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Jamaica’s Energy Crisis: From Dependence to Independence?

As a small island nation in the Caribbean without any fossil fuel production, Jamaica has frequently found itself in a crisis the type of which is unimaginable in most parts of the world.  Like most poor island nations, the ability to generate electricity and provide energy services to its teeming population, in a macro-economic and fiscally responsible manner, is very important. The rate of development of a country such as Jamaica can be directly traced to its ability to provide affordable healthcare, education, and energy services to its population. In modern times, access to energy services and development rates  are usedinterchangeably and frequently to mean one and the same thing. This blog explores how the development aspirations of Jamaica can be achieved with a transition to a low-carbon economy.

In 2007, oil was responsible for generating 95.9 percent of all  electricity in Jamaica.  Even though Jamaica does not produce any hydrocarbons, the country consumes about 77,000 barrels of oil per day.  Of all the energy that is used, just 9.5 percent is produced domestically. The largest domestic source of energy is combustible and renewable waste (such as biomass).  According to a  UNDP report, reliance on the use and inefficient production of oil-based energy is a major problem and should be identified as a priority policy focus.

Nevertheless, Jamaica has signed several agreements that keep it committed to fossil fuel sources of energy.  Because Jamaica has no indigenous sources of coal, oil, or natural gas, it has been receiving crude oil and refined products under the San Jose Accord, established in 1980 and renewed yearly.  Under this arrangement, Jamaica receives 7,000 barrels of oil equivalent per day supplied in equal proportion from Mexico and Venezuela.  Also, since 2000, Jamaica has been receiving crude and refined products at a quota of 7,400 barrels per day under the Caracas Energy Agreement.  Under this arrangement, Jamaica purchases oil at world market price and pays 75 percent of the purchase price within 30 days.  The remaining 25 percent is paid over 15 years with one year’s moratorium at an interest rate of 2 percent per annum.  The Caracas Energy Agreement is renewed annually.  Under this agreement, Jamaica does not have to pay for the oil supplied immediately. Rather, the agreement establishes a scale of prices, setting preferential percentages for financing long-term, low-interest loans to each country, based on the amount of oil purchased.

The “PetroCaribe Initiative” was proposed by Venezuela owing to the wide margins applied to the retail prices of petroleum products in the Caribbean.  Under the PetroCaribe initiative, crude oil is refined in Venezuela and shipped to other parts of the Caribbean.  Several other  agreements, including a Letter of Intent (LOI), was signed between the governments of Jamaica and Venezuela under the umbrella of the PetroCaribe initiative in February 2005, signaling Venezuela’s formal intention to seriously explore the potential for its participation in Jamaica’s energy industry, PetroJam (the state-owned refinery), retail marketing of petroleum products, and oil and gas exploration.

The PetroCaribe initiative can generate challenges for Jamaica, however. In September of 2011, it was reported that PetroJam experienced an oil shortage caused by the strict enforcement of the PetroCaribe agreement by the Venezuela-owned PDVSA. The PetroCaribe arrangement has also been described as a measure that only shields the Jamaican economy from adverse effects in the short term and not in the long term.  This is because Jamaica has special financing terms under the Agreement.  Under the terms of the agreement, when the market price per barrel of oil is US $40 or greater, 60 percent of the cost is to be paid within 90 days. This amount attracts interest at 2 percent for the 60 – 90 day period.  The remaining 40 percent attracts a 1 percent interest rate and is repayable within 25 years. In essence, every time Jamaica purchases fossil fuel under the PetroCaribe arrangement, it loans a portion of the funds from Venezuela. In addition to paying back the capital sum, it also pays an interest.  These funds could be diverted to developing Jamaica’s vast renewable energy resources.

In 2011, the Jamaican government also introduced the Liquefied Natural Gas (LNG) Supply, Floating Storage and Regasification Terminal Project.  This project has generated a lot of controversy, however, as some suggest it does nothing to further the energy security and independence of Jamaica.  Rather, some argue it makes a nation already dependent on imported oil even more dependent on other nations for its energy supply.

Despite the challenges posed by its reliance on foreign oil, Jamaica is in an enviable position because it has the potential to move quickly from being an oil-dependent country to a renewable energy-independent country.  Jamaica possesses enormous renewable resources , including wind, biomass, hydro, and solar energy, which it can quickly utilize to transition itself into an independent energy producer, or at least use to minimize its dependence on imported fossil fuels.

One of the initiatives currently being explored in Jamaica is the expansion of Jamaica’s hydropower capacity at Laughlands, Great River, and Back Rio Grande on the Northern coast of Jamaica.  The program  has a start date of July 2014 and will develop a group of small-scale hydropower projects, ranging in size from 1 megawatt (MW) to 8 MW. The Petroleum Corporation of Jamaica’s (PCJ) Centre of Excellence for Renewable Energy (CERE) is also performing a biomass assessment with the intention of updating available information, particularly with regards to charcoal and  fuelwood resources.  In February of 2011, a US $10.3 million research partnership agreement for a small-scale biodiesel pilot project, using Jamaican jatropha and castor oil plant to produce fuel, was struck between the Petroleum Corporation of Jamaica’s Centre of Excellence for Renewable Energy (PCJ’s CERE) and the Caribbean Agricultural Research and Development Institute (CARDI).According to one study, Jamaica’s wind and solar resource are estimated at 70 and 650 MW, respectively, and are capable of producing 153 and 1,139 gigawatt hours per year of electricity[1]. The success of Wigton Wind Farm, the island’s largest grid-tied, utility-scale wind power facility, is especially commendable. Worldwatch’s Low-Carbon Energy Roadmap for the Caribbean is intended to help Jamaica access the best-available data with regards to renewable energy resources, which will hopefully facilitate the construction of more successful low-carbon energy projects in the future.

As Jamaica continues to develop its existing bilateral relations in the Caribbean, it is important for the country to cultivate other relations that can help in developing its renewable energy portfolio.  As oil reserves will inevitably decrease in the future, it is vital that Jamaica transitions from being a nation dependent on imported fossil fuels to a nation independently powered by its own renewable resources.

By Ayodeji Adebola


Category/ies:Jamaica Articles.
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