Trinidad and Tobago plans to transition away from fossil fuels

Due to the country’s abundant low-cost hydrocarbons, Trinidad and Tobago has historically given a low priority to the development and use of alternative and renewable energy sources. That same high dependence on oil and gas has placed the country comparatively high up on global rankings in terms of greenhouse gas (GHG) emissions.

According to a study by the University of T&T (UTT), in 2010 the country was the world’s second-highest per capita producer of GHG, after Qatar, and the second-highest producer of GHG per unit of GDP, after Uzbekistan. Furthermore, despite concerns over the growing number of motor vehicles in circulation and increasingly congested roads, the study found that the transport sector contributed only 6% of total GHG emissions, with the bulk – 80% or 53m tonnes of GHG per annum – coming from petrochemical production and power plants.

Renewables On The Agenda

Traditional thinking about energy has begun to change for a number of reasons. The slump in energy prices has highlighted the need to reduce the economy’s dependence on oil and gas and to investigate alternative approaches. The growth of international awareness for energy efficiency and environmental issues has also played a part in leading to calls for serious reform.

One sign of the change in attitudes is that the new government has, for the first time, made a commitment to a climate action plan in the framework of the December 2015 Paris summit conference, which led to the formation of the UN Framework Convention on Climate Change. The government committed the country to achieving a reduction of 15% in greenhouse gas emissions by 2021.

In addition to that commitment, Colm Imbert, minister of finance outlined additional objectives in his October 2015 budget speech. Among the targets set out was that the country should generate at least 10% of its electricity from renewable sources by 2021. Solar and wind energy were identified as the two most promising technologies for T&T.

The target is ambitious since the contribution from renewables is currently near zero. According to the BP Statistical Review of World Energy, total primary energy consumption in T&T in 2014 was around 850trn British thermal units (Btu). Of this total, natural gas accounted for approximately 93% and petroleum products accounted for almost all the remaining 7%. Renewables – mainly biomass and waste – were reported to represent a negligible share of total consumption. The government estimates that the country’s total installed electricity generating capacity is 150 GW, so meeting the target means generating one-tenth of that total – 150 MW – from renewable sources. Although the goal is ambitious, other Caribbean countries have gone further: Dominica has set a target of generating 25% of its electricity needs from renewables by 2020, while St Vincent and the Grenadines is aiming for 60% by the same date.

New Thinking On Energy

Discussion of the role renewable energy can play in T&T has recently widened, with new and unconventional approaches being proffered. One example was a suggestion by Zaffar Khan, a programme director at the Arthur Lok Jack Graduate School of Business, that The National Gas Company of Trinidad and Tobago (NGC) should reduce the amount of gas it supplies to the T&T Electricity Commission (T&TEC) for use in power generation. Kahn argued it would be preferable to export the gas instead. “Maybe the time has come for us to use renewable energy for power generation and use the remaining natural gas reserves that we have to generate much needed foreign exchange earnings,” he said. He went on to argue that many of the large gas-processing, oil refining and industrial facilities at the Point Lisas Industrial Estate were operating sub-optimally. Petrotrin, the loss-making state oil company, could reduce its high cost base by using renewable energy, he maintained. Until recently the country has used mainly single-cycle gas-fired generators, which are not as efficient as the newer combined-cycle units because heat is not conserved. Combined-cycle generators recycle the heat that is generated during the first cycle as steam, which is used to power a second cycle.

Electricity Subsidy Under Scrutiny

T&T’s subsidised electricity tariffs, which at $0.03-0.06 per KWh are the lowest in the Caribbean, have posed a problem for renewable energy development. Electricity prices in Barbados and Jamaica are two and a half to three times more expensive than in T&T. Another factor until recently has been the existence of excess generating capacity, largely because of the commissioning of the 720-MW Union Estate combined-cycle power station in La Brea, operated by Trinidad Generation Unlimited (TGU, a subsidiary of AES Global), and originally designed to supply an aluminium plant that was not built. However, this excess has been reduced because of the decommissioning of the Powergen plant in Port of Spain in early 2016. Christopher Narine-Thomas, chairman of the Energy Efficiency and Alternative Energy Committee of the Energy Chamber commented that decommissioning the Powergen plant would rebalance T&T’s supply with its demand.

The problem remains that introducing electricity from renewables would at face value lead to higher, rather than lower, short-term electricity costs. Much depends on whether current gas prices, which remain partly subsidised, are seen as adequately capturing the scarcity value of fossil fuels. There are a number of potential solutions. Some experts advocate gradually eliminating all electricity subsidies in a series of steps running up to 2021, and setting a feed-in-tariff policy to incentivise private sector suppliers. Indeed, in October 2015 the government announced plans to curtail subsidies. Others suggest there should be a single government-led commissioning round for the entire 150 MW of renewables capacity sought, and the higher costs could subsequently be “blended” into the national pricing structure. “Renewables have been around for a long time ,but they were not part of the national conversation and were not on the agenda. They have now come onto the national agenda and it is up to the government, universities and other stakeholders to articulate the feasibility of these options,” Rampersad Motilal, director of the Energy Institute at UTT, told OBG. In his view this will be less difficult than many have imagined, for various reasons. First, the technology most appropriate to T&T – solar energy and wind energy – has now been widely tested and proven elsewhere in the world. Second, Motilal says that the current low-price hydrocarbons environment is a good point from which to begin a gradual and phased reduction of petrol and electricity subsidies. He advocates a phased reduction in existing fuel and electricity subsidies over a five-year period. “If you want to maximise your revenues from hydrocarbons-based energy when you are uncertain of price levels, and increasing production is difficult, then you need to husband your current production efficiently. In my view the best way to make that happen is to eliminate any pockets of subsidy and get prices close to those in the market,” Motilal told OBG. That would narrow the gap, but might still leave a situation where renewable energy costs might be higher than hydrocarbons based energy. However, Motilal argues that there is an overwhelmingly strong case for introducing renewables into the energy mix, not least because the Paris protocols demonstrate that in terms of damaging the environment “the downside of not doing anything is huge”.

Future Options

Therefore, Motilal suggests a number of ways in which renewables can be “blended” into T&T’s energy mix. One would be to require the largest industrial companies that generate their own power to meet a certain percentage of their needs from renewable energy sources, enabling them to blend higher-cost renewables with lower-cost gas-fired electricity to end up with a delivered cost that would not be dramatically higher than what they were previously paying. A further step would be to allow companies and households to generate renewable energy – not just for their own personal use, but also for sale back to the grid – with feed-in-tariffs adjusted to make it commercially attractive for them to do so. Lastly, another option would be for the state-owned electricity company, T&TEC, to require its energy suppliers to deliver a certain proportion of their electricity from renewable sources – here too different costs would be blended into overall prices.

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The Report: Trinidad & Tobago 2016

Energy chapter from The Report: Trinidad & Tobago 2016

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