Skeldon co-generation power project shelved
By Gitanjali Singh
Stabroek News
March 10, 2003
Guysuco has shelved its co-generation project to sell 12 megawatts of power to the national grid mainly as a result of its inability to reach a meaningful Power Purchase Agreement (PPA) with the Guyana Power and Light (GPL).
The corporation needed a PPA or a memorandum of understanding with GPL for it to move forward to secure financing and investors for the co-generation project. The project was for the production of 25 megawatts of power utilising bagasse, a by-product from Guysuco's operations. Guysuco would have purchased 12MW from that project along with steam for the new factory at Skeldon.
The timeline to resuscitate this project is very small and would require immediate action on the part of the government as Guysuco is set to award the contract for the procurement and construction of the factory at Skeldon, with its own boiler and power plant. This award is expected to take place before the end of April.
A Guysuco official said if the co-generation project was still on, a boiler and a power plant would not have been part of the Skeldon Factory project. This is because the co-generation project would have included a larger boiler and power plant to supply power as an independent power producer (IPP) to Guysuco and the national grid.
This investment would need to proceed in parallel with the Skeldon factory project because its manufacture and construction period was also two years. The project would need to be in place to supply power for the new Skeldon factory's start-up by the second crop of 2005.
Guysuco was hoping to secure around US$10M of the investment from the Global Environmental Facility or the Prototype Carbon Fund because the project would help in the global reduction of carbon dioxide emissions.
The official last week said at peak time, the project would have been able to release 15MW onto the national grid. GPL's fuel engines at Canefield have a capacity of no more than 11MW. This means the Guysuco project would have supplied the whole of Berbice with electricity. Sources have indicated that the transmission network in Berbice is much better than in the city and its environs and there would not have been many technical losses, thereby allowing for adequate power supply to consumers.
It was also revealed that the project could not attract a foreign investor into Guyana because the rate of return, arising from the feasibility study, was marginal and considered not sufficient. It is also perceived that the country risk is high and it would be hard to persuade investors to risk their funds. It is considered that a rate of return in excess of 20% on equity would be necessary. Hence, the input from the Global Environmental Facility and the Prototype Carbon Fund were considered crucial to improve the rate of return and get the project off the ground.
However, the project could not move to that stage because negotiations with GPL were dragging on. In other countries where co-generation has worked, the government has taken a lead role in ensuring a PPA is in place.
With the dynamics at the power company changing, the view is that there is a window of opportunity to have the co-generation project back on stream, but action in this regard would have to be in the very near future.
Guysuco had not calculated what it would cost to supply power to GPL but a benchmark world-standard figure is US 6.5 cents per kilowatt-hours.
Guysuco is a self-generator of its electricity and steam needs and operates at a level of efficiency that ensures that its internal demands are met. Seeking to have an investment in an IPP would lower the cost of sugar production.
The feasibility study on co-generation was completed in September 2001. The overall Skeldon project was re-launched in 2002 and is valued at US$110M of which US$78M is for the new factory and US$32M for the expansion of agricultural lands and infrastructure.
Construction of the Skeldon factory is to start by July of this year and is expected to become operational by the second crop of 2005. The factory to be installed would have a capacity of 8,400 tons per day.
