Can Natural Gas Solve the Bahamas' Power Problem?

by Larry Smith

Energy security is not just a concern for America, which now gets 70 per cent of its oil from unstable or even hostile countries. It's also something we Bahamians must deal with.

Currently, we import all of the fossil fuel (heavy fuel oil, diesel, aviation gas and gasoline) we use to generate electricity and power our cars, boats and planes. This makes us highly vulnerable to supply shortages and price shocks - things we have no control over.

Electricity demand in the Bahamas is growing by some 5 per cent a year, BEC says. And that figure is based on the assumption that projected energy conservation measures such as lighting and appliance efficiency improvements, along with a major expansion of solar water heating, are put in place to curb demand.

That 5 per cent growth represents some 13 megawatts at a cost of $1.5 million per megawatt installed - about $20 million a year, or $200 million over 10 years. But government ministers have admitted that BEC's financial condition is grave. In fact, when oil prices spiked in 2008, the government was forced to exempt BEC from paying duty on hundreds of millions of dollars in fuel imports to stem losses. And it's a safe bet that rate increases are on the way, whether oil prices rise or not.

BEC uses heavy fuel oil to produce electricity on New Providence and diesel for its smaller out island generating plants. It is currently spending well over a hundred million dollars to build new plants on Abaco, Eleuthera and Bimini, and is about to spend millions more to upgrade Nassau's Clifton plant.

Meanwhile, efforts over the past three years - supported by the Inter-American Development Bank - to identify and introduce utility-scale renewable energy supplies have yet to show any results. And even if some projects are eventually implemented, they will account for only a few percentage points of demand, meaning we can look forward to another energy price spiral as the world economy recovers.

What can we do about this? Well, efficiency measures alone could save up to 30 per cent on energy costs, experts say. But there is also new interest in using natural gas to produce electricity in the Bahamas. We would still have to import gas as we do oil - either in liquid or compressed form - but new technologies are opening up vast gas reserves around the world that will have a significant impact on price and availability.

This story has been gathering momentum for the past year or so, and now the international press is heralding natural gas as a game changer for the world's energy and emissions quandry. Preliminary estimates suggest that shale gas resources around the world (shale is a sedimentary rock) could be equivalent to, or even greater than, current proven natural gas reserves. Perhaps much greater.

The Financial Times recently described enthusiasm for shale deposits as "part of a wider revival for a fuel that could cut carbon emissions and transform global politics....Within three years the world has gone from running out of natural gas to being drowned in it (and) the implications are profound."

North American natural gas resources have risen to a level that could supply current consumption for well over 100 years, according to the respected Massachusetts-based Cambridge Energy Research Associates. And more importantly, development of this expanded resource may be able to meet significantly increased levels of demand without significant increases in prices.

"The unconventional natural gas revolution has lowered the natural gas price outlook and made gas more competitive while encouraging higher expectations for security of supply—a dramatic shift from just half a decade ago," according to a recent report by CERA. This is dramatically changing the global energy outlook and transforming the debate over generating electricity."

Gas is the cleanest of all fossil fuels, producing about 30 per cent less carbon than oil and 50 per cent less than coal - and if spilled it simply evaporates with no harm to the environment. In the face of new regulations to control carbon emissions, increased gas supply will likely lead to more gas consumption by electric utilities because of the relatively lower carbon emissions. And gas-fired power plants can also be built more quickly and at less cost than coal-fired or nuclear plants.

Here at home, BEC and Grand Bahama Power can, with minor modifications, burn gas in their combustion turbines. BEC could also burn gas in their Family Island medium and high speed diesel engines, and even in their slow-speed diesels, some say, producing economies of scale in tankage costs and more efficient fuel handling at all its sites.

So what impact does all this have on the liquified natural gas terminals that have been proposed for Freeport and Ocean Cay over the past several years to transship gas from Trinidad to the United States? Well, just last month Alan Kelley, the CEO of Grand Bahama Power, said he was still pursuing such a terminal at Freeport in conjunction with the government and Hutchinson Whampoa, Freeport's top corporate partner.

Successive governments have balked at approving the construction of multi-million-dollar LNG terminals here in the face of safety and environmental concerns. The outlook is now further clouded by the improved supply of gas in the US. Since the minimum economic size for LNG facilities can handle much larger volumes than the Bahamas could possibly use, this means that a good portion of what we import would need to be re-exported - with Florida as the obvious market.

A few years ago there were 40 applicants clamouring to obtain permits to build new LNG receiving terminals in the US, but now analysts are saying that the newly accessible reserves of shale gas will allow the US to effectively close its doors to LNG imports. This means that AES and Tractebel, the two companies that were seeking to build LNG terminals here should probably buy the government a round of drinks for its seven-year stall.

For long-distance movement, natural gas is condensed into a liquid at the source of supply by cooling to 260 degrees below zero. It can then be shipped in specially built tankers to other locations, where it is converted back into a gas for use as a fuel. A re-gasification facility costs several hundred million dollars to develop.

Meanwhile, Utilities Minister Phenton Neymour has acknowledged that oil companies are increasingly reluctant to supply the Family Islands with diesel due to high shipping costs, environmental risks, small volumes and burdensome scheduling requirements. And recently, retired Nassau-based shipping consultant Bill Bardelmeier suggested using new compressed natural gas (CNG) tankers to supply BEC facilities around the country.

"There has been a new wave of interest in transporting natural gas under pressure. The objective is simply to pack a lot of molecules of gas into a small space for economic transport to the marketplace. As I see it now, Abaco would likely use a couple CNG shuttles to run from the big LNG terminal at Savannah, or from a Gulf of Mexico terminal. CNG deserves a close look in any event," he said.

In my view, the often hysterical controversy that has swirled around the Bahamian LNG proposals was never rooted in reality. There are certainly risks. But are they any greater than the risks we currently face with heavy fuel oil and diesel transport and storage, where the environmental dangers are well known? The fact is that all existing large-scale energy technologies (from nuclear to coal, oil and gas) present substantial safety hazards - both natural and man-made.

Several companies have drilled for oil in Bahamian waters over the past 50 years. And there is no doubt that this will have a huge impact on our marine environment because a significant percentage of any oil produced offshore spills into the sea. A recent Saudi report estimated that a million barrels of oil and waste products are dumped or spilled into the Persian Gulf every year by shipping alone, for example.

On the other hand, using gas to fuel our power plants will certainly eliminate the prospect of catastrophic oil spills - something that many Abaconians are worried about with the Wilson City power plant now under construction. A gas-based solution, on its own, does not provide a long-term path to a low-carbon future, but it can be part of a portfolio of options - including renewables - that will eventually get us there.

According to BEC chairman Michael Moss, "I do believe we need to seriously look at gas to improve our fuel supply security and reduce our exposure to oil price fluctuations through diversification. We need to pursue renewables for the same reason. Also, in spite of all the naysayers, natural gas is less offensive to the atmosphere than other fossil fuels we presently use. It's all a question of price, with environmental issues being a plus."

Currently, the benchmark price of gas in America is the equivalent of less than half the cost of a barrel of oil - about $30. As the world economy recovers and utilities build more gas-fired plants, prices are expected to pick up again. "But rising US production is likely to put a ceiling on how far they can rise," the Financial Times says. "The vision of a gas-based energy system, cheap, clean and secure, is a seductive one."

Stephen Chu, the US energy secretary, recently said gas could be "a key enabler of renewable energy" by acting as a bridge or transition fuel as the world shifts toward renewable energy and a lower-carbon environment. Others feel it is part of the long-term energy solution.

Power companies, including BEC, are facing big questions about fuel choice and new generating capacity. And today’s investment decisions will determine the outcome 20 or 30 years from now. For example, US power demand could grow by a third over the next two decades, requiring 270 gigawatts of new capacity—equivalent to 540 new gas-fired or coal-fired units or more than 200 nuclear units. BEC's maximum demand last year was some 240 megawatts while GB Power's peak was about 70 megawatts.

Renewables are not yet a solution at utility scale. Assuming a demand growth rate of 5 per cent per year, the output from a proposed 20-megawatt waste-to-energy plant at the Harrold Road dump would be consumed in less than two years. Expansion of conventional plant is therefore critical even as alternative options are pursued, BEC chiefs say. And switching to gas may be the best we can hope for at this time.

It's all about balance between conservation and energy. What good is it to have a wonderful natural environment if the economy is so bad people can’t enjoy it? And what good is it to have a wonderful economy if nature has been destroyed, and we have to live with polluted skies and seas.

Comments

[Lurkey McLurker]

The corporate controlled, non-free international press is heralding natural gas... wow!

[Lurkey McLurker]

"North American natural gas resources have risen to a level that could supply current consumption for well over 100 years, "

Considering that consumption will grow over time, "current" consumption is meaningless. The level of consumption in 20-30 years will completely deplete that entire "100 years" worth of resources.

[Lurkey McLurker]

"Gas is the cleanest of all fossil fuels".

True.

"Horse shit is cleaner than bull shit".

Also true.

[larry smith]

And your point is?

[Lurkey McLurker]

"...now analysts are saying that the newly accessible reserves of shale gas will allow the US to effectively close its doors to LNG imports."

PRAISE THE LORD!
JEEEESSUSSSSSS!!!

[Lurkey McLurker]

"...oil companies are increasingly reluctant to supply the Family Islands with diesel due to high shipping costs, environmental risks, small volumes and burdensome scheduling requirements."

Based on population data from 10 years ago I realized that there are a couple "villages" in Europe (mostly in/near Germany) with populations greater than ANY of our family-island settlements that have converted a significant majority of their residential homes to run entirely on wind and solar power. There's no good reason why we can't convert most of our settlements in a similar fashion, leaving only NP & GB to be a financial drain on BEC & GBP!

[Lurkey McLurker]

"...all existing large-scale energy technologies (from nuclear to coal, oil and gas) present substantial safety hazards."

1. LNG makes a much bigger boom.

2. I was told the LNG people wanted to build underwater pipe-lines from our waters to florida and possible also to Nassau and GB. I don't trust that. Maybe I was misinformed. Maybe not.

[Lurkey McLurker]

"A gas-based solution, on its own, does not provide a long-term path to a low-carbon future, but it can be part of a portfolio of options - including renewables - that will eventually get us there."

You know how these Red & Yellow idiots go. You know how the people they appoint go. You know how the top people at the various ministries & corportations (who've been running the show forever) go. You know how the general Bahamaian mind is operate!

Instead of realizing that this natural gas good news is just a LUCKY occurance that is giving us ONE LAST BREATH before we have no choice but to dive deep into seriously looking at renewables they will consider this as "problem solved", "disaster averted", "bullet dodged", "EVERYTHING IS BACK TO NORMAL", "go home, nothing to see here", "turn off your brains and clog up your ears".

"Renewable energy is no longer needed. It's irrelevant."

It's like, the global earthquake just hit. Everybody knows there might be a tsunami of spikes in the cost of energy. The Bahamain pitch up out his bed and say "Bey! Whas goin on!?!"
CNN Says "oh, that was just a lil quake. No tsunami warning."
The Bahamian politician says "Ok then. I gone back to bed."

This ain't the time for going back to sleep!

[Charles]

Why are we still talking about fossil fuels and natural gas...we should be exploring renewables....Solar panels, wind turbines and wave generators. We hsould also be encouraging residents to look at small turbines and solar panels to reduce household energy costs. Similar to how people in Nassau dig their own wells and install tanks and pumps...we need to do the same with energy and if households produce more energy than they need then being connected to the national grid BEC should buy that energy....This is happenning in alot of European countries and gathering momentum each month.

[Lil Tangerine]

Re: what Charles said

For quite a while now I've been looking for a simple small solar panel powered device that provides just enough energy to run _only_ my laptop, cable modem, wireless router, and monitor. Sure it may not seem like a lot but it's a start.

Unfortunately I still haven't found such a device that's compact, and user-friendly but I've seen videos on youtube of do-it-yourself-ers building solar panels almost from scratch just to power their ridiculously power hungry home entertainment systems or only their fridge & electric stove, or only their super bright lights around the perimeter of their property or only the signage on their storefront etc...

Hopefully as more simple, user friendly single-purpose solar/wind devices come on the market we'll be able to use them.

[amy core]

The energy article made no mention of solar power with which the Bahamas are generously endowed. What if new construction was required to install solar panels and subsidies be offered to existing buildings? What if cisterns were used to collect rain water from roof tops as is done in Bermuda?

[C.Lowe]

Solar power is incompatible with the Bahamian lifestyle, insofar as we save nothing nor do we invest in ourselves.
It is up front very expensive, and unless one is a lottery winner, conservative use would be the norm.
We are not conservative in any fashion.
If you look at fossil fuels as a storage method, as in stored energy,
nothing compares.
We are used to mindless consumption, in electric and everything.
Governments cannot plan beyond the next election.
How will they plan for this type of migration?
Cutting duty rates won't cut it.

[Frank from Maine]

As an occasional visitor I am dismayed that there is not very much usage of renewables. With ample solar and decent wind resources, the government should have a strategic vision by which increasing demand is met by (i) conservation and (ii) renewables. Natural gas is a wonderful alternative to oil but that is short/medium-term only.