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Going Solar can Reverse the Dollar Slide




Guatemala undertakes photovoltaic solar panels project


Now that you have excess electricity virtually “for free”, make the switch to electric vehicles; the “fuel” is already paid for!

There is Chevy Volt, Nissan Leaf and a host of other makes and models for the general population; Tesla Model S or BMW i3 or i8 instead of Pajeros and Benz and the like for those with luxury needs; and in-between there is a host of plug-in hybrid electric vehicles (PHEVs) such as Toyota Avalon or Prius PHEV — not the regular Toyota Prius — that use electric motors as primary propulsion and are backed up by gas engines. Just imagine the police fleet transformed with speedy electric cars and bikes, with almost no fuel costs! For trucking, the electrified offerings are many and increasing, including Chinese-made BYD vehicles and buses for public transportation.

For a small island like Jamaica, with no excessive distances between towns, there should be no shortage of re-fuelling availability to complete your journey with ease. Add plug-in points at each existing gas-station or restaurant, or create new fast-charging plug-in points. That’s US$5 per full-charge, versus $60 for petrol; and JPS gets lots of new customers.

Does that warrant a duty-free drive by the Government to replace gas guzzlers with new clean electric vehicles? Forego the initial duty revenues for the replacements, and jettison the huge annual foreign exchange petrol imports forever!

Forego US$100 million in import duties on a one-time incentive basis, to gain US$800 million annually going forward? How novel! Electric cars (with no duty added) would be cheaper than new gas-powered models with duty. Just ask Denmark and Norway. They have already done it. Norway — a small nation of five million inhabitants and (ironically) Western Europe’s largest petroleum producer — has quickly transformed its fleet to over 44,000 units of electrified transport. Beijing city is pushing hard to do the same, quadrupling its electric car sales in 2015 to fight back against stifling smog which some days have a particle count of 399, way above the acceptable count limit of 25 for breathable air.

Now, with over US$2,000 million saved each year, we could pay off the US$2,800 million capital cost in rapid time and save almost all the loan interest costs. Smooth sailing afterwards? With the loan fully paid, we could turn off the foreign exchange outflow spigot forever, and we may possibly start to reverse the slide of the Jamaican dollar that has now reached 115:1.

Too radical an idea? Or very achievable?! Make our country progressively more livable and desirous for our citizens.

Would there be a significant impact on our exchange rate devaluations?

Let’s see. Inflows: The single-largest inflow into our foreign exchange pot is remittances — that is the aggregate of small regular amounts sent by family members overseas — which amount to an astounding US$2,200 million annually. So we are in a sense exporting our remittances right back out to pay for just electricity-related fossil fuels and petrol, not counting any other foreign purchase? Correct, my silent objector! But with the wind-and-solar maneouvre, we would have now plugged that spigot, so we will in future retain all of our remittance receipts with this wind-and-solar maneuver!

The next largest inflow is from tourism. Tourism receipts are some US$1,300 million annually but 80 per cent flows right back out for expenses related to running these hotels — food and liquor and other expenses. We only retain some 20 per cent or US$260 million annually.

The third largest is bauxite and alumina. This sector in its present diminished state injects no significant foreign exchange, when Clarendon Alumina Production’s (CAP) overdue payments of some US$490 million are included. You see, CAP deliberately over-collected for sales in previous years — a practice given the glamorous name of “forward sales” by our technocrats — and now needs to re-pay these over-collections.

Accounting for all other inflows — relatively miniscule amounts for agricultural exports and the like — our total annual real amount in the pot is a miserly US$800 million or thereabouts by my reckoning, after fossil fuel payments. (Those with more accurate figures can correct me if I’m wrong).

Outflows: Government debt servicing — repayment for all those loans our government has borrowed in previous years to make us healthier and more educated and supposedly “better off” — amounts to some US$2,500 million annually (which the pot does not have enough dough to pay!). But luckily, a fair portion of this repayment is to local banks and financial institutions like Bank of Jamaica bonds and certificates of deposit, on which many of our seniors depend for their retirement payments. So the US$ component of this US$2,500 annual payment is reduced.

Add to that all those cars and parts and equipment and other items that we regularly import from a now drained pot, and it is quickly obvious that we have to use Jamaican dollars for some of these payments, thus reducing the value of our Jamaican dollar on a never-ending cycle. Hence the “Jamaica’s dollar continues to devalue relative to the US$!” Got it?! It is this need to use Jamaican dollars to pay for imports that causes devaluation of our dollar.

With foreign-fuel purchases eliminated due to our wind-and-solar initiative and our use of electric vehicles, the outflow of some US$2,500 million per year make a considerable difference as there would be no more need for Jamaican dollars to make up the difference of US$ to pay for Government foreign debt and regular imports. Devaluation would stop. If foreign-dollar inflows begin to exceed outflows, re-valuation would begin to occur. This is quite possible, and it’s the desired objective and outcome of this initiative to replace foreign fuels.

Jamaican residents would gradually afford to travel overseas again, and a host of other such outcomes as a result of ongoing and creeping re-valuation. Immigration restrictions would invariably loosen when travelling to other countries, as we would increasingly no longer be seen as potential runaways attempting to work overseas illegally. The need to emigrate would diminish, and add a raft of other such improved occurrences. Dignity would return. Brain drain will be reduced.

This initiative could reverse the dollar slide. Revaluation! We might yet break a 50-year slow slide into poverty.

So what’s stopping us from implementing this pronto?

Our government, decades ago, unfortunately listened to our foreign “advisors” and gave away our sovereign rights to do these initiatives when we granted JPS exclusivity. We gave JPS monopoly rights for all facets of our electricity system — exclusive generation rights, transmission rights, and distribution rights to all our citizens — in exchange for a contract that guarantees JPS minimum financial returns of eight per cent annually. JPS now owns our electricity grid, and everything else involved. Only small-scale generation below 100 Kilowatts legally escapes JPS’ dragnet. The utility’s present licence expires in 2021.

We cannot force JPS to do this “eliminate imported fuels” initiative in the national interest; neither can we do it ourselves as a nation as we cannot connect to the (now private) JPS system without its say-so, which would be conditional on their making at least the minimum eight per cent return. JPS would argue that its (imported fuel) equipment would instantaneously become obsolete, but its loan obligations would not disappear. Private interests placed before national interests; and all legally done because we took bad advice so very long ago.

What should we do? Compensate JPS and get the job done? Their debt servicing is already part of their 15 cents per KWh “non-fuel costs”.

Source: Jamaica Observer


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