U.S. Virgin Islands Water and Power Seeks Fuel Diversification

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Virgin Islands Water and Power Authority's (WAPA) electrical power needs are totally dependent on purchasing fuel oil to power the generating equipment at its power plants. The Virgin Islands consists of the islands of St. Thomas, St. Croix and St. John. In mid-2008, rising fuel costs caused WAPA to spend an additional $30 million that it was not able to collect in fuel surcharges. The Public Service Commission would not allow the utility to pass on costs more than $121 per barrel while the utility was paying $129 per barrel to the local HOVENSA refinery, a joint venture between Hess Oil Virgin Islands Corporation (HOVIC) and Petroleos de Venezuela S.A. (PDVSA). It is one of the 10 largest refineries in the world, with a crude oil processing capacity of 500,000 barrels per day.

The governing board of WAPA issued a request for proposals in mid-2008 for small power producers to provide alternatives to fuel oil, including ocean thermal energy conversion (OTEC), solar, wind, biomass, coal, compressed/liquefied natural gas, geothermal, or an inter-island connection cable between St. Croix and St. Thomas. WAPA's goal is to enter into a 20-year power purchase agreement from one or more winning respondents who can provide a guaranteed monthly supply of energy. That power must be supplied at a cost lower than WAPA's projected energy costs and not indexed to oil prices.

Fourteen companies submitted proposals, and after several months of review, six were chosen. The technology selected ranges from waste to energy, coal, geothermal, solar, and ocean thermal energy conversion. WAPA wants to diversify its generation portfolio and convert up to 26 megawatts (MW) of existing fuel-oil-fired power on St. Croix and up to 30 MW of fuel-oil-fired energy on St. Thomas.

WAPA and the power development companies chosen are in final negotiations, which had been delayed because of disruptions in the credit markets, instability in the oil markets, and delays in agreements the proponents had with third parties to support their projects.

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