It was reported last week that Mr Robert Persaud proposed the high cost of energy as the key constraint preventing the development of manufacturing in Guyana. He went on to blame the opposition for not supporting the Amaila hydroelectricity project, which had a price tag of almost US$1 billion. Recall that the IDB was yet to release its study on the project’s viability, yet the contract was signed and the infamous Fip Motilall road was long from complete. One study from an Argentinean consultancy observed that the hydro volatility would have been substantial, requiring thermal plants – heavy fuel generators currently used by GPL – to be used for the dry months. In other words, after spending US$1 billion, GPL would still need to operate generators in the dry periods.
The study by Mercados Energeticos Consultores is an example of private cost-benefit analysis, focusing only on the financial viability of the Amaila project from the perspective of the private investor. I am not aware of the government’s planners ever conducting a social cost-benefit evaluation so as to judge whether the project is good from the government’s perspective. If a social analysis was conducted, then perhaps the cost associated with running generators would also have been included in the cost projections. That cost has to be billed into the system at some point by the government. Therefore, it was far from certain whether Persaud’s silver bullet energy solution would have given the manufacturers the cheap energy they need. There are other serious methodological problems associated with the study mentioned above – for example the demand projections obtained by the time series econometric model (but that’s another issue for another day).
We know politicians prefer sound bites and one line answers. These are easy for party shills to run with. But while this column acknowledges the high cost of
