Dear Editor,
The Government has been talking up the big benefits of its gas to energy project, and that electricity prices will be halved, or more, when it is completed. This sounds good, but the real question to be addressed by our nation, is whether it is the best deal for us. Unfortunately, the answer is a resounding: “No”.
The reality of power generation economics across the world is that US$2 billion is far too much to expend to acquire 300 MW of power generation capacity. Rystad Energy, the international energy consulting firm, estimates that in 2022, new power plant installations in the EU, from solar, were up to ten times cheaper when compared to new natural gas plants. A similar cost relationship applies to North America where new solar plants are cheaper by multiples of 5 and more, when compared to new gas fired plants. The “Mammoth Solar” project in the US, planned without subsidies or tax credits, is slated to cost US$1.5 billion and produce 1,650 MW of power. There are even recent announcements of the imminent closure of some natural gas power plants in Texas, the oil and gas hub of the USA, to be replaced by solar plants, a clear indication of the changed economics of power generation.
Our Government’s announcement at the recent International Energy Conference, was that Exxon has agreed to receive an annual payment of US$55 million for 20 years to repay their proposed US$1 billion expenditure to build the pipeline. This repayment figure amounts to concessional financing, since the inherent interest rate being charged is less than one and a half per cent. This can be compared to Exxon’s publicly declared cost of capital of 9.41 per cent, as of February 16, 2023, an interest rate which they apply to their investment projects.
The Government’s “wresting” of this concession out of Exxon is really a pyrrhic victory, and only gives the veneer of a viable gas to energy project.
What is key in the analysis of this huge project is whether it is the best use of our national resources. We are aware that there are other critical areas in our economy in desperate need of resources for the country’s development. The agriculture sector is starved of adequate funds to provide an effective technology generation system, without which the sector will continue to stagnate. Our University of Guyana has to receive dramatically increased funding to be able to produce graduates to make our country “world class” in efficiency and innovation. Editor, a saving of over US$1.5 billion on new power generation would go a far way in assisting these and other programmes, which are in dire need of assistance.
Yours sincerely,
Fitzroy Fletcher
