Lack of cheap electricity is not the major impediment to Guyana’s development

Dear Editor,

At the Caribbean Development Bank (CDB) Board of Governors 44th Annual General Meeting held recently in Guyana, Dr Smith, CDB’s President stated that the high price of electricity has been a major source of the Caribbean region’s un-competitiveness and its vulnerability to external shocks. To support his claim he quoted household tariffs for electricity among CDB members as ranging between US$0.48 to US$0.07 per kWh. Comparing these tariffs with electricity supplied by ConEdison in New York City for the months of March and April ’14, it was US$0.43 average per kWh. In California and locations elsewhere the cost for electricity is higher while in Guyana it is about US$0.28 per kWh.

There is no doubt that high electricity costs do have a negative effect in attracting certain categories of investments but many countries with high electricity costs have successfully attracted investors of varied kinds because they have other important infrastructure in place. Japan with the world’s third largest economy has no hydropower and much of its electricity is generated from imported fossil fuel and, until recently, from nuclear power. Yet it has attracted investors for many of its industries which are competitive despite high labour costs.

Dr Smith and former Chairman of the Board of Governors of the CDB Dr Singh, have failed to assist member countries of the Bank to identify and provide funding for worthwhile projects to develop and grow their economies, thereby finding work for the large numbers of unemployed. Instead they have been dodging the problems by finding excuses such as high energy costs, political bickering and environmental roadblocks as impediments for doing little or nothing. In the case of Guyana, President Ramotar has continued to extol the lame duck excuse that lack of cheap electricity has been the major impediment to Guyana’s development. He has failed to acknowledge that for the past twenty years or so the country has had an unreliable source of electricity with brown-outs and black-outs the order of the day; lacks an educated and skilled labour force; and has poor infrastructure such as roads, port facilities, communications and water supply. These are among the constituents that investors are looking for and Guyana lacks.

Much has been said and done about hydropower development to reduce the country’s dependency on the high cost of imported fossil fuels and save scarce foreign exchange for other needed imports. The PPP government under President Jagdeo had considered it savvy to tap Guyana’s hydropower potential at Amaila Falls. The project was ill conceived and early preliminary works were shrouded in secrecy with funding for design and construction negotiated without transparent competitive bidding. The opposition parties were deliberately kept in the dark and were given little or no information on what was going on although government funding was involved. Then came the general elections in 2011. President Jagdeo was cocksure the PPP would have won the elections and his anointed successor President Ramotar would continue to execute his projects. Surprisingly, the opposition became the majority and a brake was put on the financial shenanigans of the PPP and management of the country’s resources has to be more transparent before public funds are approved for expenditure. Unfortunately the government has been bypassing the National Assembly and siphoning funds from NICIL and PetroCaribe to finance many of the projects started during President Jagdeo’s incumbency, the financial accountability for which is very fuzzy, while the opposition majority seems helpless to stop the flow of unauthorized spending from these government sources. ‘Fip’ Motilall, deal-maker turned contractor was awarded one of these PPP government contracts to build the access road to Amaila Falls. As expected he failed to deliver and his contract was terminated. The project was eventually split and awarded to sub-contractors who are now struggling to complete the road and appurtenances which are not expected to serve their intended purpose any time soon, as funding for the Amaila Falls hydropower project (AFHP) is in the doldrums and will continue to be so for many years to come as the government lowers its financial sourcing sights and is exploring wind and solar power as alternative sources for cheap electricity.

The government has no idea what AFHP will cost and therefore it is rather disingenuous that Prime Minister Hinds has been promulgating that AFHP would be able to generate electricity at US$0.21 per kWh, reducing eventually to US$0.03 after 20 years of operation. He has never provided any data to support these claims and therefore he should state how the tariffs he quoted were developed. After all, the tariff for the Berbice Bridge crossing was to be not much more different than that for the ferry. Unfortunately the reality proved different. The Inter-American Development Bank (IDB) has carried out a feasibility study in consideration of a loan for Amaila Falls.

If Minister Hinds is confident of his tariff projections he should make a copy of this IDB study available to show all and sundry how right he is, as the study will clearly indicate the proposed cost for electricity based on AFHP cost. It is worth noting that Minister Hinds considered the 2000 CDB financed engineering survey of the potential of wind along the Guyana coast for large-scale electricity production secret, and it was never made available to the public as the government plugged the merits of AFHP without comparative pricing.

Having failed to develop AFHP Minister Hinds is now dabbling with wind and solar energy sources for electricity power generation which is more expensive than fossil fuel, although the prices are falling for these alternative energy sources which will not be available 24/7 without back-up generators/storage batteries. Minister Hinds will serve Guyanese well if he could stop dilly-dallying and devote his energies to get GPL back on track to provide its users with a reliable and dependable source of electricity at reasonable costs as Belize has been doing. The government cannot continue to subsidize GPL without solving such endemic problems as mismanagement of the utility and thefts of its electricity, and hope without addressing these fundamental problems that AFHP and/or large scale electricity from wind and solar will eventually provide cheap and reliable sources of electricity for Guyanese if only the opposition majority will go along and approve its proposals.

 

Yours faithfully,
Charles Sohan

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