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Jamaican Minister’s energy mission — Bringing affordable energy options to Jamaicans including RE

Jamaican businesses have long bemoaned the high cost of energy and the deleterious impact it has on both their businesses and the bottom line. Residents too have complained and in many cases it accounts for a third of employees wages.

With oil prices now above US$105 per barrel and geopolitical tensions in the Middle East threatening to send oil prices skyrocketing, the energy situation becomes even more precarious given the fact that Jamaica spends about a third of its foreign exchange earnings on imported oil.

Minister of Energy, Mining and Telecommunications Phillip Paulwell has vowed to oversee the liberalisation of the energy sector resulting in the reduction of electricity costs by as much as 40 per cent by 2014. Here he is supported by some of the biggest names in corporate Jamaica, including CEO of GraceKennedy Don Wehby; Managing Director of WISYNCO, William Mahfood; President and CEO of Jamaica Broilers Christopher Levy, and Managing Director of Jamaica Producers Jeffrey Hall.

Speaking with Caribbean Business Report from the Petroleum Corporation of Jamaica (PCJ) headquarters in Kingston, Paulwell said: “The energy situation in Jamaica today is probably the most critical economic issue facing the country. There is no way businesses can expand and employ more people with electricity prices at US 40 cents per kilo watt-hour, nor can we attract foreign companies to invest here with those prices. Any discussion I have with the business community, the high cost of energy constantly comes up. This means we are at a crisis point.

Solving Jamaica’s energy problem

“I think this can be solved in a number of ways. Firstly, there can be no dispute anymore about the energy policy; both the Government and the Opposition are at one. That policy signals a deregulation of the industry and the diversification of fuel sources and enhancing our own infrastructure.”

The Government has made it clear that it is committed to addressing the country’s energy problem and Paulwell has declared that he is determined to see this through. Already the Cabinet has endorsed the establishment of an Energy Council that brings together all the players in the business. The main purpose of the Energy Council is to implement policy and ensure that there is national participation.

Paulwell has stressed the importance of diversifying fuel sources and has personally signalled his commitment to this by employing solar technology at his own domestic residence. He is of the view that all the fuel sources should contend, including liquefied natural gas. He also sees a future for coal in Jamaica as well as petcoke and in time to come, probably in ten years, nuclear energy can become a realistic option. The minister will be putting particular emphasis on renewable energy and sees solar playing a big role in providing fuel for domestic residences, while wind and hydro will fuel commercial entities. Here he sees these sources offsetting the foreign exchange the country spends on fossil fuels.

“Yes, I am aware of the arguments concerning growing our carbon footprint, but that being said we will be focusing on the next three years on electrical energy. In our manifesto we gave an undertaking to liberalise our electricity grid and we are in the process of negotiation with Jamaica Public Service Company (JPS).

We thoroughly believe that we have a mandate to do so and we are resolute in pursuing that.

“We also have to liberalise the fuel source, and the government apart from re-engaging the LNG project, will allow the private sector to determine its own fuel source going forward. We also intend for the bauxite companies to make their own determination. We should not deprive ourselves of cheaper fuel sources.

“In relation to the government’s own infrastructure, we will be making a major push with the refinery and we have already signalled to the IMF that we want to see the refinery’s capacity extended to 50,000 barrels a day and utilise new technology that will enable lower sulphur in our diesel and petcoke. This should help us generate 100 mega watts of cheap electricity. We want to put this project on the front burner because it will secure growth for the economy, create jobs and lead to cheaper fuel. This is how we will push prices down and it has to be below US 20 cents because that’s where our competitors are. For this I am seeking the support of the entire country.

“I think it is a win-win for JPS. With lower prices it creates a bigger market because people will be coming to establish businesses in Jamaica. They will see an opportunity here with lower energy prices. This doesn’t just apply to Foreign Direct Investment (FDI), but Jamaicans themselves will once again take a chance in investing in the country and that’s want we want to see. This government has sworn to create an investor- friendly climate and we are not wasting anytime in doing so.”

Paulwell added that JPS will be allowed certain leverage in relation to telecommunications because there is the possibility of executing broadband over the power lines. The minister said time is of the essence because if the current situation is allowed to prevail, people will continue to look to circumvent JPS in search of cheaper electricity. This in turn will lead to a devaluation of the government’s share in the company.

Getting the private sector around the table

One of the things that Pauwell has been able to accomplish is to bring the private sector around the table and attain some consensus on the issue. He notes that it is now prepared to move with one accord toward what must bring benefits to the country. He pointed to the notion that exists that it is not appropriate to provide competition on the grid because it is a natural monopoly, but he totally rejects this.

“Once you have the appropriate regulatory system in place and an interconnection arrangement, with people paying to interconnect, then we are going to establish a model in Jamaica that will work for us. Yes, I am glad that the private sector seems unified in finding alternatives to what we have today,” said the minister of energy, mining and Telecommunications.

Read more: http://www.jamaicaobserver.com/business/Paulwell-s-energy-mission—Bringing-affordable-energy-options-to-Jamaicans_11092249#ixzz1rey8hOnI
PART II

The high cost of energy in Jamaica has proven to be a debilitating factor, hindering the growth of the Jamaican economy and proving to be a high input cost for businesses. To put this in perspective, Jamaica’s total GDP stands at about US$14 billion and its oil bill is just over US$2 billion.

Jamaica’s Minister of Energy, Mining and Telecommunications Phillip Paulwell has taken it upon himself to liberalise the energy sector and diversify fuel sources. He has set his sights on bringing electricity prices down to below US 20 cents per kilowatt-hour over the next three years. To this end he has sought and won the support of the private sector with many of the country’s leading CEOs keen to see lower energy prices.

Renewable energy

Paulwell is an advocate of solar energy, particularly for domestic residences. This fuel source has its critics, with many holding the view that the initial cost injection makes it prohibitive. The minister counters that it is no longer prohibitive, with prices coming down as the technology improves.

Speaking with Caribbean Business Report from the Petroleum Corporation of Jamaica’s (PCJ) headquarters in Kingston, Paulwell said: “We have seen many examples where it makes sense to put up from that initial capital outlay which then sees you earning it back in savings and then your electricity cost is zero. This is especially the case for homeowners. We are hoping many of them in Jamaica will explore the solar option. I have seen the combination of wind and solar work efficiently. One also needs battery storage so that you can capture that solar energy during the daytime. I am a fervent believer in renewables. Right now you can earn carbon credits for the country based on investment in these energy facilities.”

Nuclear

The minister has made it clear that he is prepared to countenance both coal and nuclear energy sources for Jamaica. He notes that many countries have been powering submarines with nuclear energy for years. He sees it as an ideal energy source for a small country like Jamaica. ” There are some compact nuclear devices being manufactured now and we have to give them the gestation period to see how it operates, but I believe in five to ten years’ time those smaller compact units will be appropriate for Jamaica. Nuclear is definitely an option that we are looking at. We are not contemplating nuclear infrastructure as employed in Japan but something more compact and safer,” said Paulwell. Another option that may be considered is the employment of decommissioned nuclear submarines around Jamaica’s coastlines. This could prove rather cost-effective.

Coal

Coal has its detractors, with many claiming that it will prove ruinous to Jamaica’s tourism product and that furthermore, Jamaica does not have an industrial economy that warrants it. Then there is the environmental argument that the C02 emissions will negatively impact the health of Jamaicans. Again, the minister disagrees. He is of the view that the Co2 emissions will be so minuscule as to be of no real consequence.

” Jamaica does not have the heavy industrial plants here that make it a cause for concern. Whatever coal facility we will establish will not add substantially to the disbursement of carbon dioxide in the atmosphere. What we will be doing on the renewable side will more than compensate for our coal programme. Let us not forget that coal is in abundance in this region and it is cheap, far cheaper than the imported oil we are now relying upon. We should not deny ourselves that opportunity, especially because the larger economies were built upon coal, particularly the United States, Germany and the United Kingdom. We have to find cheaper energy solutions and that for me is far more urgent than environmental concerns. We can deal with some of the environmental issues by embracing the renewables.”

Jamaica finds itself paying about 35 per cent of its foreign exchange on oil and the way the minister sees it the country should have made the move to diversify its fuel sources years ago. “It is quite clear that we cannot continue proceeding with oil as we have been doing and JPS has to modernise its operations. What I am trying to do now is take the government out of the picture, open up the market for competition and allow the players to make their own choices and decisions,” said Paulwell.

LNG

The last government under the leadership of Bruce Golding committed the country to Liquified Natural Gas (LNG) as its fuel of choice and set about initiating a bid process to encourage LNG players to put in place the requisite infrastructure including a floatation station. The preferred bidder was a consortium made up of the Belgian firm Exmar and the former chairman of the Petroleum Corporation of Jamaica (PCJ) Ian Moore’s Caribbean LNG. The process was embroiled in controversy. In a report tabled in Parliament, the Office of the Contractor General said the entire tender process won by the consortium led by Exmar was compromised and that there was a conflict of interest and a lack of impartiality. The tender was subsequently cancelled.

However, in September of last year, the Director of Public Prosecutions (DPP) Paula Llewellyn announced that her office could not identify any evidential basis to draw the inference that Ian Moore participated in bid-rigging or corruption regarding the proposal for the financing, development, ownership and operation of an FRSU Liquified Natural Gas Regassification terminal and natural gas transportation system in Jamaica.

So what is the state of the LNG project now?

” The committee led by Chris Zacca has been inherited and it is on track in receiving bids for the infrastructure project as well as to determine who the suppliers of that gas will be. It will also establish a Special Purpose Vehicle to manage that process. We will have a final position on LNG both in terms of the provider of the infrasrtuce and the supplier of the gas by early June,”explained Paulwell.

Ian Moore and his consortium do feel disgruntled and hard done by and it is uncertain whether they will now rebid. So should the tender process be reopened and Exmar be allowed to rebid?

The minister responded: “My position on this is to say to Exmar, please rebid because there is a role you can play. We have to ensure fairness in the assessment process, but there s no reason for Exmar to be excluded.”

Chavez and Venezuela

A few years ago, the notion was mooted to list the PCJ on the Jamaica Stock Exchange, rather like Petrobas in Brazil did. Paulwell thinks that the refinery would be a better bet than the PCJ. He doesn’t think too much is happening at the PCJ to attract investors but PetroJam runs the bulk of the commercial business. So is this viable?

” It might be, but right now we are in partnership with Venezuela,” answered Minister Paulwell.

The PetroCaribe deal which saw Jamaica getting oil at extremely favourable prices was a boon to the country. The president of Venezuela Hugo Chavez has always looked upon the Caribbean and in particular Jamaica as allies and his largesse has proven helpful to the island-states. However, he is now gravely ill and has undergone surgical operations for cancer complications. If he were to pass away it would leave Jamaica in a precarious situation.

“We hope that he will survive and return to good health. He has proven to be a great friend to this country. We believe that after his tenure based on the relationship we have always had with the Venezuela as a whole, the facility will continue and we are working to ensure that the relationship is maintained. Our prayers go out to Hugo Chavez.”

Will oil prices escalating under Middle East geopolitical tensions, is Jamaica looking to build relationships with other oil provinces such as Norway, Nigeria, the Caspian region of Russia?

“We intend to rebuild the relationship we had with Nigeria around 2006.We benefited a lot from that. We are also looking to Angola and Qatar. We want to reengage with the Middle East generally and of course we are still interested in Trinidad& Tobago.which is a big gas province. We are impressed with the number of energy players who have expressed an interest in investing in Jamaica, particularly on the renewable side.

Tax and duty regime

“We are now looking at the duty and tax regime on the renewable side and we intend to speak to that in the upcoming budget. We are looking at returning to where, we were in 2006 when as you can recall, renewable energy initiatives were completely duty-free. Now we may expand that list. Let me take this opportunity to commend Digicel for their move to implement windmills and other renewable energy options on their new world headquarters which will be located in downtown Kingston. It will be the most modern use of renewable sources in the entire Caribbean. The building will be cooled entirely from renewable energy sources. One of the mandates of the Energy Council is to focus on the government leading by example. We will be putting in place a new IDB project valued at around US$20 million. Do you know the current electricity bill at the National Water Commission is J$600 million per month! We urgently have to address that. Then we are going to go into the schools and hospitals. You will see a great focus now on slashing the government’s electricity bill over the next three years. We are currently in negotiations with JPS to use more solar and LED bulbs for street lights. This will help in reducing costs and creating greater efficiency which inures to the benefit of the entire country,” said Phillip Paulwell.



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