WAPA looks for help to develop alternative fuel sources

ST. THOMAS - The V.I. Water and Power Authority issued two Requests for Qualifications on Monday to find companies interested in helping the territory move away from its reliance on diesel fuel for its electricity needs.

WAPA is eyeing liquefied natural gas, or LNG, and liquefied petroleum gas, better known as propane, as replacement fuel sources for its diesel-powered generators and desalination plants in the territory, according to the RFQ.

"Because of its reliance on fuel oil and continually escalating oil prices worldwide, WAPA's customer rates are generally higher than in most regions of the United States," the RFQ reads.

WAPA also must come into compliance with two U.S. Environmental Protection Agency air quality standards by April 2015. The economic and regulatory pressures mean "the project must be implemented as quickly as possible, and solutions that include faster implementation timelines will be favorably considered," the natural gas RFQ reads.

In the long-term, WAPA is seeking to convert entirely to LNG, but recognizing that the conversion "may take several years," it is also seeking companies to provide "a bridging supply" of propane in the interim.

V.I. Energy Office Director Karl Knight said his office supports WAPA's search for alternative fuel sources. Aside from being cheaper than fuel oil, natural gas is cleaner than diesel and puts less maintenance stress on generators that burn it, according to Knight.

"In the Energy Office, we are fans of natural gas," he said.

Both RFQs emphasize WAPA is most interested in "a turnkey solution" from responding companies, meaning it would prefer to deal with a single company or consortium that is able to develop and operate the necessary infrastructure for the fuel-source conversion, as well as ensure reliable deliveries of natural gas or propane to WAPA's St. Croix and St. Thomas power plants.

However, the RFQ states WAPA will consider infrastructure-only proposals if the responding company can demonstrate that natural gas or propane supplies "can be readily contracted for" in a manner that is compatible with the infrastructure.

WAPA will be responsible for converting its equipment to be able to burn natural gas or propane as its primary fuel source with fuel oil as a backup source, according to the RFQs. WAPA also will be responsible for obtaining the necessary federal and local permits for converting the equipment.

Details about who would be responsible for permitting, constructing and operating the infrastructure "inside the plant" would be negotiable, according to the RFQs. WAPA also will consider relocating or installing new generator units to accommodate natural gas or propane facilities, according to the RFQs.

WAPA spokeswoman Cassandra Dunn said the utility company is expecting to spend between $1.2 million and $1.6 million to convert each of its eight gas turbines to dual-fuel machines. Assuming the RFQs are successful in finding companies with which WAPA eventually contracts, the conversion work would be done "as funding becomes available," Dunn said.

A more specific idea of where the money might come from depends on what kind of plans the RFQ respondents come up with, Dunn said.

"Basically, we would expect a payback from lower energy costs, so we would utilize the most beneficial financing available," she said.

When asked to give an idea of how much WAPA and its customers might expect to save if the conversion is successful, Dunn again said the question is premature.

"We would be hesitant to give that figure right now only because we need to see what's out there," Dunn said.

U.S. Energy Information Administration spokesman Jonathan Cogan said the agency has not studied the issue of converting from diesel to natural gas in the Caribbean. He said market prices, as well as shipping costs, would be important factors.

Cogan also pointed to a similar conversion process that is under way in Puerto Rico.

While a number of details of Puerto Rico's plan may not be relevant to the Virgin Islands because of the large difference in population between the two territories, the Government Development Bank for Puerto Rico created a graph showing the price of natural gas in July 2011 to fall between $4.36 and $12.64 per million British thermal units of energy, compared with $19.24 per million British thermal units for fuel oil. That projects to a fuel cost savings of 34 to 76 percent under Puerto Rico's conversion.

Responses to the RFQs are due Nov. 9, and WAPA expects to enter into negotiations by Nov. 28 with a possible project start-date of Jan. 9, 2013, according to the RFQs.

Though still a long way off, talk of converting to a new fuel source was welcome as V.I. residents and businesses continue to struggle with high utility costs.

"Anything that WAPA does that is going to reduce the cost of electricity or energy is a welcome sight to the community, at least for me anyway," V.I. Public Services Commission Acting Chairman M. Thomas Jackson said. "The community is bleeding as it is."

- Contact reporter Lou Mattei at 714-9124 or email lmattei@dailynews.vi.

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