Erik Lavoie
In the 2021 Public Sector Investment Programme, the Ministry of Planning and Development set a target for renewable energy to meet 30 per cent of demand for electricity in T&T by 2030. Despite progress with a 92 megawatt (MW) solar plant and wind studies by T&TEC, economic and legislative barriers may jeopardise achieving this goal.
T&T currently derives about 0.11 per cent of its electricity from renewables, according to the website ‘Our World in Data,’ all of which is solar (see graph). The addition of a 92 MW solar plant would raise this figure to around 3 per cent. The transition from a renewable penetration of 3 per cent to 30 per cent would require an aggressive buildout of renewable energy power plants and/or distributed energy resources.
92+ MW of solar capacity by 2025
Utility-scale solar is set to enter T&T’s electricity mix by 2025.
A 92 MW solar plant at Brechin Castle is being constructed by a consortium of Lightsourcebp and Shell, in agreement with T&TEC to provide electricity to the grid.
Originally, the project was to include an additional 20 MW at Orange Grove for a total of 112 MW capacity. However, a newspaper article in January 2024 revealed that the government planned to use the Orange Grove land for an unknown purpose.
Minister Young indicated that the ministry is “assessing whether the site at Brechin Castle can be further expanded as part of our solar project power generation,” although no specific plan or timeline was provided.
The cost of electricity from the solar plant is expected to increase from $0.27/kWh to $0.46/kWh due to delays, partly caused by an inefficient permitting system and general timeline delays.
Minister Young asked the ministry’s staff “to go out again with another Request for Proposals (RFP) for more solar.” The RFP indicates the Government’s interest in seeking competitive bids for additional solar capacity.
According to Guardian Media calculations, the 92 MW solar plant is estimated to produce around 246 GWh of electricity, approximately 2.8 per cent of T&T’s forecast demand of 8,900 GWh in 2025.
To reach the goal of 30 per cent renewable electricity by 2030, T&T would likely need the equivalent of 10 to 11 such projects. Dr. Curtis Boodoo, a professor of utilities at the University of the West Indies, noted that physical space may become an issue if this goal relies solely on utility-scale solar.
T&TEC explores offshore wind energy
While utility-scale solar requires significant land space, offshore wind energy utilises the vast space offered by the ocean, addressing land use concerns.
T&TEC has installed wind measurement technology to assess offshore wind potential at two locations, with two more assessments planned in the next year.
At the launch of the National Gas Company of T&T (NGC’s) Energy and Green Energy Maps in April, Minister Young stated that he “went to Cabinet, got the approval and confirmation for us to pursue, full speed ahead, the use of wind energy to bring wind energy into our electricity grid.”
He also highlighted that renewables like wind and solar can utilise a chemical process called electrolysis to produce green hydrogen, an environmentally friendly alternative fuel.
According to a May 2023 newspaper article, “experts in the wind energy sector said… it would cost between US$7-8 billion to get such a project off the ground.”
Large capacity payments to IPPs
Both market-based and legislative issues may hinder progress. Capacity payments to natural gas IPPs for electricity conversion constitute one of these concerns.
To convert fuel into electricity, T&TEC pays conversion costs to natural gas independent power producers (IPPs). About 95 per cent of these costs are capacity costs, with T&TEC paying for available generation potential (kW) rather than the actual electricity produced (kWh).
Unlike traditional renewables like wind and solar, natural gas plants are dispatchable, meaning their output can be adjusted to meet demand. Higher capacity payments incentivise power plants to remain operational and attract investment in reliable power plants.
The problem for T&TEC, is that the value of a renewable plant to T&TEC is determined by its ability to reduce the capacity (kW) T&TEC needs to contract, not just the actual energy (kWh) it produces.
Without large-scale battery storage, a solar plant offers little savings in conversion costs if peak or near-peak demand occurs when the sun is not shining. This leaves T&TEC with additional energy payments to the solar farm without reducing capacity costs. This concern has been highlighted by T&TEC; as stated in the 2021 Joint Select Committee (JSC) inquiry into T&TEC, “(T&TEC) is cognisant that the heightened national interest in renewable energy can result in higher fixed costs associated with underutilised capacity.”
Capacity payments are attractive to IPPs as they provide a steady cash flow and return on investment. Former Minister of Energy Kevin Ramnarine noted, “they provide (the IPPs) with a steady cash flow and a return on their investment.” This arrangement favours natural gas IPPs and makes prospective renewable plants less competitive.
For renewables to be more economically viable for T&TEC, the ratio of capacity costs to energy costs may need adjustment, balancing reliability and affordability. T&TEC may have hinted at addressing this issue with a statement during the JSC inquiry, saying that “the Commission is in the process of reviewing these contracts (PPAs) to determine the best future option.”
Gas subsidy distorts market
The natural gas subsidy has benefited consumers with lower electricity costs. However, it also undervalues the potential savings realised by producing electricity from alternative energy sources.
According to T&TEC General Manager Kelvin Ramsook, the true cost of natural gas-derived electricity is hidden under a subsidy, with T&TEC paying the state-owned NGC about 50 per cent less than the market value of natural gas. This means T&TEC does not fully experience the opportunity cost of generating electricity from natural gas instead of renewables.
If the cost of natural gas to T&TEC becomes unsubsidised, utility-scale projects that were once deemed uneconomical might provide net savings in generation costs, especially given the rapidly falling costs of producing electricity from wind and solar.
Despite the market distortion, a promising indication for renewable adoption is that T&TEC has pushed forward with the development of the 92 MW Brechin Castle solar farm. This likely indicates that the Cabinet has considerable power over T&TEC’s generation planning, given that T&TEC is a state-owned utility.
Can T&T reach its goal?
To pursue its 30 per cent renewable electricity goal, it is clear that the government must take significant action. Changes that the government and T&TEC may have to consider might include streamlining the licensing process and ensuring worker safety, exploring new strategies for PPA negotiation, a reconsideration of the natural gas subsidy, and an update of legislation to accommodate distributed renewables and batteries.
Furthermore, pushing towards 30 per cent renewable electricity production may potentially lead to higher electricity generation costs in the short run. For instance, in the United States, electricity from rooftop solar is roughly 2.5 times more expensive than electricity from utility-scale solar and natural gas. Similarly, electricity from offshore wind is roughly 2 times more expensive than electricity from utility-scale solar and natural gas. These figures are according to Lazard’s 2023 Levelised Cost of Energy Analysis.
Ultimately, T&T’s ability to reach its 30 per cent renewable electricity goal depends on government commitment, the implementation of necessary reforms, and a potential acceptance of higher electricity generation costs in the short run.
