Remarks by the Minister of Public Utilities at the Energy Efficiency and Renewables Conference 2021
Ladies and gentlemen, I am indeed honoured to have been asked to join you today for what has become a staple feature of the energy industry. I dare say that, perhaps more than any other industry, your Energy Conference and now this offspring, have withstood the test of time. The irony of us gathering virtually, rather than in person, for a conference that discusses our transitioning away from reliance on fossil fuels, is not wasted.
Indeed, in this new paradigm, nothing is normal anymore. Stability used to be normal, until it was overtaken by the constant of change. Growth used to be predictable, but now has been consumed by uncertainty. Organizations used to be orderly, now they thrive in disruption. There are three truths about our “new” normal: Get comfortable with change. Embrace uncertainty. Learn from chaos.
It is into this maelstrom that the Government of Trinidad and Tobago now finds itself located, and must respond. It is into this validation of the Darwinian concept of survival by those who can best adapt, that the Ministries of Energy and Public Utilities now exist. Balancing the tight rope of stakeholders’ expectations, legitimate as they are, in an economy accustomed to enjoying the benefit of heavy government subsidies, is not a task for the faint of heart, but I am comforted to be in the presence of the hundreds of years of experience and wisdom gathered today, including that which resides in my own Cabinet colleague.
The truth is that as a country, we haven’t been doing too badly. As signatories to both the Montreal Protocol 1989 and Paris Accord 2016, Trinidad and Tobago has worked assiduously to comply with its obligations, and has gone a step further by ensuring that the fifth pillar of our National Development Strategy (Vision 2030) is “Placing the Environment at the Centre of Social and Economic Development.”
Have we achieved everything we set out to do? Can we do better? Can we do it on our own? I am certain the answers are already well known to you. But where are we presently
In his 2021 Budget statement, aptly entitled “Resetting the Economy” Finance Minister Colm Imbert pushed this agenda a little further when he articulated Government’s intention to “pursue development opportunities by introducing green petrochemicals through the substitution of hydrogen from the natural gas reform process and also utilize steam which is currently wasted from an existing power station to run a new turbine to produce electricity.”
There can be no doubt, ladies and gentlemen, that in very much the same manner in which previously unused flared gas has been successfully monetized, so too the power of this unused steam can be harnessed for good.
The country was elated when the National Gas Company signed a Memorandum of Understanding with NewGen and Kenesjay Green whose focus is on hydrogen as a future fuel. Kenesjay Principal Philip Julien is quoted in yesterday’s Sunday Express as stating: “The partnership with NGC and National Energy is very exciting and positive for the companies and the country since it represents a public/private collaboration response in response to the national realization that the global energy transition is upon us.”
Currently, 99.9% of all our power generation is derived from burning natural gas. And although this is a clean burning fuel, especially when compared to the wood, diesel and coal used in other countries, we are committed to further reducing our greenhouse gas emissions from the power generation sector by gradually adding renewable power generation to the national grid.
To this end, Trinidad and Tobago has conducted its first bidding round for utility-scale renewable power generation. Following a rigorous bidding process based on lowest price per kilowatt hour, it was awarded to the Consortium of BP, LightSource BP and Shell. The cost estimate for the two utility-scale solar plants proposed by the consortium, one at Orange Grove, and the other at Brechin Castle is as follows:
The proposed cost of investment to build both plants is approximately TT$861Mn
Proposed maintenance and operations cost over 20 years: approximately TT$451Mn
Calculated cost to taxpayers based on proposal: approximately TT$76 million per year for 20 years, equivalent to TT$1.52Bn.
Even as we embark on this journey towards an energy sector characterised by greater sustainable use of our resources though, there are a few factors that are unique to our twin-island state, which are difficult to ignore and even harder to overcome.
From the very early stages of natural gas usage in T&T, this resource was provided to the Trinidad and Tobago Electricity Commission, (T&TEC) at preferential rates to facilitate the development of the electricity sector and by extension the country. The Commission has made good use of this tactical advantage, providing electricity coverage to 99.9% of the country. And even now, it continues to increase electricity access to very remote areas. The reliable supply of electricity provided by T&TEC, and its relatively low tariffs has also enabled the development of our petrochemical sector.
These factors, namely: our energy independence, the availability of natural gas for electricity production and the low tariffs associated with its supply, have understandably tempered the urgency with which we have approached the issue of renewable energy sources. And as such, we have not made as much progress in this area as some of our CARICOM neighbours.
Indeed, your Chairman, Mr. Mahabir, pointed us in the direction of some of the implications of the low tariffs associated with natural gas supply for electricity generation during his presentation last week. As the Minister with responsibility for Public Utilities, I will go one step further and say that while the low tariffs and subsidies have allowed us to keep electricity rates for both residential and commercial uses at amongst the lowest in the region, it has perpetuated the wanton and indiscriminate use of electricity, and the nurturing of a culture of entitlement, notwithstanding the economic implications of such subsidies and low tariffs.
Ladies and gentlemen, I make bold to say that the situation in the electricity sector is not entirely dissimilar to that which exists in the water sector, and both require a reset.
As always, it is a question of balance. The truth is that T&TEC is fully contracted to the existing fossil power generators via power purchase agreements and has sufficient energy capacity for the country until these power contracts start to expire in the late twenties. Therefore, our venture into utility scale renewable power generation must be accurately balanced and carefully measured economically, even as we commit to energy transition.
Heavy capital investment aside though, there is an avoided cost of fuel from which the country can benefit if the renewable power to the grid is needed and used to replace natural gas. If we are to benefit from that avoided cost, however, new power generation to the grid must be timely and accurate. Currently, the grid does not need new power and may not for at least another 4 -5 years. Therefore, instead of avoiding cost of fuel by using renewable power, the government is adding cost to generation by approximately TT$76Mn per year with the construction of the new solar generation plants.
If, however, over the next 3-5 years, national energy consumption increases sufficiently to use most of our fossil-contracted capacity, the avoided cost of fuel will ‘kick in’. And we will be, in effect, saving money by using renewable energy.
That avoided cost can amount to as much as TT$635.1Mn or approximately US$92.7Mn over a 20-year period. And the associated reduction in carbon emissions would be about 3Mn tons over the same timeframe.
It must be noted, as well, that we have currently embarked upon Energy Conservation and Energy Efficiency (EC&EE) initiatives, which are intended to reduce electricity consumption. The implementation of these initiatives as, necessary as they are, delays the need for new generation by another 2-3 years.
As such, the avoided cost of fuel has a time constraint in regards to introducing renewable power generation. It cannot be too soon, otherwise there will be no avoided costs and renewable generation will add to the cost of generation. And it cannot be too late, or the benefit of avoided cost will be delayed. Hence, the addition of renewable power generation to the grid must be perfectly planned and executed, so as to find what the ancient Greeks referred to as the “Kairos moment.” Kairos (καιρός) is an ancient Greek word meaning the right, critical or opportune moment, in short, the happy confluence of events where planning and preparation meet purpose and potential.
With regards to Wind Energy, more specifically, a wind generation plant in the southern part of the country, a case study showed the following estimates:
Cost of investment: approximately TT$751.2Mn
Maintenance and operations over 20 years: approximately TT$86.3Mn
Calculated cost to taxpayers based on proposal: approximately TT$90.6Mn per year for 20 years, equivalent TT$1.8Bn.
As with the utility-scale solar energy plants, there is an opportunity to save money if the energy harvested by this plant is used to replace what would have been supplied by our natural gas resources. That avoided cost could amount to approximately TT$326Mn or US$47.6Mn over a 20-year period. And the associated reduction in carbon emissions would be about 1.6Mn tons over the same timeframe.
Of course, the cost of power generation for both initiatives is also of primary concern. While it is proposed that the solar plants will supply power at a cost of approximately 4 US cents (US$0.0422) per kilowatt hour, the wind generation plant could do so at an estimated cost of just over 9 US cents (US$0.09709).
Meanwhile, the international cost of power generation using renewable energy continues to decline. The International Renewable Energy Agency indicated that:
“Electricity costs from utility-scale solar PV fell 13% year-on-year, reaching nearly seven cents (USD 0.068) per kilowatt-hour (kWh) in 2019. Onshore and offshore wind both fell about 9% year-on-year, reaching USD 0.053/kWh and USD 0.115/kWh, respectively, for newly commissioned projects.”
There can be no doubt that the more Trinidad and Tobago can exchange its reliance on natural gas produced electrical power to power produced by other more natural means, namely solar and wind, the greater the amount of natural gas that can be diverted to commercial production. The present scenario of uncertainty and doubt in the supply of natural gas to those elements of our national economy which actually earn us much needed foreign exchange, could possibly then be resolved or mitigated by these ventures into alternative energies.
Understandably, this is an evolving scenario, but one that is increasingly more feasible as technologies progress and become more accessible. The evolution must, of necessity, lead us to that “Kairos moment”, to that point in our continued development as a nation, where we must integrate renewable energy sources into our energy mix so as to maximise both their potential and their returns for the benefit of our people and our nation.
We, at the Ministry of Public Utilities, look forward to working with the many stakeholders represented here at this forum to arrive at that moment, and with the Energy Chamber of Trinidad and Tobago to make that leap.
I thank you for the courtesy of your attention and wish you a productive and insightful three days. May God bless your conference and our nation.