Trinidad & Tobago urgently needs to bring significant volumes of renewable energy into its electricity grid to help secure the future of its natural gas-based industries. This might sound counter intuitive, but it reflects the reality of the nation’s gas sector, which dominates its economy, and the medium-term outlook for gas production in the country.
Trinidad & Tobago is one of the oldest hydrocarbon provinces in the world and was for many decades, an important oil producer. In the 1990s natural gas overtook oil as the dominant fossil fuel, with the growth of a strong petrochemical sector, especially ammonia and methanol, and as a first mover in the Atlantic basin LNG market. The country’s electricity sector, by far the biggest in the Caribbean, has also been dominated by natural gas which accounts for almost 100% of power generation. This has meant that the country has some of the lowest cost electricity in the world.
For the past decade growth in the upstream production of natural gas has stalled and the country has grappled with shortfalls in gas being delivered to the petrochemical sector and for LNG production. This in turn has led to petrochemical plants being taken offline and one of the four LNG trains being mothballed.
There are opportunities for increased upstream natural gas production and, with high prices and unmet demand for LNG in Europe, the international oil and gas companies operating in Trinidad & Tobago are working hard to bring resources into production. While there are projects in the pipeline that will help stop the natural decline of existing fields, potential projects to increase production, including some big deepwater fields, are likely to only come into production towards the end of this decade. With the shifting regional geopolitics, the importation of pipeline gas from neighbouring Venezuela now seems that it might be back on the agenda, but there is still a lot of uncertainty about how that could unfold.
Over the next few years, Trinidad & Tobago must focus on maintaining its current gas industry, while working on securing the upstream investments to increase production. One of the important elements in that equation is to ensure that as much natural gas as possible is delivered to the export earning petrochemical and LNG sectors. Currently roughly ten percent of natural gas goes to the domestic power generation sector. The national policy focus needs to be on reducing those volumes of natural gas going to the domestic electricity sector and diverting them to LNG and petrochemicals. This can be achieved by both improved energy efficiency and the rapid introduction of renewable energy on to the grid.
Trinidad & Tobago is well placed to quickly add renewable energy to its grid. The structure of the electricity market in the country and the current reliance on natural gas means that there are few technical or contractual barriers to introducing grid scale intermittent renewables into the electricity grid.
An open tender process, completed in 2020, led to the selection of a consortium of Lightsource bp, Shell and bpTT to invest in a 112MW solar electricity project at two sites in Trinidad. The shareholders have named the investment Project Lara, in homage to Trinidad’s cricketing superstar. At the time that the winner was named, Prime Minister Keith Rowley announced that the price from the solar project was “competitive with natural gas”, which would imply that this would deliver by far the lowest cost renewable energy in the region.
The progress from project announcement to the final contractual sign-off and the start of construction of Project Lara has been a slower and more drawn-out process than most people would have anticipated two years ago, with COVID-19 undoubtedly playing a role in delaying negotiations. Nevertheless, the Prime Minister, Minister of Energy and Minister of Planning all made it clear at the recent Trinidad & Tobago Energy Conference that final agreement was close, and construction was scheduled to start by the end of 2022.
Also speaking at T&T Energy Conference was Francis Mann, Development Manager UK & Trinidad, Lightsource bp, who is leading the project development for the consortium. Mann acknowledged the frustration at the lengthy negotiations but also expressed the hope that the lessons learnt through this process could help speed up the delivery of the next major renewable energy project.
The Government has set a target of 30% renewables on the grid by 2030 but, given the level of investor interest, many renewable energy professionals have argued that this could be accelerated. The value that could be derived from more gas being diverted to the export earning commodities, estimated between 75 to 100 million USD per year certainly makes this an attractive national policy option, especially in the current global price environment. With a lot of interest also being expressed by the local private-sector and local banks, small scale renewables could also quickly be added to the grid. However, this requires legislative amendments and the introduction of a feed-in tariff or net-metering.
While the accelerated introduction of renewable energy is just one of many actions required to support the T&T gas industry (see the Energy Chamber’s Six-Point Plan) it is an important action that could be easily achieved and deliver social, economic, and environmental benefits to Trinidad & Tobago and the wider world.