A government-commissioned study in 2009 on the economic benefits of the Amaila hydropower project itself raised concerns that the hydrology of the falls could be a problem for year-round generation of power.
The study by Mercados Energeticos Consultores of Argentina also raised other troubling concerns because of its assumptions which observers say should have given rise to caution on the then existing model. The 2009 study was only afforded to the parliamentary parties in June this year amid the then mounting opposition to the project. It is not clear why the government had not made the report available to the public and opposition in 2009.
The study done in 2009 and its conclusions are based on assumptions that losses will come down to 20.7 percent and that self-generators will return to the grid. The study is called “Economic and Financial Evaluation Study: Guyana-Amaila Falls Project” and done by Mercados Energeticos.
Government in a statement on August 16, 2013 said that this study and its subsequent report validated the Amaila Falls Hydroelectric project as economically profitable and beneficial to Guyana.
According to the Govern-ment, the project would provide en economic rate of return of 33 percent to Guyana, reduce GPL’s average supply costs and bring structural benefits to GPL. That statement from the government had come days after Sithe Global had announced its withdrawal from the project after the lack of consensus in Parliament on two measures related to the project.
Government commissioned Mercados Energeticos Consultores to perform an economic and financial evaluation of the project. It said that the study sought to evaluate the economic profitability of the Amaila project for GPL and ensure the supply of power would be consistent with GPL’s medium and long term demand projections.
The Government release said that while the report’s conclusions date back to 2008 and 2009, the fundamentals of the economic profitability are more pronounced today in a high fuel cost environment. It said that the report evaluated the project against oil prices of US$75 per barrel. The statement said that in early June, 2013, Government consulted with and shared with the Opposition a number of documentation and reports, including the report from Mercados Energeticos.
A perusal of the report revealed that findings were made during the study that still pose difficulties for the project.
According to the report, the design of the Amaila Falls project encountered several problems arising from the lack of hydrologic data. It said this could result in uncertainty regarding the expected power generation and uncertainty as regards the maximum flow adopted for the design at 5.010 m3 per second.
The study found that in order to obtain more accurate information on the flow of the river, there would be the need to install a hydro- meteorological station in a section of the river that is representative of the Project. It is unclear if this was ever done.
According to the report, hydraulicity in the different months of the year will determine energy production. It said that in wet months of June to September, more power can be generated and demand is covered. However in the months of low hydraulicity, there is a deficit in power generation and demand is only partially covered.
The report said that even with smaller load factors, there is a deficit in power generation in months with low hydraulicity.
The report said that the project design has few possibilities of modification, considering that it is based on all the available information and any possible enhancement would require additional field studies.
With regard to the competitiveness of Amaila, the study said that the project will sell its energy output primarily to GPL, at a fixed annual payment of – US$105 million, regardless of actual demand. The power purchase agreement is a take-or-pay contract.
“However, in the early years of the project and given that the contractual arrangement is take-or-pay, GPL’s total generating expenses including the power purchase agreement with Amaila Falls are closer or even 5 – 10 % higher than GPL’s generation expenses without including Amaila Falls (and only adding needed thermal generators to meet demand growth),” the report said.
Further, the Mercados study is pegged on the assumption that GPL would be able to get its losses down from 33 percent to 20.7 percent as a result of a five-year programme focused on replacing defective meters and reducing electricity theft. These losses have proved intractable for years despite attempts by GPL to bring them done.
According to the study, monthly self-generating is estimated at 10.94 gigawatt hours. It said too that self-generation’s installed capacity is 47 megawatts or 38 percent of GPL installed capacity.
For the study, approximately 40 self-generators were surveyed. It said most of them utilize their generation equipment as load demand necessitates while a minority use them as standby units.
The study said that a number of firms surveyed said they would like to see the cost of power reduced and reliability and quality improved. They also expressed that they wanted to come back to the grid. All of the firms are located within the grid area.
Observers say self-generators would only return to the grid in the early years of the project if it made financial sense.