Climate scientists were surprised to discover that U.S. carbon dioxide (CO2) emissions recently decreased to levels not seen since 1992. While renewable energy has no doubt contributed to this recent trend, it is clear that the “shale gas revolution” and the recent U.S. transition away from coal and toward natural gas generation has had a very large impact on this encouraging trend.
One region where interest in natural gas has grown recently is the Caribbean. Trinidad and Tobago is already a global supplier of liquefied natural gas (LNG), the Dominican Republic and Puerto Rico are LNG importers, and nations like Haiti and Jamaica are considering building LNG import terminals of their own. LNG—the liquid form of natural gas that has one-six hundredth the volume per unit of energy of naturally occurring natural gas—is the form in which gas is typically shipped overseas. LNG imports are gaining traction in the Caribbean region, where tanker ships offload the fuel to be re-gasified and used to fuel natural gas power plants.
As seen in the United States, natural gas can play a significant role in mitigating greenhouse gas emissions and climate change. Moreover, at least in the United States, a shale gas boom has led to very low natural gas prices, making it cost competitive with almost any other source of power generation. However, it is unclear whether such benefits would translate to small island nations. The question that begs analysis is whether or not natural gas—in the form of imported LNG—is appropriate for small countries like those in the Caribbean region.
One just has to compare the standard size of LNG infrastructure to the power demand in Caribbean countries to get a sense of where natural gas may or may not be appropriate. The industry standard for the capacity of LNG tankers is between 135,000 and 250,000 cubic meters, and any tankers smaller than that are in the infancy of their development and lack credible cost estimates.
The Dominican Republic has an LNG terminal that can hold 160,000 cubic meters of LNG, and the country imports 120,000 cubic meters of LNG once every four weeks, which is enough to keep its three natural gas power plants, with a combined capacity of 555 megawatts (MW), fully operational as the country’s primary source of baseload power. Even though the Dominican Republic’s LNG supply is on the very low end of the industry standard range, it still manages to fuel greater than 4,000 gigawatt-hours (GWh) of power generation per year, or around 30 percent of the country’s total.
In a country like Haiti, where power demand remains relatively low, the over-development of an expensive infrastructure like LNG is a legitimate concern. Haiti’s state utility had an operating cost of just US$200 million in fiscal year 2010–11, while the financial cost for a receiving LNG terminal alone is estimated at between US$100 million and $2 billion. Haiti’s installed operating capacity is well under 300 MW, less than one-tenth of the Dominican Republic’s installed capacity of 3,200 MW.
In 2009, Haiti’s total electricity production was 721 GWh, and while it is unfortunately true that much of the population’s power demand goes unmet, the country’s 2009 unconstrained peak power demand was still estimated at just 226 MW. This means that if Haiti were to construct an LNG terminal with a similar size to the one in the Dominican Republic (a terminal built to receive LNG from some of the world’s smaller LNG tankers) it will have the capacity to hold enough fuel to produce more than five times as much power as Haiti produced in 2009.
LNG is simply too large of an infrastructure project for many smaller nations, at least if it is built at the scale that is economical and typical today. If small island nations were to commit to LNG, one terminal would likely be more than enough to fuel their entire power sector. While this may seem attractive at first, it is in reality a dangerous investment. A single terminal could potentially act as the choke point for an entire nation’s power needs. Especially in regions that are prone to natural disasters, it would be wiser to diversify power infrastructure investments.
The diversification of a country’s energy portfolio is not that far-fetched when it has rich solar and wind resources. Homogeneous energy portfolios increase a nation’s susceptibility to supply changes and price fluctuations, as well as increase its dependency on individual suppliers. Moreover, because natural gas, especially when it involves the construction of an LNG terminal, has such high upfront costs, it locks a country into a particular energy path for years in order to recoup those costs.
This is not to say that natural gas cannot play a role in smaller markets or countries; in fact, renewable energy sources and natural gas can complement each other well. Natural gas—a flexible fuel that can be controlled and dispatched quickly to follow varying loads—can be an ally of intermittent renewable energy sources like solar and wind, so long as it is not over-developed and does not crowd out other sources of power generation.
Despite its high upfront costs, it appears that many smaller nations are increasingly turning to natural gas for future power generation. While many renewable energy technologies also require relatively high upfront costs, projects are on a much smaller scale, allowing for countries to maintain diverse and non-centralized portfolios and increase their resiliency to economic and natural disasters. Therefore, it is important for Haiti and other smaller nations pursuing natural gas not to do it at the expense of renewable energy. In the end, an investment in renewable energy in addition to natural gas can lead to a more dynamic power system, giving a nation more flexibility to react to any changes in global politics, economics, or energy pricing in the future.
Matt Lucky is a Climate and Energy Research Associate at Worldwatch Institute.