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Powering Jamaica – Experts call for greater push towards renewable energy

Private-sector bosses have warned that smart capital will stay away from the renewable energy projects if pricing policies do not make it possible for investors to secure a return on their money.

According to one entrepreneur, Paul Scott, the chairman of the Mussons Group, that is precisely the case with his company. A proposal to install new boilers at Mussons’ Duckenfield sugar factory, which would allow it to burn bagasse to generate electricity for the plant and sell to the national grid, is likely to be stalled because of the mandated price the Jamaica Public Service (JPS) would pay for the power.

“If we are to invest US$30 million for the new boilers, it (the price received for electricity) has to be at a level to recoup the investment,” Scott told a Gleaner Editors’ Forum on renewable energy last week.

The current declared price of 10.48 cents, plus a 15 per cent premium per kilowatt hour (KWh) for renewable technology with guaranteed capacity would not be enough to support the investment, he argued.

Scott suggested a new formula that would bring the price for renewable close to the US$0.2129 allowed to Jamaica Energy Partners, a private company that won a recent bid to establish a 60-megawatt plant.

An energy policy unveiled in 2006 and updated last year called for Jamaica to double the contribution, as part of its energy mix, to 20 per cent by 2020, which all participants at the forum agreed was a good idea.

If there was, however, one matter on which there was no consensus, it was on who should pay the difference between the cost of electricity generated from fossil fuels and that produced from renewables, with their potentially more expensive technologies.

Direct subsidies

The majority preference appeared to be direct subsidies from the Government rather than billing charges to consumers.

“People coming and telling me I want 18 cents; I want 22 cents. At the same time, the same people coming and asking me to reduce the cost of electricity in this country. That’s not how it works,” said Zia Mian, director general of the Office of Utilities Regulation (OUR).

But while such issues remain unresolved, people like Scott, whose 19,000-tonnes-a-year sugar factory produces 400,000 tonnes of bagasse, believes there are opportunities to be derived from co-generation.

The trash (bagasse) that is left over from the processing of sugar from sugar cane can be burned to generate the steam to drive the turbines that produce the electricity to run the factory. The excess would then be sold to the JPS, the monopoly power transmission and distribution company.

Aubyn Hill, consultant with the sugar divestment team, agrees. He said that some factories currently generate their own power, saving “tens of millions of dollars each month”.

But many of those factories will require upgrading, as is the case with Mussons’ factory. The cost of electricity could impact on co-generation strategies.

Currently, the Office of Utilities Regulation bases the price it allows the JPS to pay independent suppliers of electricity on the “avoided cost of energy” to the JPS.

This formula includes looking at the cost the JPS would avoid if someone else establishes a power-generating plant. In the case of renewables, the avoided cost is US$0.1048, plus a 15 per cent premium. Electricity from the JPS’s own plants and independent suppliers reaches the consumer at US$0.30 per KWh.

Echoing a recent document on the issue published by some sugar interests, Scott said the price was insufficient.

Said the document: “Until a new tranche of power is brought on stream via a competitive tender process, the ‘avoided cost of energy’ should be established as the most recent price of energy as determined by the most recent competitive tender process for new capacity, which was agreed to by JPS and sanctioned by the OUR and the minister of energy, adjusted for the current price of fuel and the market cost of capital.”

Oil Imports

At present, Jamaica spends approximately US$2 billion each year to import oil. That bill is expected to increase as the price of oil continues to rise on the international market.

The national development plan – Vision 2030 – speaks to the desire to commission new renewable energy projects with a total capacity of up to 70MW by 2012.

The projects now being undertaken include a 6.3-megawatt hydroelectricity power plant being constructed by the JPS in Maggoty, St Elizabeth.

A three-megawatt wind farm is also being built in Munro in the same parish.

*   Coal is cool… one of the cheapest and most practical energy sources

IT APPEARS that even with high energy costs threatening to cripple the country’s economy, the Government is still ignoring what is seen by some as one of the cheapest and most practical of energy sources.

“Why is Jamaica not using coal?” asked Christopher Levy, chief executive officer of the Jamaica Broilers Group, during a recent Editors’ Forum at the Gleaner’s offices.

He argued that if Jamaica turns to coal as a major fuel source, the country’s energy bill could be reduced significantly, leading to growth in the local economy.

While for most Jamaicans the mention of coal conjures up images of pieces of charred wood glowing red hot in a coal pot, that is not the substance Levy and others believe could be the answer to Jamaica’s fuel problems.

This coal is a combustible black or brown-black type of rock formed from the remains of prehistoric plants that originally accumulated in swamps and peat bogs.

Today, coal is the largest source of energy for the generation of electricity worldwide, and price-wise, has historically been lower and more stable than oil and gas prices. Levy believes Jamaica’s dogged reliance on oil has been holding the country back from exploiting this resource.

“No developed country runs on oil. None,” Levy emphasised. He argued that countries as far away as Europe are importing coal from the Caribbean coast of Colombia, while Jamaica continues to ignore the commodity.

According to Levy, Jamaica’s energy costs would be lower than some European countries should it begin importing Colombian coal, given that country’s proximity to Jamaica.

He stated that it was time the Jamaican Government began looking at the least-cost options when considering alternative sources of energy. He noted that in terms of cost, nuclear energy is the cheapest source, followed by coal, with liquefied natural gas (LNG) a distant third.

“We must produce using the smartest, most efficient technology, using the advantages that we have here,” Levy said. “LNG out of Trinidad [and Tobago] is an advantage; coal out of Colombia is an advantage”.

President and Chief Executive Officer of the Jamaica Public Service Company Limited (JPS) Damian Obligio appears to also favour coal as an alternative energy source.

Obligio’s company recently built a hydroelectric plant in Maggotty, St Elizabeth, but it seems that if he had his own way, a coal plant would have been built in that town instead.

NOT AN OPTION

Head of the Office of Utilities Regulation (OUR), Zia Mian, doesn’t believe coal is an option for Jamaica. Noting that “there is no such thing as clean coal”, he cautioned that the harm it could do to the environment in terms of its high carbon emissions might not be worth its relatively cheap cost.

He also thinks it would take too much time to implement to be useful at this time.

“We had asked the Government to begin looking at coal in 2001-2002. [We did] all the studies and JPS bought the land in Old Harbour in order to go with the coal and no decision was taken by the Government, and today, if you want coal, coal is not going to come in the time frame that we need it,” Mian argued.

Obligio said he had little hope the Government would take a decision on coal, and expressed disappointment that the JPS had invested about $10 million in a coal plant that he believes will never be built in Jamaica.

The Government has instead been focusing on renewable energy sources, in particular LNG, as Jamaica’s answer to the energy crisis.

Recently, the OUR issued a tender for 480 megawatts of generating capacity in which it stated that there would be a bias towards producers who propose to use LNG. The Government also recently completed an upgrade to the Wigton Wind Farm in Manchester, which is expected to enable Jamaica to reach 11 per cent renewable energy use by 2012.

But Levy does not share the Government’s enthusiasm for renewables, citing the costliness of solar, hydro, and wind technologies.

“Renewable [energy] is an emotional thing. It’s emotional. Unless you have a specific, unique business opportunity, it’s emotional, feel good … it makes no business sense. Our country is too small to subsidise it to any great measure,” he opined.

 

 

Source: Jamaica Gleaner



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