From Vision towards Bankable Renewable Energy Projects

St. Kitts and Nevis Example

IRENA-CARILEC Renewable Energy Forum

Bermuda

Sept 17, 2012

OAS: Background

The General Secretariat of the Organization of American States (GS/OAS) is the premier forum for multilateral dialogue and concerted action in Latin America and the Caribbean. GS/OAS serves 34 member states of the hemisphere Representative Offices in most of its member states Department of Sustainable Development
Energy and Climate Change Mitigation Section

ECPA Caribbean Initiative

Goals: I. Market conditioning: Promote sustainable energy policies II. Commercialization: Assist governments deploying and commercializing renewable energy projects III. Regional integration: Support dialogue to address long-term Caribbean energy security challenges and promoting regional integration

When is a project bankable?

Starts with recognizing that what is needed to make a renewable energy project bankable is challenging for both developers seeking funding and for financiers seeking a suitable investment.

Our role is assisting in bridging the gap between developer and financiers needs to make a renewable energy project bankable.

Market conditioning
RE resource assessment

Project ID / Technology Transfer

Project Financing

Project Execution (Build/Own/Operate)

What is the basic check-list for a bankable project?

Project objectives, design, scale, and conditions must be clearly defined and be able to fit within existing sectors/branches of interest;

A (pre-)feasibility assessment needs to be performed (developer/investor (Bank/FI);

Due diligence confirming technical and financial viability (public/industry (private)

Environmental and operational standards/protocols compliance (not only local laws but internationally accepted standards);

Be the least-cost solution after CBA/Life Cycle Costs analysis of project;

Investors Final spread sheet - All inputs needed to perform a comprehensive financial analysis (including O&M costs, energy price forecasts, expected savings, 5 etc.) have to be in place.

Case Study: Federation of St. Kitts and Nevis

SKN is the smallest OAS Member State

Federal Ministry of Public Utilities, Energy, Housing & Works

Item Land Area Value 269 km (total) 176 km (St Kitts) 93 km (Nevis) 42,000 (total) 30,000 (St Kitts) 12,000 (Nevis) 17 20 N, 62 45 W

Population
Geographic coordinates

Conditions in 2005

In summer of 2005 SKN started transition from agricultural based economy to a tourism industry Need to assess alternative uses of available land Economy needed to become diversified and more competitive and energy is a key ingredient in facilitating this transition

Energy Sector Conditions in 2005

No Energy Plan or Policy in place (2005); 100% dependent on imported fossil fuels for energy generation, transportation, and other uses; St. Kitts Electricity Department (Government Department) and NEVLEC (corporatized in 2000); Limited market size (ie. Electricity demand); Shift to tourism and banking in commercial sector (ie. high quality power requirements); Water sector created considerable demands for power sector; Considerable renewable energy natural resources.
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RE Development in SKN?
Technical Perspective

What is the current energy situation? What are the RE resource potentials?
What is the long term vision of SKN? Is there a strategy in place to achieve vision?

Political Perspective

Legislative Perspective

How conducive is the existing legal structure towards RE deployment?

Does SKN Govmnt have the required capacity to assess and close contractual RE Project deals?

Institutional Perspective

Project Development

Can RE projects be identified on the short/medium term to attract investors?

How can finance be secured for identified RE projects?

Financing

Qualitative RE resource and supply mix assessment (2005-2006)

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SKN Energy Outlook Scenarios (2006)

Peak Demand and Operational Capacity (MW)

50
40

solar
30 wind conventional low

20
10 0 2005

medium
high

2010 Year

2015

2020

50
Peak Demand and Operational Capacity (MW) 40 geothermal 30 20 10 0 2005 wind conventional low medium high

St. Kitts (2005-2020)

2010 Year

2015

2020

Nevis (2005-2020)

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Renewable Energy Resource Mapping (2005 2011)

Solar Irradiation (2010) Geothermal Potential (2005)

Bio-energy (2007)

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National Energy Outlook

70 Peak Demand and Operational Capacity (MW) 60 solar 50 geothermal

40

wind
conventional

30 low 20

medium
high

10

0 2005

2010 Year

2015

2020

St. Kitts and Nevis (2005-2020)

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National Energy Policy Development (2008 2011)

Federal Ministry of Public Utilities, Energy, Housing & Works

Ministry of Natural Resources and Environment - NIA

Vision Statement: The Federation of St. Kitts and Nevis wants to become a twin-island nation with a sustainable energy sector where reliable, renewable, clean and affordable energy services are provided to all its citizens.

SKN Policy Objectives

#1 Sector Management: Secure efficient and well-coordinated planning and institutional management to guarantee sustainable and transparent performance of supply, generation, distribution and end-use of energy #2 Diversify Energy Supply: Guarantee safe, reliable and affordable supplies of petroleum products and their efficient and clean handling while in parallel significantly increasing the deployment and utilization of renewable energy technologies in the Federation of St. Kitts and Nevis #3 Electricity Generation: Secure safe, efficient, reliable, affordable and environmentally friendly electricity generation and access by all consumers of St. Kitts and Nevis #4 Transportation: Efficient, environmentally clean and cost-effective transportation #5 Energy Use: Minimize energy input and achieve lowest possible energy intensity of economic services in all sectors of the society
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Wind - Nevis

RE Assessment (2005), wind measurements (2007/08)

National Commitments/Goals National Energy Policy (2011) Sustainable Energy Plan (ongoing) RE Policy RE Solicitations/Bidding (due diligence, 2007)

Utility/Developer Contractual Framework

IPP legislation (2008) Standardized PPA (2008) PPA negotiations (2009) Commissioned (Aug 2010)

Geothermal Development Pathway

St. Kitts and Nevis (2005-2020)

Geothermal Resource Nevis (2010) 17

Geothermal - Nevis
Geo assessments +20 studies and OAS (2005) National Commitments/Goals
National Energy Policy (2011) Sustainable Energy Plan (ongoing)

Technology Specific Legislation

i.e. Geothermal Resource Law (2008)

Utility/Developer Contractual Framework

IPP Geothermal Resource Contract (2008) Standardized PPA (2008) Pre-feasibility Interconnection N-SK (2008) Environmental Impact Assessment (2010) Interconnection Study Nevis-St. Kitts (Oct2012)

RE Development in SKN?
Targeted prefeasibility studies (Bio, Wind and Geo) Perform due diligence and Legal Assistance

General qualitative RE resource analysis

Prepare legal documentation

Facilitate negotiations with developers

Close /signing of a PPA/contract

Stakeholders Consultations

Data Collection Mission and Research

Initial Draft NEP

Stakeholders Review

First NEP Draft

Cabinet Consultation /approval of NEP

Quick Scan analysis of sector conditions

Capacity Building Assessment

MOU creation of Energy Department

Development and approval of TOR

Financing stationary/ office

Establishment of SKN Energy Department

2005

2006

2007

2008

2009

2010

Present

Is the Geo-Project in Nevis a bankable project?

Geothermal Resource in Nevis
Final spread sheet - All inputs needed to perform a comprehensive financial analysis (including O&M costs, energy price forecasts, expected savings, etc.) have to be in place.

Project objectives, design, scale, and conditions must be clearly defined and be able to fit within existing sectors/branches of interest;

A (pre-)feasibility assessment needs to be performed (developer/investor (Bank/FI);

Due diligence confirming technical and financial viability (public/industry (private) -> interconnection needed

Environmental and operational standards/protocols compliance (not only local laws but internationally accepted standards);

Be the least-cost solution after CBA/Life Cycle Costs analysis of project;

DONE

DONE

DONE

DONE

Electrical Interconnection Nevis St. Kitts

Project objectives, design, scale, and conditions must be clearly defined and be able to fit within existing sectors/branches of interest; Environmental and operational standards/protocols compliance (not only local laws but internationally accepted standards); Final spread sheet - All inputs needed to perform a comprehensive financial analysis (including O&M costs, energy price forecasts, expected savings, etc.) have to be in place.

A (pre-)feasibility assessment needs to be performed (developer/investor (Bank/FI);

Due diligence confirming technical and financial viability (public/industry (private)

Be the least-cost solution after CBA/Life Cycle Costs analysis of project;

DONE

Ongoing

Ongoing
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How have we been able to assist SKN?

Global Sustainable Energy Islands Initiative (GSEII), see: www.gseii.org

Eastern Caribbean Geothermal Project (GeoCaraib)

US-Brazil Biofuels Initiative

Caribbean Sustainable Energy Program (CSEP) and in 2010 with NREL under Low Carbon Communities in the Caribbean (LCCC) Energy and Climate Partnership of the Americas (ECPA), see: www.ecpamericas.org

2005

2006

2007

2008

2009

2010

Present 21

Lessons learned and recommendations

Country vision and commitment is critical

Need to focus multilateral assistance on capacity building for stats/data generation, gathering, analysis, monitoring and evaluation (compliance to NEP); Specific resource assessments (bio, wind, geothermal) are required for some islands for others not;

OAS Strength is Presence, Continued Engagement, Liaison, and Spokesperson

Synchronization among multilaterals, development entities, etc.

Island Communities are united but not uniform

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ing. Kevin de Cuba, MSc. Senior Energy Specialist kdecuba@oas.org

Energy and Climate Change Mitigation Department of Sustainable Development - DSD Executive Secretariat for Integral Development - SEDI Organization of American States 1889 F St. N.W. Washington, D.C. 20006, USA T. 202.458.6261 F. 202.458.3560 www.oas.org; www.oas.org/dsd www.sepa-americas.net www.ecpamericas.org
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OAS: Policy Organization and Development Strategy

St. Kitts Electricity Company (SKELEC) as per 2011 Capacity (MW) 3.6
3.6 3.5 4.4 4.4 7.9 6.1 33.5 Nevis Electricity Company (NEVLEC) as per 2011 Unit #2 Technology Blackstone

Unit #1 #2 #3 #4 #5 #6 #7 Total

Technology Mirrlees KV12 Mirrlees KV12 Mirrlees K8 Caterpillar 3616 (#1) Caterpillar 3616 (#2) Mirrlees 12MB430 Mirrlees 8MB430

Installation year 1971

1971
1987 1989 1995 1999 1999

Capacity (MW)
0.9 0.9 2 2.5 2.2 2.5 2.7

Installation year 1983

#3 #4
#7 #5

Blackstone Blackstone
EMD (GM) Blackstone

1985 1990
1992 1996

#6
#8 Total

Blackstone
Wartsila

1996
2003

13.7
WindWatt Ltd.

Unit
Maddens farm Total

Technology
Vergnet Wind Turbines (8x275kW)

Capacity (MW)

Installation year
2010

2.2
15.9

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OAS: Policy Organization and Development Strategy

St. Kitts
Wind Solar

Nevis
Wind Geothermal

Regional
RETs Fossil

fuels -

Installed Capacity (MW)

Average power output (MW) Short term (1-3 yrs) Sum additional average

5.4
2.3 12.3 2011 10.0 4.2 43.4 2014

2.2
0.9

10.0
9.0

capacity (MW) Timing Installed Capacity (MW) Average power output (MW) Medium term (3-10 yrs) Sum additional average

5.0 2.0

2010 10.0 4.2

2012 35.0 33.0

capacity (MW) Timing Long term (10-20 yrs) Installed Capacity (MW) Timing

2014

2015

2015 50.0 (20.0) 2021

-30.0 2021

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Geothermal Development Technical Assistance, Geo-Carabes (2005 ongoing)

I. Technical:

Assess the resource/technical potential for the several sites and electricity interconnection scenario = Reduce resource uncertainty and development risks

II. Policy/Legal:

Reform legal framework and Develop Local/Regional Capacity = Reduce contract/policy uncertainties, expedite licensing/permitting, and strengthen local inputs Prepare Geothermal Drilling Risk Fund = Reduce financial risks associated with initial commercial exploration
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III. Financial:

Pre-feasibility study electrical interconnection Nevis St. Kitts (2008)

Resources: >98% imported fossil fuels (1.1 MW wind in Nevis and 5 MW wind in planning for St. Kitts) and WTE. Electricity Price: >US$.40/MWh
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Geothermal: Opening doors for economic development

Development Opportunities: -Interconnection between St. Kitts and Nevis -Strengthen power grid = attract new investment (tourism, high tech, light to heavy industry/minerals) -Water processing (desalination) -Interconnection with Puerto Rico (and/or other islands)

World Bank Assessment: Energy Supply Interconnections and Regional Sources of Energy (2011)
Interconnections MW Energy Source
Geothermal Geothermal

Km

Viability (Nexant Analysis)

Nevis St. Kitts Nevis Puerto Rico

50 400

5 400

Highly economic Highly economic if displaced fuel is HFO Not economic if displaced fuel is LNG Only marginally economic even though it displaces distillate Highly economic if displaced fuel is distillate and St. Maarten can accept 100 MW Marginally economic if displaced fuel is pipeline gas More economic if displaced fuel is higher cost

Nevis US Virgin Islands Saba-St. Maarten

80 100

Geothermal Geothermal

320 60

Dominica - Martinique

100

Geothermal

70

Source: Garner and Hansen (2011)

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World Bank Assessment: Energy Supply Interconnections and Regional Sources of Energy (2011) - Cntd
Interconnection
Dominica - Guadeloupe

MW
100

Energy Source
Geothermal

Km
70

Viability (Nexant Analysis)

Moderately economic if displaced fuel is pipeline gas Highly economic if displaced fuel is HFO

US (Florida) - Cuba

400

Coal-fueled steam plant, gas fueled combined cycle

HFO

400

Highly economic if displaced fuel is HFO

Dominican Republic Haiti (Land Connection)

250

560

Not economic unless export is from lower cost unit/fuel combination

ECGP Tobago- BarbadosMartinique (St. Lucia) Guadeloupe

Up to 100 MMs cf/d

Natural gas

1000

Highly economic if displaces HFO and diesel

Source: Garner and Hansen (2011)

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Energy Supply Interconnections and Regional Sources of Energy (2011)

According to recent World Bank Study, Relying on diesel and HFO is the most costly solution There are multiple fuel and power supply options that offer cost-effective alternatives to the current situation, including, pipeline gas, shipped LNG, and renewables (geothermal, wind) interconnected via submarine cable Investment requirements are large but production costs saving are huge A variety of private, public and IFI support will be necessary Requires countries to improve legal, regulatory and institutional framework and cross-country cooperation
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(Pre)-feasibility studies of interconnections (2011 ongoing)

World Bank preliminary analysis of supply alternatives ECPA US State OAS/KEMA/NREL: pre-feasibility study of SKN Puerto Rico interconnection (Oct 2012) Other regional studies: -PR-USVI (US DOE/NREL) -PR-DR (World Bank) -Dominica-Martinique-Guadeloupe (EU/France)

Snapshots of Several Caribbean Interconnection Scenarios

Eastern Caribbean Gas Pipeline Proposed Route

(Source: Nexant Study/World Bank)

Dominica Interconnections

Puerto Rico and St. Kitts and Nevis US Virgin Islands Interconnections

Northern Ring Interconnections Alternative

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