Key Market – Cayman Islands

With LPG infrastructure and storage already in place, LPG is well-placed to displace much of the power generation capacity which is currently met by diesel

 

Headlines on the outlook for LPG Power Generation in the Cayman Islands:

  • There could be a good opportunity for LPG to replace much of the island’s diesel generation in the short term, if it can prove itself economically against LNG.
  • The lack of action on renewables and interest in transitional fuels could work in LPG’s favour.
  • There is already extensive LPG import and storage infrastructure in the country.

Below, we discuss the key factors that influence the outlook for LPG Power Generation in the Cayman Islands in more detail.

Energy prices – Reliance on diesel results in a volatile fuel price that LPG could take advantage of

Electricity for all power requirements in Cayman is provided by Caribbean Utilities Co.Ltd. (CUC), which operates under a licence from the Cayman Islands Government. Diesel, imported from refineries in the Caribbean and Gulf of Mexico, is relied upon heavily for generation, which makes the price of electricity higher than the global average. Reliance of CUC’s power generation on diesel fuel means that it is heavily subject to the volatility of the global oil market, with prices for diesel often changing quickly. The price for LPG on the island is already much lower than diesel and could decrease further due to relative newcomer Clean Gas Ltd breaking the almost 50 year-long monopoly by Home Gas on propane supplies on the islands.

Electricity & natural gas grid infrastructure – Strong push for LNG, but LPG could win the economic argument

The CUC’s power system comprises of 20 generating units (17 diesel generators, two gas turbines and one steam turbine) with a combined capacity of ~161 MW. In addition, the company has 4 x 1.5 MWe mobile generator units. Diesel fuel is transferred by pipeline from suppliers’ tanker terminals to CUC’s central power plant and storage facility on the outskirts of the capital, George Town (in the west of Grand Cayman).

Power supply lags demand. To correct for this, and to meet new demand, the CUC expects to need ~60 MWe of additional power capacity within the next 30 years. The CUC has indicated it aims to move away from diesel generation to cut the country’s carbon emissions (58% of which come from its diesel generators), seemingly towards (at least in the short term) LNG; the utility is working hard to establish a large LNG storage facility on Grand Cayman. However, several things may hinder this. One is the lack of space for a large LNG facility. A second is that, since the CUC can shift the cost of infrastructure upgrades onto end-user bills, converting existing infrastructure to LNG as well as building large new storage facilities is likely to hit consumer bills hard. Since there already exists LPG storage infrastructure (see section below), it is likely that converting to propane may be more affordable and quicker.

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Policy & regulatory framework– Renewable aspirations but lack of concrete action may signal opportunity for LPG

 

The government’s long-term goal is to accelerate the penetration of renewables in the generation mix from 0.9% currently to 70% by 2037, most of which will come from utility-scale solar PV (62%). Over the same period, it forecasts that ~11 MWe of additional ‘reliable transitional’ capacity will also be needed to maintain a reliable reserve margin.

Whilst this is the stated aim, progress towards this has so far been slow. The only large scale renewable development so far is a 5 MWe solar farm on the east of the island, due to be completed late 2017, which has been plagued with setbacks and rocketing costs. Analyses have cast doubt on the viability of the overall renewables goal due to the availability of acreage for renewable generation development. Some of this pessimism has perhaps filtered through to government – which in 2012 tried to finalise a more conservative renewable penetration target of 13.5% by 2030, and failed. The unwillingness of the Cayman government to show with action that they are fully committed to solar may provide an opportunity for LPG to convince the CUC that it is (at least in the short term) a better alternative to meet the gas in electricity generation capacity.

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Current LPG activities & deployment – Lots of existing LPG availability and storage facilities

 

There are two propane suppliers in Cayman; the incumbent, Home Gas, and the younger Clean Gas Ltd. Propane gas is supplied via the US, to the extensive existing storage operations of both companies on Grand Cayman, plus satellite branches on Cayman Brac. Whilst currently most of this propane gas is used for cooking in homes and for other gas-operated appliances like water heaters and clothes dryers, the companies have capacity to feed storage for the CUC for power generation.

Current diesel-based generation is supplied mainly by the engine developers MAN and BWSC. The two companies have been strategic partners with the CUC since 1998 and have designed and installed multiple diesel generating units on a turn-key basis (seven MAN engines provide nearly 90 MWe of the country’s power).