Winning Strategies for Wind Projects in the Galápagos
April 9, 2014: Luis Vintimilla, General Manager of Eólica San Cristóbal S.A. (EOLICSA) in Ecuador shares his experience in finding winning strategies and practices while developing GSEP’s PPP wind project in the Galápagos , commissioned in 2008.
“The main ingredient for an effective and long-lasting PPP scheme is that everybody’s objectives are fulfilled within the project.”
How did you get involved in GSEP’s wind project on San Cristóbal Island in the Galápagos?
Luis Vintimilla: As a private consultant, I provided support to the United Nations Development Programme (UNDP) office in Ecuador in some research they were conducting for the Galápagos Islands regarding energy supply; in particular, which renewable energy sources would be the most reliable for each island in the Galápagos Archipelago. The final report established the most convenient renewable resources that should be developed for each island. For San Cristóbal Island, the research showed that wind energy was the most suitable source. During that time, GSEP, the UNDP and the Ecuadorian government began working together on the project plan and I was contacted once they came to a joint agreement in order to develop the San Cristóbal project in 2001.
Could you describe the type of PPP that was put in place for this project?
Luis Vintimilla: It was a very interesting collaboration. On the one side, we had GSEP providing a big portion of the financing for the project as a grant, and on the other side we had the national government (through the local utility ELECGALÁPAGOS S.A.) providing a financial contribution in the order of 30% of the project cost. There was also participation from other local private companies that, in accordance with the national regulations, were able to contribute from their income tax payments to the local municipality. This accounted for approximately 5% of the financing of the project. We also had a small portion of the financing provided by the United Nations Fund. In summary, that was how the project was financed.
In addition, how the project was structured from an institutional perspective was also very important. In that respect, the participation of local and regional entities like the Galápagos National Park, the Charles Darwin Foundation and the local municipality, were extremely important. I would say that those were in summary the most important stakeholders that came together to support the project.
Was there a national energy plan in place when you started the project?
Luis Vintimilla: Yes, there was a national electricity plan in place, but renewable energy development in the Galápagos Islands was not included in the plan. This renewable energy development came mostly after an agreement between the national government and the United Nations Development Programme (UNDP).
How did you manage to get the project approved?
Luis Vintimilla: It was a hard work. At the beginning, it was not easy to get all the national and UN agencies involved in the project. This was the first large-scale wind energy project in the country so we started up almost from zero and the agencies were in some way reluctant to believe in what the United Nations Development Programme (UNDP) and GSEP were offering to them. Before we came with this project, a lot of offers to develop different renewable energies in the islands had unsuccessfully come and gone and it had created some kind of reluctance from the local people and from the institutions. So, we had a very hard time to convince them that this time it was going to happen. Now that it has happened, they are all happy.
A PPP must be a win-win situation for both the public and the private counterparts. From your perspective, what are the most important ingredients for a PPP to be effective and long-lasting?
Luis Vintimilla: I agree: win-win is the most important feature. If everybody wins, everybody is happy. In the case of the Galápagos project, I think everybody won. The main ingredient for an effective and long-lasting PPP scheme is that everybody’s objectives are fulfilled within the project. As a matter of fact, thanks to the San Cristóbal project, the government, through the local utility in the Galápagos, is paying 12 cents per kWh to the wind facilities, while their regular cost from burning diesel is 27 cents per kWh. There is a big difference in favour of the government.
If we talk about the environmental perspective, this is also a very interesting project because we are avoiding greenhouse gas emissions by not burning diesel fuel. This is a really important issue, especially in the case of the fragile environment of the Galápagos Islands. The most important objective of the project was to reduce the consumption of diesel, especially following the big oil spill in 2001 in the front of San Cristóbal Island’s coast. This goal has also been achieved. In addition, the project did not bring an increase in tariffs to the final users. I consider that these are outstanding winning facts for the local population, for the environment and for the government as well.
On the other hand, GSEP, as the most important private counterpart, also won with this project. One of its most important objectives – the promotion of sustainable energy development through electricity projects – was fulfilled.
What strategies did you use to mitigate the risks when engaging in this PPP?
Luis Vintimilla: Even though the project’s objective is to avoid greenhouse gas emissions and to reduce fuel consumption, the environmental institutions located on the islands, like the Galápagos National Park and the Charles Darwin Foundation, were afraid because of the potential damage they believe might be caused to the local bird population, especially to the endangered Galápagos petrel. The petrel nested in the area originally selected for the wind park. Therefore, those agencies were very reluctant to support the project. What we did was to engage them in the project’s feasibility studies from the start. We started to work together to look for alternative sites for the wind park and to research and review local bird behaviour such as flight patterns, nesting places, etc. Finally, we were able to convince them that the project was going to be a good project and that we were not going to harm the birds. In the end, we have demonstrated that the project works. We have already completed almost seven years of operations and zero petrels have been injured during this time.
Do you think that this project will be replicated successfully in the region?
Luis Vintimilla: Yes, in fact it has already been replicated. After our project, other initiatives have been developed on the islands directly through the government. In the neighbouring Santa Cruz Island, the biggest island in the Galápagos Archipelago, the government is building a wind park of almost the same size as ours. That project is being replicated using our experience. The government is also developing other projects using other renewable energy technologies. On Isabela Island, very good wind resources are not available, but instead they have a better sun exposure: in this case, a photovoltaic system is being developed. On Floreana Island, they already have a photovoltaic system combined with bio-diesel engines in operation. This demonstrates that our project was the leader in the area for renewable energy development and has been used as an example for replication in the other islands.
In conclusion, what would you recommend to other stakeholders interested in developing similar projects in the region? What are the do’s and the don’ts?
Luis Vintimilla: I would say that the most important issue is to present a solid project proposal which is supported by serious organizations. In the case of the Galápagos project, we demonstrated that what we offered was going to work. A key point is to have organizations bringing interesting initiatives and providing serious support which significantly reduces the risks. This is very important as a starting point.
The next is to engage all the local stakeholders from the very beginning. This is especially important for local agencies like environmental organizations, municipalities and regional governments. The best way is to establish a good framework supported by the locals in order to have a successful conclusion.
Finally, the central government can be considered the most important stakeholder in the PPP scheme. Hence, the optimal way for success is to start by providing and building a structure and to continue reinforcing it as you grow from the ground up. I think it was what made this project work and I am very happy because of it.