GEBE’s tariff-structure hampers energy transition
PHILIPSBURG — The structure of the tariffs used by Utilities Company GEBE are a stumbling block on the road to energy transition, it appears from a report by TNO, the independent Dutch organization for scientific research.
Currently, GEBE charges a base tariff of 0.25 guilders ($0.13) and a variable component for the cost of fuel, the so-called fuel clause. This clause covers the cost of the fuel GEBE has to buy to power its diesel-generators and the base-tariff should cover the company’s operational costs – but it doesn’t.
TNO published its report entitled The energy transition of Aruba, Curacao and Sint Maarten on May 2 of this year, labeling it as “a roadmap for climate-neutral energy provision.”
DP-MP and President of Parliament Sarah Wescot-Williams has requested an urgent meeting of the parliamentary VROMI-committee to discuss the contents of the report and the availability of subsidies for St. Maarten through the SDE++-program. “The government needs to take a stance on this report and adjust our energy goals with haste,” she stated in a press release. “We do not need another study, as the expertise to get us there is available.”
The SDE-program offers subsidies for projects that aim to reduce CO2-emissions. Applications for a subsidy have to be submitted between September 5 and October 5. The Dutch government has made a budget of €11.5 billion ($12.5 billion) available for the program.
The TNO-report states that Aruba generates 20 percent of its electricity from renewable sources; in Curacao that percentage in 30 and in St. Maarten it is unknown but, according to the report, “very limited.”
The fossil installations of GEBE are outdated and cannot meet demand anymore, the report states. “Investment in new production capacity is very urgent.”
According to the TNO-researchers solar energy is the best option for St. Maarten, though such a transition would require improvements of the distribution network.
Transition to renewable energy is challenging, because it will result in less revenue that does not cover the expenditures of GEBE. There are however several options: photo-voltaic (solar panels), waste burning, geothermal energy, cooperation with the French side and the use of hydrogen and bio-fuels.
“Wind and solar energy projects are profitable compared to electricity production with fossil fuels,” the report states. On the other side of the coin are the costs associated with a transition. GEBE would have to invest in the quality of its distribution network, in battery-storage, adjustable power and back-up capacity. “System costs can be charged to consumers,” the report states.
There is an important unknown factor: it is unknown which investments are needed for large-scale electricity production with solar panels and for the improvement of the distribution network.
Currently GEBE’s production capacity is 75.4 MegaWatt. The company has twelve generators and five of them are older than 25 years, while their expected lifespan is 34 years. In 2023 the peak demand was 55 Megawatt.
Unlike Aruba and Curacao, St. Maarten has not made any steps towards the use of electric vehicles. Shore power for cruise ships could generate revenue for the company, but its limited production capacity is a problem. The port is the only entity that has made some strides towards renewable energy with twenty electric vehicles and plans to replace all of its vehicles within the next five years with electric cars.
The report briefly refers to Gridmarket, an American consultancy that proposed in 2023 to execute the energy transition in St. Maarten. Disagreements and a lack of proper cooperation have thrown a spanner in the works. Gridmarket’s plan involved photo voltaic installations, offshore wind energy, batteries and the use of bio fuels. The proposal was to have a third party take care of sustainable electricity production and to have GEBE buy from this company and deliver the product to consumers.
The TNO-report notes that there are significant risks associated with privatizing the production of electricity.
The report also found an interesting dilemma. Photo voltaic electricity production is an interesting option because the peak demand for power falls between 10 o’clock in the morning and two o’clock in the afternoon. However: investing in PV is not attractive for GEBE, because the company would only receive the base tariff and that money would not only have to cover the costs of PV-projects but also all other expenditures at GEBE. “Financially it is more attractive for GEBE to produce based on heavy fuel oil and not to invest in PV,” the report states.
The fuel-clause, the variable part of a GEBE-bill depends on the consumption of fuel. After an energy transition the use of fuel diminishes and with it GEBE’s revenue from this source goes down as well. “With the current tariff-structure energy transition only results in more financial problems for GEBE,” the authors of the report conclude.
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