Guyana continues to work with Brazil on hydropower

Dear Editor,

Please allow me to point out some inaccuracies and  to shed some light on some of the questions raised in the article, ‘Greenidge questions suitability of Amaila Falls for Hydropower‘  published  in the Kaieteur News of Monday, February 27, 2012.

In summary, Guyana has not ignored the offers from Brazil but, rather, continues to aggressively work with Brazil as quickly as the procedures and processes of the two governments allow.  Amaila has always been short-listed as a good site for development.  Current electricity generation in Guyana is based on the most up-to-date medium-speed, HFO-fuelled diesel engines which best match our demand, in terms of the daily load curve and the off-service times of units for regular maintenance and rare emergencies.  Whilst annual payments to Amaila hydro are more than the purchase price of imported fuels, today, Amaila offers 40% more electricity at constant annual payments, whilst knowledgeable authorities project continued rises in petroleum prices.

To expand on the above, let me firstly assure Mr Greenidge and the people of Guyana,  that following the meeting and joint communiqué issued by Presidents Bharrat Jagdeo and Luiz Inácio Lula Da Silva, a Brazilian government mission came to Guyana, and subsequently an MOU was entered into for the Brazilian side to develop a study of potential hydropower sites within the Mazaruni and Potaro  river basins,  including diversions within and between the two basins.  Previous studies which are in the control of Guyana would be made available as a starting point.  Consistent with this MOU, arrangements are presently being made with the Brazilian government for a consortium of two large Brazilian hydropower design and construction companies to pursue the relevant feasibility studies, which are a requirement for such major projects.

Both the Guyanese and Brazilian governments are keeping before them the attractive possibilities for the development of hydropower sites in Guyana,  for sale of electric energy to Brazil, specifically into northern Brazil which itself is still at a relatively early stage of development, and in which various supporting infrastructure is to be, and is being, developed.  Whilst remaining open to the outcome of the studies, but taking account of the distances involved,  rules of thumb would suggest that production and export/import of at least 1000 MW would be desirable, with probably 500 MW being the economic minimum.

For sure, Guyana’s domestic needs of less than 150 MW could readily be met from any such large hydropower development, and unit costs are likely to be lower than costs at a site developed solely for satisfaction of Guyana’s own domestic demand.  The question is, when will a large hydropower be actually in place, and should we not proceed with plans to satisfy our own domestic needs.

Governments, even with the best of intentions, are constrained by many factors:  first of all elections cycles  and election results; different personalities with different focuses and different prioritizations, even within the same party when  returned to government;  and, of course, the timing which makes good economic sense, and the availability of financing.  We are, nevertheless, encouraged by recent discussions with our Brazilian counterparts.

I recall at the time of our nationalization of the DEMBA operations, 1971-72, losing one of our best general foremen on holiday, having been involved in a traffic accident on the then unsurfaced road from Bon Fim to Boa Vista, and hearing all the talk then that that road was to be surfaced within a year or two – it wasn’t completed until about 2000! Similarly, the Takutu Bridge had been under discussion since about 1970!  Governments are no less earnest than others, but government procedures  and  processes are subject to far more uncertainties.

This government, quite likely as the preceding one, has judged that whilst prices are likely to be lower for electricity from some large hydropower development, such as for a large smelter which might be built in Guyana or for export sale to Brazil or elsewhere, it is prudent to pursue a hydropower development to meet our local domestic needs in good time.

It is very true that development of hydropower sites in Guyana has long been a dream of our people. Thus, the government of the day, in 1976, had a MONENCO  report that identified sixty- plus sites and which recommended fifteen,  including Amaila,  for further study.   A review by SWECO, in 1982, identified six sites for focus – Tiger Hill, Tumatumari, Tiboku, Amaila, Kaieteur and Upper Mazaruni, listed roughly in order of increasing size.  The first four would be aimed at meeting existing local needs – the last three could meet the additional needs of a local smelter, or for export.

Tiger Hill, Tumatumari and Tiboku are each less than the 125 MW we need today.  Amaila falls in both groups – the geography of its location is good, with one of the lowest development costs per MW in Guyana.  Utilizing only the Kuribrong and Amaila rivers,    Amaila is good for about 150-200 MW, but with diversions of water from the Upper Mazaruni and Upper Potaro, it could be increased to about 1100 MW. The topography at the Kaieteur Falls on the Potaro is similar to the Amaila Falls on the Kuribrong, and similar developments can be done around the Kaieteur, as at Amaila.  For such, and additional, reasons, in the estimation of many,  including the late Mr Joseph O’Lall, Amaila was judged to be the most suitable site for development to satisfy local domestic needs.

The adjacent Potaro and Mazaruni river basins, the subject of the current MOU between the Governments of Brazil and Guyana,  hold the potential for some 4000 MW, or more, out of the total potential of some 7000 MW for Guyana. The SWECO Upper Mazaruni design, which the government was pursuing in the mid-1970s, projected a single power station of up to 3000 MW, with a huge flooded area instead of the cascade of four or more stations envisaged earlier by MONENCO, with much less flooding, much less storage, much less smoothing of power developed through the year, and likely higher costs.  In these days, flooding and displacements are treated with much less disdain than in the 1970s, and the now prevailing formalized environmental and social impact study procedures set very high standards for approval.

Whilst, on the one hand, Mr Greenidge seems to be taking the government to task for not proceeding expeditiously and earnestly with large hydropower development for export to Brazil, be assured, on the other hand, of very public procedures and processes for consideration and mitigation, if at all possible, of negative environmental and social impacts on any, and all, stakeholders of any such developments.

Thirdly, allow me to address, and to expel from Mr Greenidge, any view that “electricity generation in Guyana has been based on outdated technology.”  The medium-speed Wartsila, HFO-fuelled diesel engines on which we have been standardizing, have been meeting the best specifications in the world for gensets of that size.  The question of utilizing high-cost imported fuels is a matter of choosing the realistically lowest-cost alternative available to us, here and now.  Yes, petroleum is costly – and yet, a good portion  of the electricity generated in the world is based on petroleum fuels and incurs much the same costs as we do.  As reported a few months ago in a Caricom Energy Review, Hawaii, utilizing petroleum fuels, has an electricity tariff of US34 cents per kwh, much the same as obtains in Guyana.  Electricity prices, like everything else, reflect to a great degree the “natural advantage” of the location.  In our current circumstances, we have not so far been able to be persuaded of a lower-cost alternative to meet our demands.  For decades, hydroelectricity has been a tantalizing possibility on the horizon – in Amaila, we think we now have it!

Finally, let me assure Mr Greenidge, along with our fellow Guyanese, that  a  number of issues to which he has alluded, are before us, and we do have answers:-

:  bringing the large, greater-than-1MW customers, like Banks DIH and DDL, and other  large,  industrial customers on the grid, with the related issues of tariff rebalancing – there are  studies on  these specific issues, and no one would be worse off for having Amaila;

:  regarding the requirement of at least three weeks off-line of any hydro-station (or independent part thereof) for checks and maintenance within one year  of start-up, and every five years thereafter – yes, GPL will keep its sets maintained and will do the best at the time, as for example, take power from any other hydropower station connected, or pursue short-term rental of emergency sets;

:  regarding payments of about US$100 million annually to the hydropower station, as stated in the article, against  fuel purchases, now, of about US$90 million,  Amaila will supply up to 40% more electricity than we generate today.  The annual  payment to the hydro will be fixed for the 20-yr BOOT (Build, Own, Operate and Transfer)-life, then be dropped  to  no more than 15% of the earlier price, whilst fuel prices are expected to be volatile but steadily increasing, particularly so when the cost of fossil fuels must carry the cost of removal of the CO2 from the atmosphere.

Let me express my appreciation for this opportunity to address questions which were in the mind of Mr Greenidge and, no doubt, many others. This response would, undoubtedly, present only a few steps in educating ourselves about electricity generation and costs, our hydro potential, and what would be involved in hydropower development.

Yes, Amaila would be one of the biggest single developments undertaken so far within our country.  Certainly, we must do all we can to avoid errors, and to this end, at least four groups are subjecting the plans to independent review.

We always work and hope for success, but the future is never known and it often comes with a few surprising turns; nonetheless, we must go on ever hoping that fortune will smile on us and that our people will consider us kindly.

Yours faithfully,
Samuel A Hinds
Prime Minister