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Ex-Manager Targeted 47% Bpl Generation Cost Slash

Bahamas Power & Light’s (BPL) former manager aimed to slash electricity generation costs by 47 per cent, while rejecting liquefied natural gas (LNG) as the best fuel option.

PowerSecure’s ‘business plan’ called for BPL to focus on heavy fuel oil (HFO) generation units that could be converted to LNG when the economics made sense, while ruling out both liquefied petroleum gas (LPG) and automotive diesel oil (ADO).

“The prospect of bringing LNG or LPG to the islands looks promising,” PowerSecure wrote. “However, current analysis indicates that pursuing those today may put BPL in the position of a loss leader, which is misaligned with the current financial situation.

“Therefore, the current plan is to procure HFO units that can be converted to LNG. This approach preserves the capital resources of BPL, and positions the Bahamas to be a leader in advancing cleaner and less costly energy as the market matures.”

The significance of PowerSecure’s BPL ‘business plan’ is that it seems to contradict the former Christie administration’s decision to seek out an LNG supply deal, complete with new power plants/generation units, with New Fortress Energy.

While the Minnis administration has elected not to pursue what the previous government left behind with New Fortress, the BPL ‘business plan’ clearly suggests that going ‘all-in’ with LNG is a step ahead of its time and not justified by the economics.

PowerSecure’s plan, had it been able to execute, was to operate BPL’s existing generation units as efficiently as possible and bring them “up to service standards” prior to it adding 140 Mega Watts (MW) of new capacity.

This would have reduced BPL’s heat rate by 10 per cent in the first instance, with a further 11.3 per cent drop predicted when the new generation came online. Reduced heat rates means less oil needed to generate electricity, saving Bahamian consumers millions of dollars in fuel costs.

“These two efforts limit the consumption of expensive ADO to less than 3 per cent, and reduce overall fuel consumption by more than 20 per cent by 2020, which is essential to achieving the performance goals of the managed services agreement,” PowerSecure wrote.

“The plan includes training, process design and improved resourcing to drive the recurring costs (including fuel) of the business down by approximately 47 per cent.”

PowerSecure said its analysis showed that BPL’s Clifton Pier and Blue Hills plants were operating at 65 per cent and 81 per cent capacity, respectively, giving New Providence an overall generation capacity of 74 per cent or less than three-quarters.

It blamed this on a lack of financing for maintenance and repairs, which had resulted in BPL having to increasingly rely on Blue Hills - which produced electricity at double the cost of Clifton - to meet base load demand, thereby raising energy costs unnecessarily for Bahamian businesses and households.

The increased reliance on Blue Hills for generation resulted in BPL paying 20 per cent more for its fuel during its 2014 financial year. “Operations using economic dispatch would have yielded a 2014 savings of over $47 million in fuel costs,” the business plan added.

“Improving reliability and lowering generation cost go hand in hand,” PowerSecure said. “The route to greater reliability leads to higher fuel savings, and the route to generation cost savings leads to a dual fuel strategy.

“The vicious cycle of deteriorating service levels must be broken. This is the first priority of the generation plan.” It described the five HFO units at Clifton as “the priority”, with the goal of increasing their output from a combined 87 MW to 108 MW - a 23 per cent increase.

“The higher service levels at Clifton Pier will shift 180,000 MWh (Mega Watt hours) if generation to Clifton Pier from Blue Hills,” PowerSecure added. “This creates a savings of more than $13 million per year.

“The operation of the five HFO units will also be improved by modern automated oil lubrication systems, bringing down lubrication oil cost by $6 million per year.”

Comments

Porcupine 1 year, 1 month ago

Perhaps the many persistent problems we have in this country are exemplified by the archaic thinking as in this situation. Does anyone reading this article actually think our rates will go down? Does anyone reading this article not make the connection between the burning of fossil fuels and the fact that most of The Bahamas will be underwater within our children's generation? Does anyone reading this article not see the connection between education and the future of humanity. Does The Bahamas pride itself in remaining an intellectual backwater?

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