BASSETERRE St. Kitts, January 12th 2012 - Mayor of New York Bloomberg said of democratically elected ruling bodies ‘Do the bad things first’. The voter has a short memory, so if you wish to give yourself the best chance of re-election take, at the beginning of your term, the necessary measures. Those which your electorate may not like, such as an increase in taxation.
The Premier in his New Year’s message, after reciting a long list of his Administration’s achievements was guardedly but absolutely optimistic about the prospects for Nevis. The Leader of the Opposition in the Federal Parliament in his bulletin refers to the colossal mistakes and the failed policies of the past year. Somewhere between these two positions is the reality.
The Premier says ‘This Government will continue its efforts to bring Geothermal energy to this country. We have overcome many hurdles and we will succeed in the end’. One is reminded of the childhood rhyme ‘This year, next year, sometime, never’.
Brantley says ‘…the year 2011 saw the last rites being read for the much vaunted Geothermal project which was killed by mismangement and incompetence of the NRP regime’. Both cannot be right. Between April and August 2008 I wrote six articles about Geothermal energy on Nevis. I attempted to explain the science behind this source of energy in a simple way, and discussed the huge rewards that could accrue to Nevis through this medium, provided a fair arrangement was made with a bona fide (properly funded) Geothermal developer.
There is not now enough evidence for the ordinary citizen to be able to share the Premier’s optimism, and none to persuade him that, for certain, the project is dead, or moribund beyond the point of revival, Brantley’s claim. What really is the position? We need to know. The affair formed a part of the NRP 2011 election campaign and if we look back over the past four or so years we may recall at different times, statements, promises that next year the major drilling would start, or the plant would arrive. These promises were sometimes accompanied by information pertaining to the size of the plant in Mega Watts. Now we are told that the plant would not be new, but reconditioned. Over the period differing costs were given for the amount due to be spent on plant for the Nevis project. The conflicting statements were confusing, and left most of us wondering what the aim of the project was; just a plant for Nevis, or one for St. Kitts and Nevis, or what? In September 2007 Kerry Macdonald said ‘We believe that by mid 2008 the initial temporary power plant of 6 MW will be in operation’.
And early on I remember the Premier saying that Geothermal would cost Nevis nothing. WIP would fund all the development.
Then, at some time, we were told that Nevis would have to pay for electricity lines between the Geothermal plant and our power station, and last year, we were informed , unexpectedly, that Nevis would have to guarantee the loan which West Indies Power/Renova, the developer was to take out with the Export Import Bank of the US. This loan was to be for US$63 million, a sum totally beyond the present capacity of our much indebted island. Given the recent history of Government guarantees, that have gone wrong and been called in – St. Kitts with a guarantee to Italy over the hydrofoil purchase and Nevis with its guarantee to the Alaska based company having an interest in the Nevis Express Airline, it was disquieting to hear that this Nevis Administration was also going down that risky route.
Governments have no business committing taxpayers’ money in this way. Too many things can go wrong. Renova is supposedly well capitalized, even if WIP is not. It is for the entrepreneur to take the risk. They are the ones who are in control of that risk. We are not. There is no such thing as a risk free guarantee. If it was totally risk free it would not be a guarantee. However in this matter, it was IMF to the rescue. They have obliged Nevis in view of the Nation’s state of indebtedness to withdraw our guarantee. This leaves us wondering whether WIP/Renova is now able to obtain the necessary funds.
We were told that the US$63 million loan to WIP/Renova was US$55 million for an 8.5 MW plant plus drilling and US$8 million for electricity lines. It has been pointed out by others that this sum, in comparison to other projects, seems excessive. A usual method of comparison is dollars of capital expenditure required for each Kilo Watt of capacity. On the above figures it is to cost US$6,470 per KW of capacity. (For reconditioned, not new plant).
In the MIT led 2007 Survey called ‘The Future of Geothermal Energy’, they give the capital cost of a single flash plant, (the kind we are to have in Nevis) to lie within the range of US$1080 to US$1889 per KW capacity. When I first interviewed Kerry Macdonald of WIP in 2008 he said he hoped for a capital cost of US$1500 per KW of capacity. Also in the MIT Report, made by the top personnel in the field, and which can be considered the Bible of Geothermal information, we learn that in 2004 the average anticipated cost of a 1500 meter (4900 feet) Geothermal production well was US$2.3 million. Apparently Phase 1 in Nevis will have two production wells of 5000 feet each and one return or injection well of 6000 feet.
So we would expect the cost of our wells to be similar to the MIT given average. On these MIT figures, for the 3 Nevis wells at 2004 costs, it will be US$2.3 + 2.3 and 2.4 (for the 6000 feet well). TOTAL US$7.0 million. Allow a generous increase for 2012 of 50% to give a TOTAL of US$10.5 million. The plant itself of 8.5 MW, upon Kerry Macdonald’s 2008 hope of US$1500 per KW/US$1.5 million per MW would total US$12.75 million.
Increase that for 2012 to a round US$2 million per MW and you have a maximum cost of US$10.5 million for drilling, plus US$17 million for plant, making a total of US$27.5 million, exactly half of the $55 million being sought as a loan by WIP to put up a reconditioned 8.5 MW plant. Something wrong somewhere?
Minister Powell, having responsibility for Geothermal, said on March 19th 2010 that the NIA had granted an extension to WIP from late 2010 to June 2011 to get their finances in place.
And on March 22nd 2010 he said that the NIA had received assurances from WIP that all the funding required to set up the 10 MW plant had been secured and that they would be able to supply Nevis with the geothermal power which the NIA promised the people. He went on ‘That is not to say that we have not been listening to other people because we have had approaches from at least half a dozen potential investors who are prepared to step in to Geothermal in Nevis’.
My last Nevlec bill, excluding the standing charge, obliged me to pay the equivalent of 35.10 US cents per Kilo Watt hour. In Indonesia, where they are pursuing Geothermal energy vigorously, the Indonesian Government is to pay the developer 9.7 US cents per KW hour. In that country there is plenty of foreign interest by major, well funded companies.
At the beginning of this article, I suggested that Governments are better off doing the bad things early in their term. This Government has performed well in many areas. Production of Geothermal Energy through WIP is not one of them. It is time for a radical change. Of course difficulties were to be expected. It is a new investment for Nevis. The global recession has restricted the grant of loans. The Government would have had more support if it had been more open. It is to be assumed that the independent experts whose advice they have sought will have analyzed all WIP’s technical findings, and reported to Government exactly what the Nevis resource is, and the way it should be developed.
We want to believe in our Geothermal. Brantley’s defeatism about it is unappealing, but we cannot accept without evidence that the apparent present course with WIP is going to yield positive results. The people have withheld serious criticism of the non implementation of Geothermal and unsupported expressions of optimism, but promises have currency only for a limited time. We need the Government to take us into its confidence, and give a full exposé of the last four years of Geothermal progress. Except in matters of National Security, no harm comes to the people by telling them fully what is going on. Lack of openness and transparency produces frustration and annoyance in the minds of the voters. The Administration should also remember that unreal expectations produce irrational discontent.
Syndicated Columnist
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