Power Project Pledges 25% Water Cost Slash

By NEIL HARTNELL,  Tribune Business Editor-

Bahamian water bills could be slashed by 25 per cent through the cheaper electricity costs proposed by a $700 million power plant project.

Taylor Cheek, the Caribbean Power Partners’ consortium’s principal, told Tribune Business this would result from the group’s proposed 300 Mega Watt (MW) power plant cutting New Providence energy costs by up to 60 per cent.

“Given that 50-65 per cent of water costs are energy, and that we’re going to cut the cost of energy in half, if the maths is right we will knock 25 per cent off everyone’s water bill,” Mr Cheek told Tribune Business.

Caribbean Power Partners expanded further on this added benefit in its project proposal, which said it would generate both direct and indirect savings for the Water & Sewerage Corporation.

These, it added, would result from reduced energy costs at BISX-listed Consolidated Water’s two reverse osmosis plants, Windsor and Blue Hills.

The consortium, which features global energy services giants, Fluor Corporation and ProEnergy Services, promises that the cheaper energy generated by its plants will “eliminate the need to reimburse Consolidated Water for costs associated with direct diesel purchases and subsequent mark-ups” related to the BISX-listed company’s energy charges.

The Caribbean Power Partners proposal said the Water & Sewerage Corporation had pegged these costs at $9.75 million per annum.

It added that their project would also reduce the Water & Sewerage Corporation’s direct water pumping and sewerage costs, plus energy costs throughout its operations.

“We understand that energy costs directly and indirectly related to the production of reverse osmosis water on the island of New Providence are approximately 45 per cent to 65 per cent [of total costs], depending on the cost of fuel, and that the business relationship between Consolidated Water and the Water & Sewerage Corporation requires the Water & Sewerage Corporation to pay a full reimbursement for fuel oil and BEC charges to Consolidated Water,” the Caribbean Power Partners proposal stated.

It added that the energy cost reduction offered by its power plant would create “significant savings” for the Water & Sewerage Corporation and its New Providence customers

Meanwhile, Mr Cheek told Tribune Business that renewable energies would be unable to meet 100 per cent of the power needs in the Bahamas’ main population centres – New Providence, Grand Bahama and, perhaps, Abaco.

Noting that utility-scale renewable energy costs were sometimes three-four times’ higher than their fossil fuel rivals, Mr Cheek said such plants were not economically feasible on New Providence.

Acknowledging that renewable energy sources “had their place”, he added that fossil fuel power plants would still have to be kept as a back-up should there not be enough sun to fuel utility-scale solar, for example.

“Utility-scale renewable generation is extremely expensive,” Mr Cheek told Tribune Business. “You have to back that generation up with fossil fuel-fired generation.

“You are already paying for that capacity, and if you look at the economics it’s much less expensive than the renewables side, sometimes as much as three-four times. Economically, it doesn’t make sense.

“Renewables have their place, but they don’t solve your core power needs. Let’s resolve your core power needs, and renewables can be worked in.”

Mr Cheek said renewable energies were better-suited to the Family Islands, where smaller population sizes and energy demand gave them attractive economies of scale.

“If you put solar on Harbour Island, Eleuthera, it makes a lot of sense as you can’t get economies of scale for power plant efficiencies, as they’re too small,” he told Tribune Business.

“We do have a component to our proposal that provides wind generation on the Family Islands that are suitable for it. Technically, we can do it. Commercially, I don’t know if we can.”

Mr Cheek said it would also likely be too expensive, and difficult, to supply Family Islands with energy via undersea cables that linked them to generating plants on New Providence.

He added, though, that if Caribbean Power Partners took over New Providence’s generation needs, this would free-up BEC to deploy capital previously earmarked for this and associated maintenance in the Family Islands.

Caribbean Power Partners believes its proposal is structured so that BEC, the Government and Bahamian consumers gain the benefits of privatising power generation without actually ‘selling off’ the Corporation or its assets.

This would avoid any of the political and nationalistic opposition that arose to the Bahamas Telecommunications Company’s (BTC) privatisation, and sale of a majority stake to Cable & Wireless Communications (CWC).

Describing its proposal as a public-private partnership (PPP), Caribbean Power Partners said: “We believe that BEC is a prized Bahamian asset that is better suited for a properly structured PPP rather than an outright sale or takeover that takes it permanently, or even temporarily, out of the hands of Bahamians.”

The urgent need for action over the Bahamas’ relatively high energy costs, and poor power reliability, was underscored by an economic impact analysis conducted for Caribbean Power Partners by Oxford Economics.

It pegged total spending on energy/power needs as accounting for about 10 per cent, or $800 million, of annual Bahamian economic activity.

“The high costs are likely placing a heavy burden on businesses,” the Oxford Economics report said. “The higher costs are likely discouraging business investment and costing the Bahamas market share of international tourists that visit competing destinations offering lower costs.

“The significant amount of purchasing power going to electricity also siphons off domestic consumer spending in other areas, and restrains business investment.”

The Oxford Economics report described the Bahamas as having “some of the highest rates for electricity in the region”, with existing BEC generation plants outdated and with limited funds for maintenance.