Since coal is identified as the best fossil fuel for the Northern corridor of Haiti’s power development projects, the drivers that will shape and influence the future of the industry will be funding and particularly the stakeholders’ ability to handle risk. This endeavor can present enormous opportunities for potential investors given the size of the market for energy in this part of the country.
According to government estimates, the production of electricity will triple over the next couple years. Much of this growth will take place in the North where the increase in capacity will be used to supplement Caracol and Ouanaminthe Industrial Parks. Trends differ between the North and the rest of the country. With fossil fuel production continuing to grow in the developing world, Group Citadelle is ceasing the opportunity to formulate an energy policy that will bring dividend in terms of economic development for the area. Manufacturers will favor coal-fired power generation technology because of cost and viability. They never have to preoccupy themselves with watching their profit being eaten up by the prohibitive cost of energy, which will hamper their ability to grow their operations and create jobs. Increased energy efficiency, from generation to final consumption will be our focus.
Although renewable sources of generation continue to advance because of concerns regarding global warming, alongside that there is a new pragmatism about fossil fuel combustion which will continue to dominate the power sector
|The power sector still remains an attractive area for investment but investors are now more cautious than previously. Global warming continues to be a dominant theme but alongside that there is a new pragmatism about fossil fuel combustion which will continue to dominate the power sector for another generation at least. Meanwhile renewable sources of generation continue to advance, led principally by wind power but with solar capacity growing rapidly too, though from a small base.
Electricity is the most important energy source in the modern age but also the most ephemeral, a source that must be consumed as fast as it is produced. This makes modeling the economics of electricity production more complex than carrying out the same exercise for other products. Accurate modeling is important because it forms the basis for future investment decisions. In the electricity sector two fundamental yardsticks are used for cost comparison, capital cost and the levelized cost of electricity. The latter is a lifecycle cost analysis of a power plant that uses assumptions about the future value of money to convert all future costs and revenues into current prices. This model is widely used in the power industry but has some significant failings, particularly in its ability to handle risk. Even so these two measures, together, are the first consulted when power sector investment and planning decisions are to be made.
Production of electricity has always involved an element of risk but this has been extended, and in some cases magnified by the introduction of liberalized electricity markets. One big source of risk is fuel price risk. If an investment is made today based on a predicted cost of natural gas that turns out to be wildly in error because prices soar, as has happened during the past decade, then that investment will be in danger of failing to be economical to operate. Therefore some measure of the risk of fuel price volatility should be included in any economic model. Other risks arise where large capital investment is required in untested technology. Meanwhile the liberalized market has introduced new types of risk more often associated with financial makets.