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15-Year Window To Benefit From Low Solar Costs

204382At the start of this series, a month ago, you learned about the powerful and predictive tools used in power planning — cost curves (also known as experience learning curves). Had we paid attention to these when planning, we would have been aware that the cost curves for fossil-fired power is upward and, in Jamaica’s case, are presently marginally higher than most renewables.

Nuclear energy is now the most costly non-renewable source, with USA’s natural gas being the least costly non-renewable. Conversely, the cost curves for renewables are downwards, with solar-PV prices dropping by some 22 per cent annually, and wind dropping by some 16 per cent annually, and with both wind and solar being cheaper than natural gas almost anywhere in the world. That would have put paid to the loudest and noisiest proponents trying to talk up their favourite technology and winning out in Jamaica. Data-driven decision-making would have prevailed over the loud noise and we would have saved some five years of pain.

With Eight Rivers Energy Company winning the bid to build and operate the 33MW solar plant in Westmoreland to supply electricity to the grid at a cost of US$0.085 per kWh some four years after a losing bid for US$0.145, the trend is clear. Expect further drops to five cents within two years, and for larger sizes than the 33MWs just secured. In fact, solar costs will continually drop by around US$0.01 per year with increasingly bigger volumes, so expect prices to fall below US$0.03 within the next five years. By the time solar reaches saturation, some 85 per cent replacement of present power plants, we can reliably expect a 15-year window of ever-decreasing prices for solar in Jamaica, with costs eventually dropping below US$0.02 per kWh for large volumes. Reasonably priced wind has a little higher-cost, as our wind capacity factor is a little inferior to our solar insulation potential, but wind is still a much cheaper replacement for night-time fossil-fired electricity. (Similarly, cost drops for rechargeable batteries are almost identical to the 16 per cent annual cost reductions of wind, but they need another decade of reductions to be classified as low-priced).

Planners and decision makers need to adjust their single-mandate policy of “lowest cost electricity” and override this with a dual mandate to “eliminate the maximum possible amount of imported fuel cost, provided electricity cost is not significantly impaired”. Let’s prioritise foreign exchange savings over lowest cost, without losing sight of electricity cost. Had we done this at the auction which Energy World International eventually won (but failed to deliver on), we would have given preference to Jamaica Public Service’s (JPS) double submissions to convert massive amounts of its generation (over 380MWs) to power-and-heat combined cycle plants, massively reducing the amount of fuel purchases for about the same amount of electricity. This would have had a big impact on lowering our poverty-inducing foreign fuel purchases annually. By the quantity of annual foreign dollars saved our exchange rate would be nowhere near the present US$125: $1.

Going even further back, had there been this dual-mandate to make our country’s finances stronger, JPS would have converted its power plants from single-use of fuel to double-use power and heat generation long ago, the heat being also used to nearly double the electricity output for the same quantity of fuel. Increased efficiency would have overridden lowest price. Imagine the cumulative foreign exchange saved over the previous 20 years. Our exchange rate would be no more than US$25:1 by my estimation. Yes, your present pay cheque would have five times the purchasing power!

With 100 per cent wind and solar use over the next 15 years, Jamaica stands to save US$777 million annually just by eliminating JPS fuel purchases. We could pump all the savings into the economy. That’s more than US$100 million every month, if we include similar savings from the Independent Power Producers (IPPs). Our annual balance of trade would at last be eliminated and there could be no more excuse for the continued Jamaican dollar slide.

Right now, we could have grid electricity generation cost for as low as US$0.05 per kWh, but it’s more likely to hover around US$0.08. Add US$0.02 for round-the-clock storage for an overall generation cost of about US$0.10. Add JPS’s present mark-up and transmission and distribution charges plus GCT and you’ll end up with around US$0.15. You’ll realise that the add-on costs are higher than the generation charges. UGH!

My recommendation is to quickly build out the complete JPS wind and solar transformation to lock in low prices as soon as we can. This inevitably means moving fast to gather finance for pumped-hydro (see just-published section, Part 4) which is the backbone of the new cheap power system.

Why stop there? Next step, roll out a programme to stimulate individually owned or leased solar and wind — rooftops for building owners, and co-operatively owned solar carports and ground-mounted neighbourhood solar gardens (mini solar farms) for renters and strata properties with an agreement to transfer their “shares” to another solar garden if they change properties. Lots of employment would be generated here for salespeople, installers, do-it-yourselfers, and others. The USA, with just below two per cent adoption of solar already has over 200,000 people directly employed in just solar, not counting those employed in wind and batteries and electric vehicles and related jobs. That’s much more than those employed in coal, despite coal’s overwhelming share of power (near 40 per cent).

Further, we ought to gather our cheap excess midday solar generation and other overproductions, some for later lucrative economic sale to large-scale manufacturers via pumped-hydro storage, and use any excess to create and feed a second market for JPS-gathered energy, a new export market via underground ocean cables. Pricing for export (with storage priced in) is tentatively presently US$0.07 to US$0.10 per kWh plus profit with prices dropping over time as new cheaper facilities are added. A very lucrative market exists less than 100 miles away in Cuba, where 75 per cent of its 11.25 million inhabitants live in cities with next-to-no power. Their solar insolation potential is quite inferior to ours so it is unlikely they can produce their own solar competitively. Another neighbour who is insolation-inferior to Jamaica is Puerto Rico with its 3.7 million inhabitants and a near-bankrupt public utility.

This power export market is worth over US$2.1 billion annually from just these two close neighbour countries, with no import content and five-times the size of our domestic market added to ours. This export market is as big as our annual tourism intake, but unlike tourism does not drain 80 per cent as outflows. With our excess power going to new export earnings, this is a hedge against recently un-embargoed Cuba weakening our tourism earnings.

Eliminating the importation of fuels removes some 17 per cent annual drag on our GDP, even if we get no reduction in power rates. With much reduced electricity prices, factoring in improved manufacturing growth or jobs created (manufacturing and solar jobs) will add a further seven per cent or so to our GDP. Power exports add a further 15 per cent to GDP, all foreign exchange. Combined, that’s well over a 30 per cent improvement to our GDP annually — not 1.5 per cent growth as we have perennially struggled to achieve over the decades.

Energy is the biggest business in the world, US$8.5 trillion for just fossil fuels by International Monetary Fund estimates. If we do it right we will join the big leagues. We have the rooftops and land space to supply to all, and at low prices, via mainly rooftops and solar farms of all sizes.

Let’s spread the wealth, too, and not concentrate it on the already wealthy. One way is to add government-approved foreign exchange investment accounts for every Jamaican adult for these new storage investments with a lifetime of 100 years. This attractive account manoeuvre will also boost tax compliance, as only tax-filing individuals are allowed these sought-after accounts. This could be our ultimate personal retirement accounts, especially for the majority of us who don’t have company retirement benefits.

You are free to suggest your own strategies to garner the best from our ability to generate cheap power from these new-age power plants plus storage. The bottom line is to stimulate individual broad-based wealth and reduce wide-spread poverty and its attendant social ills to keep boosting our foreign reserves to make us strong again.

Don’t be afraid to think large. Every successful business person has learnt this painful lesson — one can’t barely survive, one has to go big and soar! Enough said. Live well and prosper! (No political innuendoes meant. Think Mr Spock of Star Trek).

 

Source: http://www.jamaicaobserver.com/environment/15-year-window-to-benefit-from-low-solar-costs_64698



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