Granger-led gov’t con­firms ‘de­vo­tion to LCDS’ to Nor­way after telling Guyanese it was ‘too nar­row’ – Nor­way re­port

Weekend Mirror - - EDITORIAL -

fi­nal re­port on the Re­view of the Amaila Falls Hy­dropower Project in Guyana – a 49-page doc­u­ment – done by the Nor­we­gian com­pany, Nor­con­sult, has been made pub­lic.

And states that the Coali­tion Gov­ern­ment has “con­firmed its de­vo­tion to the Low Car­bon De­vel­op­ment Strat­egy (LCDS)”, which was in­tro­duced in 2009 by the for­mer gov­ern­ment and con­firmed by its up­dated LCDS dec­la­ra­tion in 2013.

The “con­firmed de­vo­tion” of the Coali­tion Gov­ern­ment, which was ex­pressed, comes after Pres­i­dent David Granger, him­self, has crit­i­cised the LCDS as be­ing “too nar­row” in its con­cep­tu­al­iza­tion. “We would like to look at Cli­mate Change more broadly,” he had said in one of his tele­vised ‘Pub­lic In­ter­est’ pro­grammes.

On June 20th 2016 NORAD (Nor­we­gian Agency for De­vel­op­ment Co-op­er­a­tion), in sup­port of NICFI signed an agree­ment with Nor­con­sult AS for car­ry­ing out an ini­tial anal­y­sis.


Since 2009 Nor­we­gian In­ter­na­tional Cli­mate and For­est Ini­tia­tive (NICFI) has sup­ported Guyana’s ef­forts for pro­tect­ing its rain­for­est from ex­ploita­tion and degra­da­tion and for chang­ing its cur­rently oil fu­elled elec­tric­ity sec­tor to emis­sion-free power gen­er­a­tion. As re­ward for Guyana’s en­deav­ours to­wards these goals, Nor­way in 2014 de­posited USD 80 mil­lion in the In­ter-Amer­i­can De­velop- ment Bank (IDB) ear­marked for Guyana’s eq­uity share in Amaila Falls Hy­dropower Inc (AFHI), a Spe­cial Pur­pose Com­pany for re­al­is­ing the 165 MW Amaila Falls Hy­dropower Project (AFHP) as a pub­lic/ pri­vate part­ner­ship BOOT project sup­ported by IDB.

Sithe Global, the pri­vate part­ner and main spon­sor in AFHI, with­drew from this po­si­tion in Au­gust 2013 after the Guyanese Na­tional Assem­bly did not vote unan­i­mously in favour of a propo­si­tion pre­sented by Sithe Global for cer­tain project fea­tures, in­clud­ing rais­ing the ceil­ing for max­i­mum an­nual pay­ment by Guyana Power and Light (GPL) as power off-taker. There­after, ef­forts con­tin­ued, sup­ported by IDB, to es­tab­lish a new main spon­sor in AFHI. This came to a stand­still after a new coali­tion gov­ern­ment cre­ated by the ear­lier op­po­si­tion par­ties took power after the par­lia­men­tary elec­tions in May 2015.

The new gov­ern­ment has con­firmed its de­vo­tion to the Low Car­bon De­vel­op­ment Strat­egy (LCDS), which was in­tro­duced in 2009 by the for­mer gov­ern­ment and con­firmed by its up­dated LCDS dec­la­ra­tion in 2013.

With the aim of find­ing a way for­ward for the tran­si­tion of Guyana’s power gen­er­a­tion sys­tem, Gov­ern­ment of Guyana rep­re­sented by the Min­is­ter of Fi­nance and the Min­is­ter of Nat­u­ral Re­sources and the Gov­ern­ment of Nor­way rep­re­sented by the Min­is­ter of Cli­mate and En­vi­ron­ment, de­cided in De­cem­ber 2015 to per­form “an ob­jec­tive and facts-based” as­sess­ment of AFHP.

On June 20th 2016 NORAD (Nor­we­gian Agency for De­vel­op­ment Co-op­er­a­tion), in sup­port of NICFI signed an agree­ment with Nor­con­sult AS for car­ry­ing out an ini­tial anal­y­sis.

Main con­clu­sions and rec­om­men­da­tions are pre­sented be­low:

The only re­al­is­tic path for Guyana to­wards an emis­sion free elec­tric­ity sec­tor is by de­vel­op­ing its hy­dropower po­ten­tial. The fastest way for­ward is to main­tain AFHP as the first ma­jor step for sub­sti­tut­ing its cur­rent oil fired gen­er­a­tion. AFHP was pri­ori­tised as the first hy­dropower plant be­cause it was the only project with a full fea­si­bil­ity study com­pleted, it has a higher plant load fac­tor than the al­ter­na­tives, a smaller reser­voir and a lev­elised unit cost in the same range as the most at­trac­tive al­ter­na­tives.

Amaila Falls alone can­not pro­vide a 100% emis­sion free power gen­er­a­tion in Guyana. Other gen­er­at­ing sources will have to be added in par­al­lel like sun, wind and ther­mal pro­duc­tion based on emis­sion neu­tral fuel ( bagasse) for back-up in the dry pe­ri­ods when the wa­ter flow to AFHP may be in­suf­fi­cient for full ca­pac­ity op­er­a­tion. As the power de­mand is grow­ing, and for reach­ing the goal of 100% emis­sion free gen­er­a­tion by 2025, as as­sumed by the LCDS, a sec­ond hy­dropower plant of ca­pac­ity com­pa­ra­ble with AFHP will have to be com­mis­sioned by 2025. In par­al­lel with prepa­ra­tions for AFHP, there­fore, pre-fea­si­bil­ity stud­ies will have to be car­ried out for promis­ing can­di­dates for the sec­ond hy­dropower project and a full fea­si­bil­ity study be per­formed for the se­lected can­di­date.

The en­vi­ron­men­tal and so­cial im­pacts of AFHP are well es­tab­lished in the per­formed stud­ies. No re­set­tle­ment is re­quired and there is lim­ited hu­man ac­tiv­ity in the area di­rectly af­fected by the project. About 23 km2 of rain­for­est is in­un­dated by the power plant’s reser­voir. The live stor­age vol­ume is small com­pared to the an­nual wa­ter flow and the plant will be op­er­ated mainly as a run-of-river plant with lit­tle im­pact on the down­stream river hy­drol­ogy, ex­cept for the about 4 km stretch of the river be­tween the in­take dam and the tail­race out­let from the pow­er­house. The most se­ri­ous threat to the en­vi­ron­ment that may re­sult from the project is the ac­cess road, which is al­most com­pleted and has al­ready, while the fur­ther progress of the project it­self is un­cer­tain, cre­ated eas­ier ac­cess for min­ing and ex­ploita­tion of the for­est along its align­ment. A strict con­trol regime is re­quired for ob­struct­ing such ac­tiv­i­ties. It is im­por­tant to take up again con­sul­ta­tions with all af­fected par­ties as soon as re­sum­ing the project prepa­ra­tions.

Other hy­dropower plants that could have re­placed AFHP as the first hy­dropower project to be im­ple­mented, would re­quire 1-2 years of in­ves­ti­ga­tions and stud­ies, in­clud­ing en­vi­ron­men­tal and so­cial im­pact as­sess­ments meet­ing to­day’s stan­dards, to reach an up­dated fea­si­bil­ity study stage com­pa­ra­ble to AFHP.

The first needed step for re­vi­tal­is­ing AFHP is de­ci­sion by the Gov­ern­ment to main­tain AFHP as the pri­or­ity project in the tran­si­tion to a green gen­er­a­tion regime, as rec­om­mended in the “Ini­tial Study on Sys­tem Ex­pan­sion of the Gen­er­a­tion & Trans­mis­sion Sys­tem” of 2014 and re­it­er­ated in “Guyana’s Power Gen­er­a­tion Sys­tem Study” of June 2016, and there­after to re­sume the plan­ning of Amaila Falls with po­lit­i­cal con­sen­sus and un­der­stand­ing with all stake­hold­ers.

It is our opin­ion that the BOOT type pub­lic pri­vate part­ner­ship model should be main­tained for the project im­ple­men­ta­tion. An in­ter­na­tion­ally well mer­ited in­vestor and op­er­a­tor in the hy­dropower in­dus­try should be in­vited to take the ma­jor­ity po­si­tion and the driv­ing seat (main spon­sor) in the project com­pany. The main spon­sor and the EPC Con­trac­tor should not be as­so­ci­ated in any way.

By re­struc­tur­ing the fi­nan­cial model, the risk for Guyana’s econ­omy can be re­duced. The an­nual pay­ments from GPL may pos­si­bly be re­duced by 20%, which are sig­nif­i­cantly lower than the cur­rent fuel costs paid by GPL for its oil fu­elled gen­er­a­tion. The risk to Guyana’s eco­nomic sta­bil­ity would be at the same level with other projects gen­er­at­ing the same amount of en­ergy, as the in­vest­ment would be of a sim­i­lar mag­ni­tude.

It is our opin­ion that the EPC ten­ders from 2008 are out­dated and need to be re­placed by a new EPC ten­der process. Be­fore that, cer­tain tech­ni­cal fea­tures of the project should be re­viewed and the EPC ten­der doc­u­ments be up­dated. In or­der to save time this work should be done in par­al­lel with iden­ti­fy­ing and as­sign­ing a new main spon­sor.

To get on with these ac­tiv­i­ties GOG will need con­tin­ued sup­port by IDB, or a sim­i­lar in­sti­tu­tion, and Guyana Light and Power will need tech­ni­cal and man­age­ment sup­port by a highly qual­i­fied en­gi­neer­ing com­pany with ex­ten­sive ex­pe­ri­ence from the in­ter­na­tional hy­dropower in­dus­try. If later agreed be­tween the par­ties, the same en­gi­neer­ing com­pany may con­tinue in a role as in­de­pen­dent en­gi­neer in the re­la­tion be­tween GOG/GLP and the new main spon­sor.

We may sug­gest that the cost for buy­ing out Sithe Global from the project com­pany and ex­penses for ser­vices by an en­gi­neer­ing com­pany en­gaged for sup­port un­til a new main spon­sor is es­tab­lished, are cov­ered from a por­tion of the USD 80 mil­lion de­posit in IDB for later be­ing turned into eq­uity con­tri­bu­tion from GOG to the project com­pany.

Our es­ti­mate is that 3 years will be re­quired from a de­ci­sion is taken to re­sume project prepa­ra­tion for AFHP un­til Fi­nan­cial Close and No­tice to Com­mence to the EPC Con­trac­tor.

From this point in time, we es­ti­mate an­other 3.5 years for con­struc­tion un­til start com­mer­cial op­er­a­tion of Amaila Falls Hy­dropower Project.

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