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Dash for gas could deliver cheaper energy
The shale gas revolution in the US promises cheaper fuel for Latin America – but it should only be a part of a long list of power sources
The shale gas revolution in the United States could have a profound impact on Central America and Caribbean by enabling countries to access cheaper sources of energy, experts have said.
The United States is in the process of converting ports along its southern coast in order to export liquefied natural gas (LNG). The estimated cost for LNG would be under $10/million BTUs (British thermal units), which is high but still much lower than the current $17 paid for fuel oil used by thermal plants in Central America and the Caribbean.
The two regions have been looking at alternatives to fuel oil, with a major push for geothermal, solar and wind projects, in addition to traditional hydroelectric power, but LNG is being considered in the mix and even some of the countries with the greenest energy matrixes are considering LNG as an option to guarantee supply.
Teofilo de la Torre, of Costa Rica ICE Group, said that his country was looking at the possibility of LNG not only to replace the 10% of energy currently produced by thermal plants but even upping the capacity for thermal generation. Costa Rica produces 90% of its electricity with either hydroelectric or other renewable sources.
“We are studying the possibility of using LNG to replace fuel oil. It is important to take advantage of our capacity for electricity generation with renewables, but we can complement this with LNG,” he said at an energy panel during the Mesoamerica Business Forum on the sidelines of the IDB’s annual meeting in Panama.
Sector operators and analysts say that while LNG was an option, it should only be considered as part of a long list of power sources.
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The issue for many countries is the cost and how to finance LNG or alternative electricity projects that would reduce dependency on fuel oils.
Construction of a 300MW combined cycle thermal generating plant using natural gas would cost around $300 million. Another $300 million at least would be required to build a terminal to receive and re-gasify LNG. It would cost around the same to install a wind farm with a similar generating capacity, but that would be the final cost. The trade-off is that wind power is not as reliable as thermal generation and requires countries to have higher electricity reserve levels when wind farms are not producing.
Joydeep Mukherji, managing director of sovereign ratings at Standard & Poor’s, said countries throughout the Caribbean were talking about natural gas and alternative renewable sources, but the problem was the cost. “Jamaica has been discussing a switch from expensive fuel oil, but when a country is already close to default, getting it off the ground will be hard because of the larger economic issues,” he said.
- Like every year, Emerging Markets daily newspaper covers the Inter-American Development Bank’s annual meeting, held in Panama in mid-March. Pick up your copy at the meeting, read the news on our website and follow us on twitter @emrgingmarkets
