If we are to believe everything we read in the papers, we’re on the cusp of a wave of geothermal development across the Caribbean. But from Nevis to Dominica, we’ve seen the headlines before. What, if anything, is different this time around?
Money and people certainly seem to be showing up at the right time. Geothermal industry stalwarts such as Ormat and Reykjavik Geothermal are prowling the region. Meanwhile the multilaterals – from the Caribbean Development Bank (CDB) and the Inter-American Development Bank (IDB) to The World Bank – are falling over themselves to support geothermal development.
If a project is actually to move forward, however, assuming a committed developer and a supportive government, it requires three things: capital, a proven resource, and capacity. Call it a three legged stool. We profiled the progress made by St. Vincent and the Grenadines in a previous article, but which – if any – of the other islands in the region have projects with legs to stand on?
Dominica Hunting for Last Piece of the Puzzle
Though Dominica has a confirmed resource in the neighborhood of 65 MW, it has struggled to lock in a developer. Sources suggest that Emera Caribbean, who own a controlling interest in Domlec – the island utility – have indicated their interest in the project; notwithstanding, Prime Minister Roosevelt Skerrit’s recent plea for private sector investment in its geothermal project suggests a level of concern around Dominica’s ongoing efforts to identify a developer – and then come to terms. Meanwhile the World Bank, with its funding package of up to US$50m, remains at the table. Until the government can successfully convince a private partner of the project’s commercial viability, that funding package may remain on the table for some time yet.
St. Kitts, Nevis – or Both?
St. Kitts, with developer Teranov, is conducting the second phase of surface exploration. Results, which are said to be inconclusive but promising, will be released in September 2016. Meanwhile Nevis received technical assistance from the U.S. Department of State’s Bureau of Energy Resources to issue a competitive tender, out of which developer Nevis Renewable Energy International (NREI) emerged. The signing of a 7.5-9 MW PPA with utility Nevlec marked the first PPA for a geothermal project in the region for over a decade.
To complicate the matter, however, Nevis’ baseload capacity is somewhere between 5 and 6 MW and the 7.5-9 MW PPA leaves minds to wonder about the economics of the project, though plans for a load-following geothermal technology and government energy growth projections could put NREI in a much better position to make a decent ROI than some have speculated.
Firm plans for the oft-discussed interconnection between St. Kitts and Nevis are yet to materialize. This, explains Teranov President Jacques Chouraki, makes sense: “It’s important to first establish a resource before discussing exporting power”. He continues, “We believe there is a need for a plant on each island.” Deputy Premier of Nevis, Mark Brantley, suggests prospects are good either way. “If St. Kitts has geothermal it will complement what we are doing on Nevis, and if they don’t we can still supply them. It provides an opportunity to maximize our resources – we are one country after all.”
“The reservoir has the capability to supply St. Kitts, and we can put the interconnection line into the price structure we’ve created.” – Bruce Cutright, President, NREI.
NREI President, Bruce Cutright believes there is still an opportunity to export, whether to Nevis or beyond to neighboring islands. “The simplest thing for St. Kitts would be to connect into Nevis. The reservoir has the capability to supply St. Kitts, and we can put the interconnection line into the price structure we’ve created.” A U.S. State department official said they “will be supporting an integrative energy planning process between the two islands and will soon have consultants working on the process”. For the time-being it’s still a waiting game for both St. Kitts and for Nevis.
St. Lucia Finds Fertile Ground Outside UNESCO Heritage Site
In St. Lucia, recent off-the-record discussions with the Government suggest a new-found optimism after surface exploration discovered potential for geothermal outside of the originally proposed location within a UNESCO World Heritage site. Although the extent of the resource remains unconfirmed, the St. Lucian government is well-regarded amongst both the multilaterals and the private sector and they have succeeded in attracting a pool of talent – Ormat, the Clinton Climate Initiative and the Government of New Zealand have all been associated with the project – to the table. Discussions are also said to be ongoing with the national utility, Lucelec, towards agreement on a term sheet. Although it’s too early to put out the bunting, there is reason to believe that St. Lucia is getting its ducks in a row.
Grenada Ready to Bite the Geothermal Bullet?
Grenada has made noises about exploring its geothermal resource but is in the early stages of assessing its potential. According to Robert Blenker CEO of WRB Energy, the majority shareholder of the island utility, Grenlec, “we remain strongly interested in developing geothermal and have worked with previous government administrations to assess the resource and to develop the appropriate regulatory and legal framework.” He continues, however, “we would be the first to admit that progress hasn’t been as swift as we would have wished.” The government is currently coordinating with the international community, including the New Zealanders, to explore a roadmap to future development.
Montserrat – Is Scale the Issue?
Montserrat, a British Overseas Territory, receives economic support from the Department for International Development (DFID) so financing has been a non-issue up to this point. The resource, though small at 2.3 MW, is proven and drilling for a third well is underway, and baseload capacity is 2 MW, so they are on target. They’ve had difficulty, however, attracting a developer, according to Martin Dawson DFID Resident Representative. “We’ve had discussions with the private sector, but because of the size of the resource it isn’t as appealing as it may be in some other islands.” When that developer shows up DFID has indicated that “there may be opportunities (for the project) to be privately financed or a public private partnership. All options are on the table for moving to the next stage while ensuring the government of Montserrat isn’t put into any risk of debt.”
“We’ve had discussions with the private sector, but because of the size of the resource (in Montserrat) it isn’t as appealing as it may be in some other islands.” – Martin Dawson, Resident Representative, DFID
Guadeloupe at the Vanguard – Again
Finally, in Guadeloupe, the only Caribbean island with an operating geothermal plant, Ormat just purchased a majority stake and plans to increase its output from 15 MW to 45 MW by 2021.
Fair to say, then, that with the exception of Guadeloupe, we’ve heard it all before. Or have we? Measure progress in megawatts and the region comes up short; dig a little deeper, however, and it’s fairly clear that the landscape has changed. It’s no longer about the how; it’s about the when and the endgame. And the endgame for most of these jurisdictions will not be the resource; it’s clearly abundant; nor will it be the availability of multilateral capital to support the many phases of a geothermal project; that, too, is abundant. Instead, for most of the region’s islands, the challenge is to identify a private sector partner and to demonstrate that geothermal in the Caribbean is commercially viable and worth the operational headache that comes with developing a project on an island. Developers looking at long-term PPAs are also going to want to know that their off-takers are financially secure and that sovereign risk is a non-issue.
We choose to be optimistic. Governments and utilities are increasingly geothermal savvy. Drilling rigs which once would have been bound for oil fields are now, in many cases, lying dormant and available on favorable economic terms to seek out geothermal. Well respected industry players such as Ormat and Reykjavik Geothermal have been hovering around the region and seem prepared to play the waiting game. Ormat has already, in Guadeloupe, upped the ante. Show them, and others, a route to economies of scale in the region – and the potential for increased ROI – and we may really be off to the races.