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An Economic Argument for Renewable Energy Adoption to Help the Trinidad and Tobago Energy Sector

“In God we trust, all others must bring data” - W. Edward Deming


I was asked to develop a presentation on why we need to care about Climate Change and why there is a need for us to focus on this in the business sector of Trinidad and Tobago. The easiest approach and maybe the most responsible one is to appeal to the “better angels of our nature Abraham Lincoln's first inaugural address, March 4, 1861 [1]. This is the appeal to our humanity and doing the best for ourselves and our future children. Climate Change has been devastating to many countries in the developed and developing world e.g. the bush fires in Australia, fires in California, flooding in the mid-West United States and the occurrence of multiple Category 5 hurricanes in the Caribbean. My work began this way, but very quickly I pivoted to looking at economic data locally and internationally. An analysis of the Energy landscape in Trinidad and Tobago shows clear signs of an economic case for the adoption of Renewable Energy. This needs to be done as soon as possible based on the trends that we are seeing in the local economy, the global economy and in the Global Environment


1.0 1st Data Set- Natural Gas Production (the Supply Side of the equation)


Figure 1 below is the result of a study conducted by Rysad Energy. “Falling of Mt Trinidad” was the front-page headline in the magazine from the Energy Chamber in Trinidad and Tobago in March. Reference was made to Rystad Energy’s outlook for the gas production forecast for Trinidad Solbraekke (2017)[2]. It shows that gas production would continue to fall at a rate of 13% annually from 2019 unless new development is decided upon urgently.



Figure 1- Falling of Mt Trinidad. Solbraekke (2017)


This data shows clearly that there is a need to expand Natural Gas production and that the decline of Natural Gas is going to continue rapidly. This is not the only challenge that exists within the Natural Gas value chain. See figure 2 below:

pic 2



Figure 2- Natural gas production vs Henry Hub prices. Central Bank (2020)


The data above from the Central Bank of Trinidad and Tobago reflects the study done by Rystad. We have seen a slight uptick in gas production with the commissioning of the Juniper platform by BP which helps the production shortfall issue, but it is still not significant enough Natural Gas production needed to supply domestic contractual needs and the power sector (we need 4.0 Billion cubic feet per day but we are producing about 3.4 billion cubic feet per day with a decline production rate from older existing wells of about 14%). Even if we take the most optimistic position that there is Natural Gas offshore to be discovered, the other factor that must be weighed is the price. The gas that is known to be available is in deep water which is significantly more expensive to drill. This increase in the cost of drilling with a significant fall in the price of gas on the international market see (figure 2) paints a bleak picture. One of the strategies that can be used to reduce our dependence on Natural Gas, and help with the transition, is the use of Renewable Energy Technology (Wind, Solar, Utility-scale batteries and behind the meter battery systems for homes). We can use our dwindling reserves for export and Petrochemical processing. Another technology that can be developed for commercial use is Carbon Capture and Utilization technology with can capture CO2 being emitted from Point Lisas industries and Atlantic LNG and manufacture Aviation Gas, Gasoline, Methanol, and Ethanol, essentially making the local industry carbon neutral. This is a tall order and requires a lot of capital investment. The question is, when is it the right time to change? Do we wait until we are forced to change? Wouldn’t the economic fallout be damaging to us all?


1.0 2ndData Set- Natural Gas Markets (Is supply growing faster than demand?)

Another set of data that is important to take sight of is the volume of Natural gas that is being put into the global market. The United States Shale revolution has been a significant change to the Oil markets (see Figure 3.). US export of crude oil is expected to catch up to Russia and Saudi Arabia.




Figure 3- US Export of Crude oil 2012- 2024. IEA (2019)


Notwithstanding the successful development of Oil Markets in the US, it is believed that the real crown jewel with the Shale revolution is the abundance of Natural Gas found (See Figure 4 below). The United States represented a major market player in LNG in terms of high demand for LNG (and other Petrochemical products) and they were at one time a major customer for our local industry. Now they are a major global supplier. In a few years, they will no longer purchasing LNG from the market as they will be self-sustaining. This will mean a reduction in global demand (see Figure 5). It must be noted that larger players in the industry on the demand side of the energy equation e.g. China, have been experiencing slower economic growth and demand for energy products, such as LNG, has decreased. Another possible disruptor here is the rise of Renewable Energy technology in the developed and developing world. Solar Energy is cost-competitive with Natural Gas power generation plants in most countries globally. This is another factor that can severely reduce the demand for LNG in the future.


Figure 4- Shale Gas production- EIA (2017)



Figure 5. Natural Gas production vs Consumption in the US. EIA (2017)


1.0 What do we do now?


There are a lot of signs that are pointing toward a needed change in our Energy policy in Trinidad and Tobago. On the supply side, more and more Natural Gas is being discovered and produced globally while at the same time, demand could be falling based on new players (the United States) and the slowing of economic growth for major economies with high energy demand (China). This is a complex topic and there is a lot more to discuss in the paper I am writing (this is a small sample of the data I have collected referenced here). In the meantime, I hope this sparks an internal dialogue. The golden age of Natural Gas in Trinidad and Tobago is over, and we need to change before it becomes even more painful to adjust.


These are some of the changes that we should be looking at critically in the next five years


1.1 The T&TEC act and the RIC act must be amended and updated to create a local Renewable Energy Market (Solar, Wind)

1.2 Demand Side Management of the Power market (increase electricity rates only during peak periods to force all energy users become more energy efficient

1.3 Implement the plan for ESCO’s. This is the framework for energy efficiency where tax breaks and capital can be allocated to companies (commercial and industrial) to invest in technology that makes their business, buildings and process plants more efficient

1.4 Conduct a feasibility study of establishing a new industry built around existing legacy industries of manufacturing industrial chemicals from CO2 (Carbon Capture and Utilization technology. See links below:

https://www.youtube.com/watch?v=Mb_8DJF6Hp0

https://www.youtube.com/watch?v=VHHz-AWwdvs

https://www.youtube.com/watch?v=wOEHIVxRMx0


I believe we can achieve this if we recognize the urgency and the opportunity that is in front of us.


Author

Brendon James,

BA Geography, MBA Occupational Health and Safety, MSc Process Safety Management, MBA Sustainable Energy Management

LinkedIn: https://www.linkedin.com/in/brendon-james-94332a18/

"I am a lover of Economics, Energy, Stoic Philosophy, Crix and Milo in that order."



References:


[1] Slagell, A. R. (1991). Anatomy of a masterpiece: A close textual analysis of Abraham Lincoln's second inaugural address. Communication Studies, 42(2), 155–171. Retrieved 1 26, 2020


[2] Solbraekke, K. (2017). The Falling of Mt Trinidad? Accessed January 25, 2020. https://www.rystadenergy.com/newsevents/news/press-releases/falling-of-mt-trinidad/

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