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Grenada 2011 Budget Statement- (Energy Development Excerpt)

Presented by
HON. V. NAZIM BURKE
Minister of Finance, Planning,
Economy, Energy and Cooperatives
to
The House of Representatives
January 14, 2011

5.5 ENERGY DEVELOPMENT
As the world begins to recover from the global recession of the last two years, the year has started with the price of oil

rising to a 26-month high of over US$92 dollars per barrel. This recent price hike is partly due to unusually cold weather

in the North but also in response to predicted increased demand from the manufacturing sectors in the USA and China.
Analysts predict that 2011 will see the price of oil rise over US$100 dollars per barrel.

Government remains convinced that the ultimate solution to the drain on our foreign reserves caused by the high costs of energy is to transition to a low carbon economy based on the use of indigenous sources of renewable energy and on the most effi cient use of energy.

A National Energy Policy has been completed to guide this transition to a low carbon economy. The policy is now before the Cabinet and is expected to be laid in Parliament by the second quarter of this year. The Government wishes to thank the Organisation of American States for its assistance in developing this important policy initiative, which sets the framework for sustainable and secure energy development and provides a detailed action plan to achieve a 30% reduction in greenhouse gas emissions from fossil fuel combustion by 2020.

This voluntary commitment provides Grenada with the moral authority to continue to play a lead role in the ongoing international climate change negotiations, the outcomes of which are vital to our very survival.

Let me now address our priorities for 2011.

Pursuing the potential discovery of geothermal energy and its exploitation is now the top priority for this Administration in the energy sector. The successful exploitation of this potential resource will dramatically reduce our dependence on imported fuels, provide long term energy security, reduce our greenhouse gas emissions and ultimately allow the

transport sector, which consumes the majority of fuel imports, to transition to electric vehicles and be powered by a clean electricity grid.

Last July, Cabinet appointed a Geothermal Energy Committee comprised of representatives of responsible Ministries and GRENLEC and has requested this committee to accomplish two major tasks:

1. To prepare drafting instructions for a Geothermal Resources Bill, which would, amongst other things:

a. Declare that the resource is the patrimony of the State.
b. Enable Grenada to grant exploration and production licenses;
c. Enable Grenada to charge Royalties and other Fees for the
extraction of the geothermal resource.

2. To negotiate an exclusive Resource License and Concession Agreement with GRENLEC, subject to approval by Cabinet. We have appointed a geothermal energy Project Manager to strengthen the Energy Division and to chair the Geothermal Energy Committee. The committee has been meeting. The Government wishes to expedite these negotiations, cognisant of the need to make planning decisions on future generating capacity. Government is committed to facilitating the private sector investment required to have a 20 megawatt geothermal plant operational, as Phase 1, by the end of 2013.

We are working closely with the Office of the Attorney General to draft a Geothermal Bill to ensure all investments proceed within a sound legal framework.

Government will also seek funding through the fifth cycle of the Global Environmental Facility (using the flexibility mechanism under the new System for Transparent Allocation of Resources) to help defray the costs of the risky exploratory drilling phase and to allow for an equitable licensing agreement to explore for and use national geothermal resources.

This, Mr. Speaker, leads me to another priority of our administration, which is to secure grant funding and concessionary loans for renewable energy and energy efficiency projects. During the recent Climate Change Negotiations in Cancun, our Prime Minister, on behalf of AOSIS, signed a Memorandum of Understanding, along with representatives of the World Bank, UNDP and the Danish Government for the sensationalistic of a new fi nancial mechanism called
SIDS Dock in 2011. SIDS Dock is targeted at facilitating sustainable energy projects in small island developing states.

The Danish government will kindly provide an initial capitalisation of this mechanism of US$14.5 million and Grenada has already submitted a US$1.0 million dollar proposal for funding of its geothermal programme I am also pleased to report that we have been successful in securing 2.5 million Euros (EC$ 8.9 million) in grant funding, under the ACP-EU Energy

Facility, to partially finance the purchase and installation of wind turbines to provide up to 1.9 megawatts of electricity generating capacity and displace up to 68% of the diesel currently used to generate electricity in Carriacou.

The people of Carriacou will benefit from stable electricity prices in the future and will also benefit from being able to market Carriacou as a green and eco-friendly destination. A potential co-benefit of the wind project may be the generation of desalinated water and the production of ice for the fishing communities on our sister islands.

We wish to commend GRENLEC for their assistance in putting together the proposal to the EU and we look forward to the implementation of this  project over the next 15 months. This is a good example of public-private partnership. Government, in association with the Windward Island Research Education Foundation of St. George’s University, as part of a joint-venture entitled the Renewable Energy and Energy Efficiency (REEF) Initiative, is also in the final stages of submitting a proposal to the GEF (under the GEF 4) for US$1.1 million for energy interventions in the building sector.

The buildings sector is responsible for over 90% of all of the electricity consumed in Grenada. Under this regionalproject, if approved by the GEF, energy efficiency standards (as promised in my 2010 budget) will be promulgated for refrigeration, lighting, air conditioning, standby plug loads and other major users of electrical energy within buildings.

Part of the grant funds will also be used to create a soft loan mechanism, which will be administered by a local financial institution. Loans will be made available, under very concessionary terms, to householders and businesses wishing to purchase and install solar photovoltaic systems and energy efficiency devices. Through this innovative financial mechanism, our Administration hopes to increase market penetration of solar PV from the current 0.3% to 10% by 2020, in line with the targets set in the National Energy Policy.

Government will formalize a long-term interconnection policy or what is referred to as a Feed-in-Tariff with GRENLEC to provide confidence to purchasers of PV systems and other renewable energy technologies. Under the energy efficiency component of the proposed GEF 4 project, we also hope to conduct a pre-feasibility study on the use of cold seawater to air condition the True Blue Campus of SGU and perhaps the Maurice Bishop International Airport as well. This single project, if proven feasible, has the potential to reduce national energy consumption by 5%.

Another exciting project is the conversion of solid waste to energy either in the form of electricity or an alternative fuel. Last year, my Ministry drafted a terms of reference for a waste to energy project and later this month,
officials from my Ministry and the Grenada Solid Waste Management Authority will meet with interested representatives of the private sector  to explore the technical and commercial feasibility of such a project. It is noted that the National Energy Policy calls for a waste-to-energy facility to be operational by 2016. We hope to achieve this target even sooner.
Mr. Speaker, Government wishes to see the electricity sector regulated by a competent and independent regulatory authority. Grenada and at least one other country have approached the World Bank for funding to operationalise the Eastern Caribbean Energy Regulatory Authority or ECERA.

Mr. Speaker, the final energy issue, I wish to address, is the Offshore Hydrocarbon Programme. As you are aware, Grenada settled its Maritime Boundary with Trinidad and Tobago last year. In 2010, Government again received a favourable decision from the International Center for the Settlement of Investment Disputes (ICSID) against a fresh legal action brought by RSM (Grynberg). Detailed terms of reference for consultancy services to take the offshore
oil and gas programme forward have been prepared and grant funding is being sought from the OPEC Fund for International Development. Part of the work programme, in particular the gathering of up to date seismic data, is conditional upon clarifying some contractual issues with the Russian group – GPG.

Our Administration intends to press ahead with the legislative component and pilot a new Offshore Petroleum Bill, a Petroleum Fiscal Bill and Regulations in 2011. We are committed to expeditiously remove all legal obstacles to our hydrocarbon exploration and exploitation programme.



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