Bahamas Power and Light (BPL) yesterday signed a Memorandum of Understanding (MOU) with Shell Gas and Power Development B.V. for a gas to power project, a move that BPL Board Chairman Dr. Donovan Moxey said begins the process to deliver cheaper energy costs and significantly reduce the number of blackouts.
Moxey said the next step is to begin negotiations for a power purchase agreement, which will set out the fine details. He said the process could last up to five months.
It was not made clear yesterday how much the deal is worth.
The MOU establishes Shell as the project developer for the power project, which will include the development of marine infrastructure to receive liquefied natural gas; a gas pipeline to bring gas to shore; onshore LNG regassification terminal and a new gas-fire 220-plus megawatt power plant.
“The MOU is the first step towards a desired long-term power generation pact between BPL and Shell, and bringing strategic change to electricity generation and supply in New Providence,” Moxey said.
“The goals are to achieve cleaner power generation, lower cost fuel sources and a reduction in the cost of electricity generation. Ultimately, we are seeking more reliable electricity supplies and lower prices to electricity consumers as well as to make The Bahamas more attractive to investors in terms of the reduced costs of doing business here.”
Moxey said the LNG plant is central to the success of the venture. However, it will be a few years before the plans come to fruition.
“The hope for us is that we get construction started soon enough so that we can have the plant online by the early 2020s,” he said at a press conference at BPL’s Tucker Road headquarters yesterday. “Our target goal is sometime around or before 2022, but you never know what may delay the project.”
He said environmental studies will be carried out before construction commences. The plant will likely be built near BPL’s Clifton plant.
Shell, which would become an independent power producer (IPP), will cover the cost of constructing the plant, which is reportedly expected to be upwards of $100 million. BPL will in turn pay Shell to supply electricity. However, Moxey said it’s still too early to say just how much this venture will cost the Bahamian people.
“When you look at what utilities are doing today, getting out of the generation business, is you’re reducing your capital costs and expenditure by bringing on IPPs. So, that’s the nature of the relationship,” Moxey said.
“So, when you look at the construction costs, the cost of building this plant, BPL will bear none of those costs.
“We will be paying for the electricity supply being provided to us…at a negotiated rate. And that’s what we’re working on, negotiating that rate.”
Moxey said the decision to seek an electricity generation partner comes out of the recognition that the Bahamas Electricity Corporation (BEC), the legacy provider, would have to undergo a “revolution” in terms of reliability and quality of its electricity generation, administration and staff size and capabilities.
“The view that change was an imperative was held by successive government administrations. This is made obvious by the unreliability of electricity supply, leading to year-round blackouts and equipment failure,” he said.
Moxey said once the project is off the ground, blackouts would essentially be a thing of the past.
“One of the things that we have to recognize is that the power generation assets that BPL has, a lot of them have been around for 20, 30 years,” he said.
“And quite a lot of them are at the end of life and some of the issues that we’ve experienced with blackouts has been due to the fact that we have old generation equipment.
“In addition to that, there is also some transmission distribution issues that are in our network, that need to be fixed.
“When you talk about engaging… a power producer in the PPA, it is their job to keep generation running to the agreed level that we have essentially worked with them to establish.
“So, when you look at that, that’s their (Shell) focus, and, so from our expectation, if they live up to that then we should have very little, to no, generation issues.”
Shell Country Chairman Mark Regis said the company looks forward to providing more reliable and cleaner energy. He said the signing of the MOU is an “important first step” in the process.
“We still have several more milestones to meet but we are optimistic about the future and our ability to move this project forward,” he added.
The MOU signing comes several months after Cabinet selected Shell as a preferred bidder to help solve BPL’s power generation issues.