Guyana’s retail electricity prices among highest in the Region – IMF
…proposes oil-dependent power generation is not “best” way to go
Citing that Guyana depends heavily on imported oil for its power needs, a country report on Guyana produced by the International Monetary fund (IMF) proposed that an oil-dependent power generation is not the best way to go.
Stating the country’s installed power generation capacity is about 83 per cent oil-based and 17 per cent biomass (bagasse) fuelled, the report indicated that the oil-dependent power generation mix contributes to macroeconomic instability. It explained that high oil prices widen the external current account dearth, raise fiscal transfers to the public utility Guyana Power and Light (GPL) and reduce oil tax revenues due to the limited pass-through in the domestic fuel pricing system.
Therefore, unpleasant oil price shocks consume foreign exchange and fiscal resources and the unpredictability in oil prices quickly disseminates to the external and fiscal sectors.
The report stated that these oil price shocks increase the cost of power generation and when those costs are passed on to users, they increase the cost of production and hold back investment.
It emphasised that GPL’s relatively high rate of technical and commercial losses also contributed to high electricity prices, while declaring that the country’s average retail electricity prices were among the highest in the Region in 2014. Although the recent decline in oil prices has provided some respite, it purported that Guyana “remains exposed to oil price corrections”.
Odds with renewable energy
The IMF stated further that the oil-dependent power generation is at odds with the vast renewable energy potential. “The country has extensive hydro power potential, estimated at 7600 MW, which by far exceeds its annual consumption and installed capacity,” it said, adding that Guyana’s climate is also apposite for wind and solar power generation, while its sugar and rice industries provide opportunities for co-generation of electricity from biomass .
It noted that a transition to a green power atmosphere has been delayed by various constraints, thus reducing the chances of lowing Guyana’s carbon footprint.
Guyana has always been cited for having high hydro potential, even as far back as the first oil shock in the mid 1970s. Plans were in order to build a large hydroelectric project at Amaila Falls in the late 1980s; this evolved through several proposals and rounds of negotiations but implementation has been constrained by the project’s large size, complexity, cost, and Guyana’s limited fiscal space.
The project was deemed a no-priority by Government due to its purported lack of financial sustainability. Finance Minister Winston Jordan had posited that the Amaila project is too costly to pursue. He stated that it will cost GPL US$2.6 billion over 20 years (US$130 million per year) and this was too unreasonable.
However, Opposition Leader Bharrat Jagdeo had contended that instead of Amaila Falls costing GPL US$2.6 billion over 20 years, GPL would actually be saving almost US$2 billion, or G$400 billion.
Nevertheless, Guyana has launched a comprehensive review of its power sector strategy and the Government has tasked the Inter-American Development Bank (IDB) with a review of its optimal energy matrix. The IDB will assess the optimal power generation mix for the country, looking at a broad array of energy sources.
The Government has also retained an international consultant for a review of the feasibility of Amaila Falls Hydropower Project and the power sector strategy will draw upon the results of these studies.
Additionally, it has put in place fiscal incentives to promote solar power and will use solar panels and mini hydro stations in remote communities without grid access. Solar power is also increasingly used by businesses to power their buildings and operations.
In this respect, enabling green technology independent power producers to sell their excess power to the grid could reduce energy losses, increase supply, and lower tariffs.
The Government is also exploring the modalities of renewing its ground-breaking low carbon partnership with Norway, which has provided grants for developmental projects in exchange for Guyana’s progress in preventing deforestation and reducing the economy’s carbon footprint.