Baseload, Geothermal, Solar

Montserrat – A Geothermal Economic Exclusion Zone?

Issue 10 and Volume 19.

The island of Montserrat is a small British Overseas Territory located west of Antigua and north of Guadeloupe. It was devastated by Hurricane Hugo in 1989 and then by volcanic eruptions in 1995 and 1997 when the entire south end of the island, including its capital city Plymouth, were completely buried in pyroclastic ash. This area, referred to as the “exclusion zone” remains off limits to anything but escorted access. Although there is a permanent scientific observatory manned by some of the world’s leading volcanologists, the Soufriere Hills volcano, though still active in geological terms, does not present a threat to the remaining population.

Drilling rig in Montserrat. Credit: Government of Montserrat.

The population at the time of the volcanic activity was about 13,000 and is now less than 4,800 as many of the displaced inhabitants migrated to the UK or the U.S. since the eruptions. The UK government under DFID (Department for International Development) has attempted to put the island back on its feet and has spent more than £400M in the process over the last 20 years. The Montserrat government still relies on its annual stipend of about £20M from the UK to finance its public sector operations and limited capital budget, but the island’s economic growth has remained stagnant. It is still without an adequate port, hospital, or modern electrical generating station. It will be many years before it can be self supporting again, if ever.

The island’s utility, Montserrat Utilities Limited (MUL), a government controlled statutory body, relies on several high-speed gas powered generators housed in transport trucks (which would normally be used as back-up generators) to power the entire island. There is a new medium-speed diesel generating station under construction which should be operating by the end 2016. Although peak demand is only 2.2 MW for the entire island, it continues to experience power outages and distribution breakdowns due to the aging infrastructure. Electricity rates in Montserrat are some of the highest in the world, which, when combined with fuel tariffs equals about US $0.52/kWh.

The opportunities for solar and geothermal for the country are considerable. DFID is in the process of building a 3.3-MW geothermal plant, but due to budgetary limitations impacting both its procurement process and supplier quality, it has taken four years for the initial source well drilling and the project won’t be online until about the year 2023.

Independent residential solar electricity generation is just starting to gain traction, but the government charges severe duties and taxes on imported solar equipment at the port, which is having a detrimental effect on uptake. These penalties seem to be in direct conflict to the government’s declaration that it would like to make the island 100 percent renewable by 2020. Hopefully the government will soon implement its updated and recently released energy policy, and eliminate penalties to support small investors looking to convert to renewable energy generation.

Opportunity for Energy Export

One significant opportunity for Montserrat exists in geothermal energy export. While local demand may currently be limited, within 150 miles from the island sits the larger islands of Martinique, Dominica, Guadeloupe, Antigua, St. Kitts and Nevis, and others. Together they represent a demand of more than 200 MW. In addition, they are hungry for cheaper energy. Current data indicates that the Montserrat volcano could supply this amount through advances in directional drilling and generating technologies. These islands are all within commercially viable distance to supply through underwater cabling.

Unfortunately the recently elected PDM government of Montserrat (2014), who is responsible for these decisions, has seemingly closed the door on public-private partnership options on a number of needed infrastructure projects. It has publicly stated that there is limited interest in exploring the potential of geothermal export project.

The Minister of Energy is focused on the development of small-scale solar and insists that his government will secure direct construction funding from various public agencies, either from the UK or the EU, however the recent Brexit decision may impact these funding sources.

If Montserrat would reconsider a progressive change to its current investment policy that reflects the intent of its updated energy policy, and begin to consider private sector partnership, it could lead to a number of downstream benefits fairly quickly. A new industry in geothermal generation would be established that would create large-scale economic growth for this small island, present higher skilled jobs for locals (and its talented diaspora who may want to return), and potentially attract additional high energy use companies to the island.

Volcano on the island of Montserrat. Credit: Ralph Birkhoff.

Montserrat would be the first Caribbean island nation to claim 100 percent renewable energy production, and one of only a handful around the world. Most importantly, its local population would enjoy significantly reduced electricity charges, which would produce increased and much needed spending power in other areas of the economy, and in turn provide the opportunity for this country to take care of itself again.

Ralph Birkhoff is Director of Business Development for Alquimi Renewables, a US/Caribbean based project development and finance/technology facilitator in the renewable energy sector.