The
Development Planning Unit
Government of the British Virgin Islands

ENERGY SECTOR

1.01 INTRODUCTION

No doubt the importance of energy is well known all over the world. While it is recognised that energy alone is not sufficient for development planning in any nation, it worth noting that it is used as primary inputs in the production of all commodities, in nearly all advanced manufacturing, in transportation, as well as in power generation. As a result, many developing countries are still struggling with transportation problems; power utility inefficiencies, industrial woes and under-utilization of industrial technology because of improper energy planning and lack efficient energy information infrastructure. This has, in turn, retarded consistent growth.

From a global point of view, the nature of difficulties in present energy supply is more political than technical. For instance, apart from some gaps between local supply and demand, oil is not scarce but an expensive commodity a situation initiated by the OPEC countries in 1973. Since then, the industrialized economies as well as many developing countries have been unable to adjust to this situation. But there are more problems ahead in the coming century. The technical supply capacity available from the energy sources deployed today is likely to fall short of an increasing global energy demand.

1.02 BACKGROUND

If we look at historical evolution of energy, you will see that first the source of energy started with wood later wood was replaced by coal up to 1920s. From then, oil and gas substituted coal. This transition was by no means due to a shortage of coal supply. Instead, the evolution of modern urban life styles soon treated a strong demand for more sophisticated energy forms than raw coal could provide. Later, coal was converted into a town gas and pipeline grids were growing. Later years, electricity grids for lighting offered a more convincing solution and gas was used for cooling and heating. When mineral oil and natural gas began to rally into the market, they followed a demand for quality, which had been stimulated and supported by "converted coal" for quite sometime. Central heating systems running on oil brought comfortable heating to homes. Natural gas made it possible to skip the conversion from coal to town gas. The handling of fuel oil and natural gas was much easier for consumers than handling coal without the problem of ashes both helped to maintain the environmental conditions in urban areas at tolerable levels up to today.


1.03 THE CASE OF BVI

Like any other developing countries the supply of and demand for fuel energy have influenced the pattern of life over the years. Prior to the decade of 1950s, fuel wood and charcoal provided a major source of energy for the BVI. Today's use of liquefied petroleum gas ranges as well as solar water heating is in great use by the islanders. BVI has witnessed tremendous changes in their socioeconomic well-being. The early demand for charcoal and firewood energy in the near-by USVI, St. Thomas in particular, created a viable market for local traders who eked out a livelihood that was typical of the country as a whole.

Before the 1950s, mule and donkey carts transportation provided a mode that obviously reflected partially the subsistence nature of the economic base of the territory. However, despite this rural setting the desire of the inhabitants to improve the physical quality of life was evidenced in the then acute demand for miniature tins of kerosene, diesel and gasoline, commodities that were purchased along the Waterfront area of Charlotte Amalie, a trading area that was owned by the West Indian Company. According to information obtained from BVI business communities, it was St. Thomas energy situation - market inconsistencies in the early 1950s that triggered response to an urgent local demand for petroleum energy products, vehicular traffic during the late 1950s was minimal undoubtedly partly due to the 28% import duty levied on all foreign vehicles. However with the advent of generated electricity in the late 1950s made possible by a small government owned generator, the commercial use of a more dominant of energy source began. Despite a daily 12 hours generating period, the approach of tourism and international banking activities signaled a more service-oriented economy. The establishment of the Little Dix Bay Resort in the early 1960s created a greater demand for generated electricity and with the foresight and guidance of local businessman, Mr. J. R. O'Neal, Esso established itself on Tortola with the construction of a 25,000 gallons gasoline-diesel bulk storage facility coupled with 15,000 gallons kerosene. The fuel boom had commenced resulting in a once-monthly off-loading shipment of petroleum products imported from Trinidad. In the late 1960s and early 1970s fuel business increased and another company, Shell Antilles and Guianas, entered the business. Later the market viability upscale tourism, increased vehicular flow and greater public sector demand for generated electricity saw the arrival of the third supplier, Delta Petroleum. currently BVI has about seven companies importing and distributing different types of energy. They are:

1. Shell Antilles and Guianas Company Limited
   
2. Delta Petroleum (Caribbean) Ltd
   
3. O'Neal Gases Limited
   
4. Virgin Islands Petroleum Ltd.
   
5. Big Brothers Service Station
   
6. Domino Oil Limited

1.04 ENERGY SECTOR IN ECONOMIC DEVELOPMENT

The energy sector is very crucial for socioeconomic development of BVI and its linkages with other sectors deliver the major impact to the entire economy of the country. It is used as a primary input in the production of all commodities in nearly all manufacturing, in transportation, in hotels and offices as well as in power generation. The multiplier effects or linkages with other sectors especially tourism and financial sector has enabled these sectors to do better in their contribution to the national gross domestic product.


1.05 ENERGY CONTRIBUTION TO GDP

According to 1999 National accounts, the energy sector contributed US$ 11,552,000 to GDP at constant prices. This is equivalent to 1.77% of total GDP. The national GDP was US$654,052,000 (see table 1.01 below). Its percentage contribution may seem to very small, but its impact without it, is very big in total national economy. If you can compare its contribution in the previous year, you will also note that there is an increase of US $ 805,000 about 0.01%. From the GDP table, you will note that there is an increase of 47,8% from 1991 figures. This trend indicates the increase of importance of energy from one year to another. The constant supply of energy in the economy in one way or another, has contributed better performance of other sectors for the past years. In 1999 for example, the sectors which contributed much to the GDP, includes, Financial Intermediation which contributed US $ 236,240,000 (36.12%), Wholesale and Retail Trade $ 137,685,000 (21.05%), Hotel and Restaurant $ 87,253,000 (13.34%) and Real Estate, Renting & Business Activity $ 79,680,000 (12.18%). In general this sector provides more backwards and forwards sectoral linkages, probably more than any other sector in the economic development of the Territory. Just imagine what would happen to the economy of the territory without electricity? What would happen to the transport sector without fuel to run vehicles, ferries, ships, etc.? It is obvious that without energy, the total economy will collapse. Table 1.01 below shows the percentage contribution of energy compared with other sectors at a given time.

Table 1.01 GROSS DOMESTIC PRODUCT CONTRIBUTION BY SECTOR 

   
1.06 EMPLOYMENT CONTRIBUTION

According to 1996 Employment and Earning statistics, the number of employees in the territory stood at 11,254. While the number of employees in the energy sector stood at 194 which represents 1.73% of the workforce in the territory. The leading sectors are Hotel and Restaurants, which employed 2,713 or 24.11% of the labour force followed by Public Administration with 2,298 or 20.42%, Wholesale and Retail Trade at 1,466 employees or 13.03% and Construction employed 1058 or 9.41% of the labour force. The other sectors employed less than 7% of the work force.

By comparing with the 1992 statistics, there was an increase of 999 workers in the whole territory. This represents growth of 9.75%. The Energy sector in 1992 had 166 workers in 1996 had 194, which represents an increase of 28 employees or 16.87%. If you compare with other sectors, Manufacturing, employment increased by 45%. Other sectors registered only marginal changes.

The gross earnings of the work force from employment, which is also the wage bill of the economy was US$143.997 million in 1996. Of this amount, Energy sector paid $3.861 million while Public Administration paid $39.289 million, Hotel & Restaurant paid $27.720 million, Wholesale & Retail Trade $14.126 million, Financial Intermediation $16.1 million and Real Estate and Business Services paid $11.575 million.

From these statistics, you will note that the number of employees employed by the sector is very small comparing with other sectors, but its multiplier effect contribution enable other sectors to employ linkages with other sectors. of the economy. Table 1.02 below shows the number of employees by sectors from 1990 to 1994- and Table 1.03 shows the earnings in the same period.


Table. 1.02 NUMBER OF EMPLOYEES BY INDUSTRY / SECTOR; 1992 TO 1996

Table 1.03 EARNINGS OF EMPLOYEES BY INDUSTRY / SECTOR; 1992 TO 1996

Source: DPU- Employment & Earnings Statistics, 1996


1.10 TYPES OF ENERGY IN BVI

Most of the energy supplies are derived from imported petroleum energy products, which include gasoline, leaded and unleaded diesel, kerosene and liquefied petroleum gas. From a commercial perspective, two types of energy activities can be identified:

1. Non-commercial energy: This includes fuel wood/charcoal energy production, solar energy and wind energy.
   
2. Commercial energy: This type includes the importation of petroleum products mentioned above and the generation and consumption of electricity.

1.11 NON-COMMERCIAL ENERGY

There has been a decline in the use of non-commercial energy, i.e. charcoal and wood, as a major commercial resource. This resulted in the dominance use of petroleum energy as the major source of energy, but due to rising fuel costs has created the possibility of non-commercial energy alternative, already the domestic use of charcoal for barbecue purposes reinforces this situation.

1. Fuel Wood/Charcoal
   
   Charcoal and wood were the only energizers during the early 1900s. The production of charcoal and wood was one of the major economic activities during those days. Coal-pits could have been seen all over the territory especially in the rural areas where easy access to the appropriate firewood was most available. During the Prohibition Era (US), charcoal was sold for as little as 25 cents per bag. It was the largest export commodity next to cattle.
   
   With time, especially in the 1960s when financial institutions and tourism started to gain importance and the development of more infrastructures, created a new life style and better standard of living, electricity was introduced on commercial scale by the provision of the government-owned generator that operated 12 hours per day. With the gradual consumption of electricity, the commercial use of charcoal started to decline. Charcoal can be considered as an economically viable alternative to other forms of energy in that its quality of heat sustainability affords the low income earner some cost savings relative to the production and consumption of charcoal conflict with the notion that its production give rise to some land cleaning for pastures and building purposes. However, this practice of deforestation has been combated by the implementation of an agro-forestry replanting programme by the department of Agriculture.
   
2. Solar Energy
   
   The advent of solar energy in its technologically transformed state to the BVI dates back to the 1980s. The economic rationale underlying the growing usage of this form of energy is the rising fuel costs that have continued to cause consumers to gravitate towards solar use, a cheaper source. Presently, solar energy is being harnessed for basically water heating, thus the concept solar water heating. In order for this to work properly, it will depend on the design of the systems and the location exposure to secure maximum efficiency. Solar energy is being described as an approach to energy conservation. Temperature can be maintained for 3 to 4 days to about 130 Degrees (F). At present there are over 100 homes using this type of energy. One farmer, Mr. Michael Lloyd, is using this type of energy to illuminate his living quarter. He also uses it in the New Bush area to pump water from a spring to one of his nearby garden plots. It should be borne in mind, however, that solar energy is being used extensively for drying clothes (sunshine).
   
3. Wind Energy
   
   Wind energy is another source of energy, which is in great use in other parts of the world.
   For example, in California (USA), windmill energy is being utilized well, 10% of the energy produced is met by wind energy. In BVI, despite the great potential for the harnessing of wind energy through the use of the windmill, the use of this type of energy is no longer operational. Many years ago, this form of energy producing device was commonly used but its rapid decline is evidenced by a remnant of one windmill situated at Paraquita Bay. Although there are no plans for re-establishing the use of windmills for energy production, the government should re-think again of reviving this technology because of keeping rising of prices of fuel every now and then. Actually, windmills have low operational costs comparing with other type of energy.

1.12 COMMERCIAL ENERGY

This category includes all imported petroleum products and electricity generation. Private companies do importation of petroleum products, while the generation of electricity is undertaken by BVI Electricity Corporation a government owned corporation. The corporation was formed in 1978 under the British Virgin Islands Electricity Corporation Ordinance No. 74 of 1978.


1.13 PETROLEUM ENERGY

Mainly when we talk of petroleum energy products, we normally mean the following products, which are imported for domestic consumption:

• Unleaded premium
  
• Unleaded regular
  
• Leaded regular
  
• Diesel
  
• Kerosene
  
• Propane gas

The decline in the use of fuel wood and charcoal energy as a major commercial resource was resulted from the dominance of the contemporary use of petroleum energy products as the major energizers in the territory. Table 1.04 and 1.05 show the households in BVI and type of energy used for cooking and lighting.

Table 1.04: Households and Type of Energy in use for lighting

                                          Source: DPU - Population and Housing Census 1991

Table 1.05: Households and Type of Energy in use for cooking

                      Source: DPU - Population and Housing Census 1991

From the above tables, it is obvious that most of the BVIslanders use mostly electricity energy for lighting and gas energy mainly for cooking purposes.

1.14 PETROLEUM ENERGY IMPORTATION

The importation of petroleum products in BVI is the private sector controlled activity. The government normally secures only an import duty, which differs from one year to another. For example, in 1999, the import duty of about 40 cents was charged on each imperial gallon imported. Seven companies do the importation of petroleum products. The larger importers are Shell Antilles and Guianas Ltd. and Delta Petroleum. Others are, Caribbean Atlantic Petroleum Company (CA-PCO), O'Neal Gases Ltd. Virgin Islands Petroleum Ltd., The Big Brothers Service Station and Domino Oil Ltd. For the year in review, i.e. 1999, about 7,314,400 gallons was imported valued at US$9,955,200. This value is almost the same with 1996 energy imports, which was $9,081,100. 

For the past decade there have been a sharp increase in energy imports. This is due to an increase in economic activities within the territory. By comparing this rapid increase and by considering the rise in fuel costs in the world market, there is a need for the government to educate the masses in efficient use of scarce energy supply otherwise such a big rise in price will continue to bring impact on the disposable income of the consumers.

Table 1.06: IMPORTS OF PETROLEUM AND PETROLEUM PRODUCTS

Source: Development Planning Unit.


1.20 ELECTRICITY GENERATION

Electricity supply is provided by the British Virgin Islands Electricity Corporation, the public sector corporation formed by the government in 1979. The BVI Electricity Corporation Ordinance No. 7 of 1978 was formed in 1978 to provide for the establishment of a statutory corporation. This Ordinance came into effect in January 1979. Among the major functions of the corporation are the generation, transmission, supply, distribution and source of electricity throughout the BVI.

1.21 ELECTRICITY INFRASTRUCTURE

The Electricity Corporation facilities are located in two areas, Long Bush in Road Town and in Pockwood Pond in western Tortola. Currently, the Long Bush facility supply over 5 mega watts of power and is used as a back up facility when cycling and maintenance need to be carried out. At present East End is being upgraded with more power with a 35.5 kv cable in order to provide more power to Virgin Gorda and nearby islands with an upgraded services as presently Virgin Gorda is being served by a 13.2 kv cable and as a result there are problems with the service. The existing system now serves 8 of the islands, which include Tortola, Virgin Gorda, Great and Little Camanoe, Jost Van Dyke, Marina Cay, Peter Island and Anegada. Anegada is served by a 6OKW generator. The Electricity Corporation has a fairly comprehensive network which covers the inhabited islands. The network primarily uses overhead lines, however, some of the high voltage lines are underground.

1.22 ELECTRICITY AND THE ECONOMY

Electrical power is very important element in the development of the national economy and its linkages with other sectors are the most dynamic and deliver the major impact to the entire economy. The BVI Electricity Corporation supplies electricity in a form of energy and lightening to individual homes, industries, commercial enterprises and many more productive institutions. The BVI entire expanding international economy based on tourism and financial services obviously has direct linkages with electricity supply. Just imagine the following situation and what would happen:

• without electricity to hotels, marines and restaurants, 
  
• without electricity supply to facilities, telecommunication,
  
• without electricity supply to banks and other financial institutions,
  
• without electricity supply in offices, homes and industries,

The answer to this situation is obvious, that is the whole economy will collapse; there will be no more production of goods or services. That is why electricity is considered to be a major element in economic and social development; therefore, the continuous growth of BVI will depend very much on adequate continuous reliable electrical supply to the entire economy of the territory.


1.23 GENERAL PERFORMANCE

Over the last ten years, there has been a significant expansion in the capacity of the system, which now has a capacity of 19.58 mega watts. The increase in the capacity was largely in response to demand resulting from accelerated growth in residential demand and expansion in tourism sector. The distribution system is being continuously upgraded to meet the excess capacity as peak demand is now 12 mega watts. The following table shows the generation and sales statistics from 1992 to 1998.


Table 1.08: GENERATION AND SALES STATISTICS 1992-1998

Source: BVI Electricity Corporation

Table 1.09: Units Generated at Long Bush & Pockwood Pond Power Stations 1992-98 (MWh)

                                                              Source: BVI Electricity Corporation

Note: The Pockwood Pond Power station was officially commissioned in September 1990. Electricity generated at this station is transferred to Long Bush Power station via two 10 km 4.5 kv underground cables. The units of electricity shown in this table reflect the output of both stations.


1.24 PRESENT OPERATIONS

According to 1998 statistics, BVI Electricity Corporation continued to generate more electricity than before. At the end of this period a total 98,863 MWh, were generated. This is an increase of 6,606 MWh (7.2%) from the previous year (1997) and 32,769 MWh (50%) compared with 1992) data. During this period, sale increased by 6.110 million units, an increase of 7.56% over 1997 and units. While the actual units sales were in line with projections, the actual dollar increase realized for 1998 was lower than that projected at 2.06% primarily as a result of lower bills to customers due to savings realized from lower fuel prices. The combination of technical and non-technical losses was 7.49% of net generation. Even though the fuel usage in 1998 exceeded that of 1997 by approximately 468,086 gallons, the dollar value spent on fuel fell by $656,154. This was directly influenced by a significant fall in the average price of fuel. The same period, additional 412 customers were added to the distribution system bringing the total number of customers on the system to 10,211. The revenue per unit metered decreased by 5.11% over 1997 and the cost per unit metered decreased by 8.52%. The decrease in cost was due to a decrease in fuel prices.

Table 1.10 Sales 1994- 1998 by Islands ($1 000)

                                                          Source: BVI Electricity Corporation

The above Table 1.10 indicates that Tortola (in 1998) almost consumes over 78% of the electricity generated, it recorded US $12,829 out of total sales of $16,454. Virgin Gorda recorded $2,771. In 1994, Long Bush and Pockwood Pond stations continued to operate with high level of reliability. Due to the increase in demand the Long Bush power station was required to generate approximately 55% of the demand and Pockwood Pond approximately 45%. Previously both stations were sharing the load equally. During the year, the maximum demand shifted from evening to midmorning summer months, as a result of energy required to cool the expanding commercial sector. Since 1995 Pockwood Pond station has become the major generating station. Long Bush station now supplements the generation when it is necessary. The raise in voltage generation at Pockwood Pond station is a result of installation of two 4.6 mega watt stork-wartsila SW38 diesel generators in August 1994 the electricity generation at this station was transferred to Long Bush. Work on the implementation of Phase III of the corporation's Development Programme began in 1998. This will entail the extension of the Pockwood Pond Power station to house an additional four generators, their auxiliaries and steam generation equipment. Initially two generators in the 4.5 to 5.5 MW range will be installed. It is also proposed to install an additional Desalination unit of similar size to the existing Desalination Plant. In 1996, Kennedy & Donkin of the UK were commissioned to carry out a study for the construction of a parallel bus bar at the Long Bush Power Station. 

1.25 ELECTRICITY SUPPLY TO CUSTOMERS

In the 1994 census, it was indicated that some 98% of households in BVI were connected to the electricity network. This percentage represented 7267 customers. In 1998, the number of customers has increased to 10,211 customers an increase of 49% from 1990 statistics. The customers can be categorised as follows, domestic 8,767, commercial 1,395, industrial 48 and one street lighting. The table below shows the number of customers by category form 1986 up to 1998 and 1999 and 2000 are projections.


Table 1.11: Number of Customers by Category

                                                                              *Projections
                                                                              Source: BVI Electricity Corporation

The table below shows the number of customers by island. The 1998 statistics shows that Tortola has more customers i.e. 8,622 followed by Virgin Gorda with 1,327 customers, the rest are Anegada 119, Jost Van Dyke 95 Camanoe 47 and Marina 1.

Table 1.12: No. of Customers by Islands

                                            Source: BVI Electricity Corporation
                                 Note: Tortola includes Beef Island & Frenchman's Cay


1.26 REVENUE GENERATION

In 1998, 78% of the revenue from sale of electricity came from Tortola, 16.7 came from Virgin Gorda, 3.4% from street lighting the remaining percentage (1.8%) from other islands. At the end of the year, the Corporation realized operation revenue of 16.7 million dollars compared to 16.4 million dollars for the previous year. Revenue from the sale of electricity increased 1.76% over the previous year, primarily as the result of lower fuel prices, which were translated into lower bills for customers. Operating expenses, which included depreciation expenses of 2.55 million dollars, was 80.39% of total revenue. In 1998, operating expenses decreased by 1.77%. This revenue and operating expenses resulted in operating profits of 3.28 million dollars. The decrease in operating expenses was due to a significant reduction in the average cost of fuel. As a result, there was an overall increase in operating profit of 19.57%. The table below shows a summary of units sold and revenue by customer grouping in 1998.

Table 1.13: Summary of units sold and revenue by customer grouping, 1998

                                                                                  Source: BVI Electricity Corporation

1.27 MANPOWER

At the end of 1998, BVI Electricity Corporation had 158 employees. The corporation's staff structure was made up of 13 employees from Administration, 20 employees Accounts, 48 employees Distribution 62 employees Generation, 11 employees, Customer Services and Meter Reading and 4 employees from Computer Department. The following Table shows the number of employees by department from 1991 up to 1998.


Table 1.14 : Employees by Department