Potential breach of energy plant approval not pursued
A query over the possible contravention of a Regulatory Authority order approving the procurement of Belco’s North Power Station and the decision after construction not to pursue the matter have been laid bare in records released to The Royal Gazette.
Documents obtained under the Public Access to Information Act showed that in August 2022, a senior manager at the RA highlighted that before the build in 2018, there was a last-minute alteration to language in a contract and schedule linked to the plant.
The “subtle” change related to an “upgrade” to the project for the engines to run optimally on gas from the start as opposed to at a later date because gas had not been approved in Bermuda.
Belco’s decision to optimise engines for liquefied natural gas but then run them with fuel oil led to emissions problems that persist to this day.
An approval order was issued by the RA on March 6, 2018 for diesel-configured dual-fuel engines.
Two weeks later there was “a subtle change in terminology” in the contract indicating a “phase 2 upgrade” to the NPS that readied it for gas.
As reported earlier, the station was built using dual-fuel engines optimised for liquefied natural gas.
It was planned that conversion to the gas would take place at a later date because LNG was not approved at the time.
When LNG was rejected by the RA, Belco ran the engines on heavy fuel oil instead, which caused emissions and soot fallouts, as explained by Wayne Caines, who became president of the utility after the station was commissioned.
According to documents freshly released to the Gazette by the RA, Belco spent $2.4 million retrofitting the station to a diesel configuration after the problems arose.
Belco took the RA to court in 2023 in an unsuccessful attempt to allow capital costs incurred in retrofitting the station to be passed on to the customer — a move the regulator described as “imprudent”.
In August 2022, Abayomi Carmichael, who was then the senior manager of energy at the RA before becoming its chief executive, wrote to senior RA staff including Nigel Burgess, the head of regulation, and Denton Williams, the RA’s former chief executive who tendered his resignation from the post “several weeks” earlier.
Mr Carmichael, who has since left the RA, said in an e-mail: "Everything up to the order being signed and all information I can see within the proposal, responses and commitment letter underpinning it, indicated the NPS engines would undergo conversion if and when gas became available in Bermuda.
“However, two weeks after the order was signed, a subtle shift in terminology is seen in the contract and schedule indicating a phase 2 ‘upgrade’ for the NPS engines and ‘conversion’ for the older E5 through E8 engines.”
He then detailed how the NPS engines were instead readied for gas from the outset, saying: “The upgrade replaces mainly off‐engine components — including the ones that caused the fallout and were [sic] Belco recently retrofitted back to diesel‐suited ones at $[2.4m] to ready for gas utilisation, with internal components pre‐installed for gas from the start.”
He explained that “conversion” would modify older E5 to E8 engine components in the East Power Station and replace gas supply-related engine components.
Mr Carmichael added: “So, technically, all available information I've seen says on March 6, the RA signed off on the NPS engines undergoing gas conversion at a later date, but I don’t see anything indicating malintent on Belco’s part. It may have simply been a miscommunicated fact.
“I personally don’t think it's worth pursuing any further (ie did they contravene the order) but it is worth noting it’s part of the Supreme Court filing.
“They will argue the RA knew these details (and have ex appropriated [sic] $[redacted figure] from Belco for the diesel configuration retrofit) when there’s no evidence I can see that the RA did.”
Ricardo Energy and Environment, another RA consultant whose responses were included in the latest Pati response, advised in 2019: “Insufficient natural gas is currently available in Bermuda for bulk electricity generation and it is not clear whether natural gas will be available in the future.
“Therefore, the decision to select engines with natural gas capability should be scrutinised as part of the Integrated Resource Plan process considering the associated cost premium.”
The IRP is a road map for Bermuda’s energy mix.
The records released under Pati also revealed that on May 23, 2018, there had been a clarification of the approval order stipulating: “The authority shall monitor the implementation of the proposal in order to ensure efficient delivery of the replacement generation.
“This shall include, without limitation, monitoring of the financial expenditure, the technical specifications of the assets and the timely delivery of the proposal.”
The RA recently responded to questions from the Gazette about the potential order contravention. It said: “The authority to issue planning or construction approvals did not fall within the RA's remit; the RA's decision related to cost recovery of the development.
“The decision was based on the best available information at the time, including independent technical advice and engineering realities such as cost efficiency, system stability and long-term maintenance needs.”
In 2023, the Gazette’s Clearing the Air series revealed that the Department of Energy had warned in 2018 that the planning application for the station may be “premature”, given the country had not yet had its say on Bermuda’s future electricity generation through the mandated IRP process.
The Ministry of Home Affairs, on behalf of the planning department, said then: “To be clear, the decision to run the new engines on diesel, HFO, LNG or another fuel is not the remit of the Government.
“Questions regarding the approval of fuel type should be directed to the Regulatory Authority.”
The RA said then, in response to a Pati request, that Belco did not disclose any documentation to the authority regarding its intention to optimise the NPS for LNG.
It revealed: “The RA learnt of the optimisation through the media.”
In June 2018, Sean Durfy, then the Belco chief executive, told energy website Power Progress the company was pleased with the NPS engineering contractor Burmeister & Wain Scandinavian Contractor and engine manufacturers MAN Energy Solutions, noting that it was critical the company used vendors with a proven track record.
The North Power Station was completed on April 1, 2020, which Belco described as a “momentous day”.
Dennis Pimentel, who took over from Mr Durfy as Belco’s chief executive in October 2018, issued an apology to the public in November 2020 after soot events started.
Asked by the Gazette in 2023 about the NPS pollution, MAN ES said it was not surprised that the challenges existed with the combination of the dual-fuel gas engines running with HFO.
The IRP was designed to be a living document to be revisited every few years to take into account new technologies and changing circumstances and is mandated under the Electricity Act.
A new IRP proposal was requested of Belco for the next phase of Bermuda’s energy supply.
The latest plan, as outlined in July 2024, included a wide variety of fuel proposals, including floating solar production and offshore wind-generated power.
LNG is also included, with a 2016 feasibility study referenced.
In October, it was reported that the RA was undertaking a further detailed analysis of the latest proposal.
Mr Caines, the president of Belco and its parent company Liberty, did not address specific questions regarding the potential order breach but said: “All infrastructure decisions to build the North Power Station were made with comprehensive information available at the time.”
The Ministry of Home Affairs did not respond to questions from the Gazette and Mr Carmichael could not be contacted.
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