…only way for Govt to fulfil its LCDS commitment to UN
The independent assessment of the Amaila Falls Hydropower Project (AFHP) has revealed that the only realistic path for Guyana moving towards an emission-free electricity sector is by developing its hydropower potential and the fastest way forward is to maintain the AFHP.
The report, which was compiled by Norconsult, an engineering and design consultancy firm out of Norway contracted by the Government of Norway, detailed an “objective and facts-based” assessment of the Project on the agreement of the two Governments, and was released on Wednesday.
According to the report, which was handed over to the Government of Guyana (GoG), the first needed step for revitalising the Project is a decision by the Government to maintain the 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 and embraced by Government in “Guyana’s Power Generation System Study” of June 2016.
“It is our opinion that BOOT (Build, Own, Operate, Transfer) 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 (Engineering, Procurement, and Construction) should not be associated in any way.”
Importantly, the independent assessment team noted that by restructuring the current financial model, the risk for Guyana’s economy can be reduced. “The annual payments from GPL may possibly be reduced by 20 per cent, 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,” the team concluded. In their opinion, the EPC tenders from 2008 are outdated and need to be replaced by a new EPC tender process, noting that before that, certain technical features of the Project should be reviewed and the EPC tender documents updated.
The report noted that to get on with these activities, the Guyana Government will need continued support by the Inter-American Development Bank (IDB), or a similar institution, and the Guyana Power and Light will need technical and management support by a highly-qualified engineering company with extensive experience in the international hydropower industry.
“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 US$80 million deposit in IDB for later being turned into equity contribution from GoG to the project company,” the report noted.
In the report, it was estimated that three years would be required from a decision being taken to resume project preparation for the 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 of commercial operation of Amaila Falls Hydropower Project.”
FULL FEASIBILITY STUDY
The AFHP was prioritised as the first hydropower plant because it was the only project with a full feasibility study completed, with 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.
The report noted that Amaila Falls alone could not provide a 100 per cent emission-free power generation in Guyana in the future. 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 the AFHP may be insufficient for full capacity operation. As the power demand is growing, and to reach the goal of 100 per cent emission-free generation by 2025, as assumed by the Low Carbon Development Strategy (LCDS), a second hydropower plant of capacity comparable with the AFHP will have to be commissioned by 2025. In parallel with preparations for the AFHP, therefore, prefeasibility 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 the 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.
According to the report, about 23 square kilometres of rainforest would be inundated by the power plant’s reservoir.
The live storage volume is small compared to the annual water flow and the plant would be operated mainly as a run-of-river plant with little impact on the downstream river hydrology, except for the about four-kilometre 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 the AFHP as the first hydropower project to be implemented would require one to two years of investigations and studies, including environmental and social impact assessments meeting today’s standards, to reach an updated feasibility study stage comparable to the AFHP, but none of them match it on economic, environmental and social costs.
BLIND EYE
But turning a blind eye to the recommendations of the independent assessment, Government, through Public Infrastructure Minister David Patterson, said the Administration believed that the report highlights several risks and flaws in the design of the project, which will threaten its long-term effectiveness and prove too costly and burdensome to the people of Guyana and the country as a small developing state.
The review, according to Patterson, stated that the Amaila Falls Project would not be optimal in its current model and rectifying the many issues identified would increase the total cost substantially, thereby impacting the tariff rates from the outset. But, the report contradicts this statement by the Minister. Additionally, there are at least six more years of work to be completed, including a minimum three years of water flow study and analysis on the Project. Having committed to a ‘green agenda’, the Government now proposes to utilise a mix of energy options, starting with what it described as “less risky options” such as solar and wind, as outlined in Budget 2017.
Before taking office, the governing coalition partners the Alliance For Change (AFC) and A Partnership for National Unity (APNU) were opposed to the Amaila Falls Project.
Only recently, Opposition Leader Dr Bharrat Jagdeo called for the release of the facts-based assessment of the AFHP.
The Project, which would be the largest Foreign Direct Investment (FDI) in the country’s history, has the potential to reintegrate the country with the global capital markets for the first time in over 40 years.
If approved initially, Amaila Falls could have been almost operational by now and consumers could have been close to seeing the end to expensive, unreliable and dirty electricity and Guyana would have been entering into the ranks of the top 10 users of clean energy worldwide.
In 2013, Guyana had secured a best-in-class US private investor to be the major sponsor for Amaila Falls and the contractor to build the project was selected through an open, competitive, international process.
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