At the invitation of the chairman of the U.S. Senate Committee on Energy and Natural Resources, Sen. Lisa Murkowski (R-AK), V.I. Water and Power Authority Executive Director Hugo Hodge Jr. appeared before the committee Tuesday to offer testimony on remote and isolated energy systems, including energy and infrastructure challenges and opportunities.
Hodge told the committee about WAPA’s challenges in being significantly dependent on fuel oil in generating electricity. He outlined initiatives now under way to bring about relief to the utility’s customers, according to a statement from WAPA.
“While the territory has received some relief in recent months due to the recent decline in oil prices, which has reduced the current electric rate to 32 cent per kilowatt hour for residential customers and 35 cents per kilowatt hour for commercial customers, analysts are divided on how long this respite from high fuel prices will last. One thing is certain, however; prices will elevate again and so the urgency remains the same,” Hodge told the committee.
He said that like most other islands in the Caribbean, the U.S. Virgin Islands has no conventional energy resources to meet its energy needs. “While U.S. mainland utilities can connect to grids to purchase power from other utilities, island utilities are small, isolated and are not interconnected to a grid comprised of other utilities. This is primarily due to their separation by water and the depth of the ocean floor, which makes interconnection via underwater electric cables technologically and economically unfeasible. As a result, island utilities have historically purchased small simple-cycle generating units that are oil-fueled,” Hodge said.
Hodge told the committee that since fuel prices began to skyrocket more than 10 years ago, WAPA has pursued every option to reduce the cost of electric services to the people of the Virgin Islands. “We have pursued alternative and renewable sources tirelessly for almost 10 years now, and tangible relief is finally on the horizon.”
WAPA could not, however, have made the advances that it has without a number of strategic public and private partnerships.
Hodge testified about the utility’s use of federal grants and loans and gave an overview of WAPA initiatives to reduce the cost of electricity in the territory.
For example, until October 2014, WAPA was completely dependent on fuel oil to produce power. Since that time, WAPA has placed on its grid approximately 8.2 megawatts of solar power through partnerships with Toshiba International Corp. and Mainstreet Power Company/Morgan Stanley. The result is that about 8 percent of WAPA’s peak demand generating capacity now comes from renewable resources.
The cost to the authority to purchase power from these sources is 15 cents and 17 cents per kilowatt hour respectively, according to Hodge.
In December of 2014, WAPA issued a request for proposals for six more megawatts of solar power on St. Croix and three more megawatts of power on St. Thomas. In January, WAPA signed contracts for the additional solar capacity for St. Croix, with St. Croix Solar and St. Croix Solar II. The purchase price is 13 cents per kilowatt hour.
This project is expected to be operational in 15 months, according to Hodge. As for the three megawatt solar facility for St. Thomas, WAPA has selected a bidder and contract negotiations are substantially completed. An executed power purchase agreement is anticipated in the upcoming months, the director said.
On another front, WAPA has entered into a contract with Tibbar Energy to design, construct and operate a king grass-fed anaerobic digester facility capable of producing up to seven megawatts of power. The plant is expected to be in commercial operation by December 2016, according to WAPA.
Hodge also testified about wind studies WAPA completed with the V.I. Energy Office, saying that since the studies were completed, WAPA is currently in negotiations with several qualified facilities proposing wind projects that were approved by the Public Services Commission.
According to Hodge, one of the pivotal actions taken by the V.I. government to aide WAPA was the passage of Act 7360, which increased the gasoline tax from 7 cents to 14 cents per gallon. The money will fund new power generating units and/or heat recovery steam generators.
Also Hodge said WAPA has partnered with the VITOL Group, a Swiss-based, Dutch-owned multinational energy and commodity trading company to supply lower cost and cleaner burning LPG (low pressure gas or propane) for power generation, with an expected 30 percent reduction in fuel costs. WAPA’s combustion turbines are now being converted to enable them to burn LPG and liquefied natural gas in addition to fuel oil.
In his testimony Tuesday, Hodge said the propane project has not been without its challenges, as there have been a number of unforeseen circumstances that have forced adjustments to the project completion schedules. “The obstacles include adverse weather conditions, undocumented soil conditions and underground obstacles, challenges in coordinating the conversion of the power plants to safely burn propane while simultaneously operating power generating facilities to meet daily electricity demand.”
But some progress is happening.
“I am pleased to report that the St. Croix power plant will be operating on LPG within the next 30 days. The St. Thomas project is, however, lagging behind. This is due to remaining work that is directly linked to the issuance of the U.S. Army Corps of Engineers Permit, which the island of St. Thomas has not yet received. The Corps of Engineers is doing its utmost to process the permit; however, its permitting staff is inundated with other requests," Hodge said.
Hodge was among representatives of Guam, Alaska and Hawaii outlining the challenges remote island electric system operators, such as WAPA, face in the generation of electricity. Also testifying before the committee was the assistant secretary of the Department of Interior for Insular Areas.