry, US$120M/yr in total retained foreign exchange earnings to Trinidad and Tobago and US$80M/yr net earnings to Petrochemical operators via increased sales.
According to calculations by the team the investment in efficiency if given as a tax break would be paid back within 2.5 years – US$520M. However, the benefit would be immediate to NGC and the downstream sector.
Bringing on new renewable energy plants to the country would have a similar effect, in the sense that there would be a switch of fuel source, from natural gas to solar or wind as the case may be. The issue with renewable energy for the government is the Take or Pay contracts that exist with power producers. According to Narine-Thomas, the government would still have to pay for capacity to produce electricity but the net benefit to the country would be greater.
He also suggests that bringing on renewable energy is risky in Trinidad and Tobago because there are no solar resource assessments, wind resource assessments and no grid integration study. These are crucial to bring down the risk and reduce the cost of electricity through renewable sources.
The Government of Trinidad and Tobago has announced a 10 per cent renewable energy target by 2021. As the date looms, there are many things that the government needs to address to ensure that the renewable energy sector thrives.